China Evergrande EV Unit Told to Return $262m in Subsidies

China’s cash-starved local government bodies have sent a notice to the electric vehicle unit of debt-ridden China Evergrande, demanding it return 1.9 billion yuan ($262.42 million) worth of subsidies and incentives it previously received.

China Evergrande New Energy Vehicle Group (Evergrande NEV) said on Wednesday it had received a letter of demand, which declared the government bodies were terminating a series of investment cooperation deals signed in 2019.

The demand comes at a time when Evergrande and its units are facing Beijing’s ire over the developer’s near $300 billion debt.

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Beijing has accused Evergrande of committing fraud worth $80 billion — possibly the biggest ever in Chinese history. That was after a Hong Kong court ordered the developer’s liquidation, due to a lack of a concrete restructuring plan more than two years after default.

In January, Chinese authorities also detained the vice-chair of Evergrande NEV on suspicion of “illegal crimes”.

The executive’s detention came amid turmoil at the EV unit, which included its $280 million legal proceedings against its parent. Last year, the unit also posted a combined net loss of about $10 billion for 2021 and 2022 in long overdue financial reports.

The unit had stopped EV production in December 2022, citing a lack of new orders. That was just a month after the company delivered its first batch of EVs.

Evergrande NEV said the demand from local administrative bodies to return millions in subsidies could adversely impact the company.

The “demands of the letter, if ultimately implemented, could have a material adverse impact on the financial position and operations of the Company or each of the relevant subsidiaries,” Evergrande NEV said in a statement.

The repayment demand also comes at a time when Beijing is trying manage risks stemming from trillions of dollars worth provincial debt.

Local governments, which once bankrolled the meteoric rise of Chinese developers, have been left saddled with more than $12 trillion in debt amid a real-estate slump.

Last year, Beijing announced $137 billion in sovereign bonds to aid those provincial administrations — a move that experts said was a mere band-aid.

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Reuters, with additional editing by Vishakha Saxena

Vishakha Saxena

Vishakha Saxena is the Multimedia and Social Media Editor at Asia Financial. She has worked as a digital journalist since 2013, and is an experienced writer and multimedia producer. As a trader and investor, she is keenly interested in new economy, emerging markets and the intersections of finance and society. You can write to her at [email protected]