China Evergrande's EV Unit sees much wider first-half Loss

China EV Unit: The electric vehicle unit of the troubled property conglomerate China Evergrande warned on Tuesday that its first-half, 2024 financial loss would be markedly increased mainly through increases in provisions for impairment, mirroring more extensive challenges affecting the group. China Evergrande New Energy Vehicle 0708.HK expects to post a consolidated net loss of about 20.25 billion yuan ($2.84 billion) in six months ending June 30. That is up from a 6.87 billion yuan loss in the same period a year earlier. It added that the surge in losses is principally because of an impairment provision amounting to approximately 16.74 billion yuan, which was identified to relate to receivables due from subsidiaries, associates, and joint ventures of its parent.

The electric car maker symbolises China Evergrande Group's grim financial outlook, which has struggled through years of a liquidity crunch. In an eventful development this year, things turned out badly when a Hong Kong court ordered the liquidation of China Evergrande Group, indicating how grave the financial problems the group finds itself in presently.

To normalise operations, China Evergrande New Energy reached an agreement with a potential investor in the sell-off of a stake in the company. However, the outlook remains grim and murky, as Evergrande remains operational headwind. As of the end of 2023, the EV unit was only able to produce 1,700 units of its flagship Hengchi electric vehicles. Production at its Tianjin factory was suspended from the start of this year, adding further to the company's woes.

Investors will be keen to follow the upcoming report since, at the end, it should shed more light on the scale of challenges currently facing the EV unit and the larger Evergrande Group. China Evergrande New Energy Ltd. is expected to announce its earnings on half-yearly reports by August 30, which will throw more light on the company's financial health and the future outlook.