Shares in China Evergrande New Energy Vehicle Group (NEV) fell their biggest drop in nearly nine months after the Chinese government ordered units of the group to return state subsidies, deepening financial difficulties for the world’s most indebted developer.
On the Hong Kong stock market, Evergrande NEV’s shares fell as much as 26.7% at one point, closing at HK$0.34, down 20.9%, the lowest price in almost a month.
The Guangzhou-based automaker has been ordered to return 1.9 billion yuan (US$261.9 million) it received in subsidies from various local authorities after failing to meet contractual obligations, according to an overnight statement filed with the Hong Kong Stock Exchange.
Local authorities terminated the contract with Evergrande NEV in April 2019 after the company failed to meet its obligations to set up a headquarters and meet production and sales targets, according to the statement, which did not name the authorities.
According to the statement, Evergrande New Energy Vehicle must return the subsidies within 15 days of the notice or risk losing assets such as equipment, factory buildings and land allocated for vehicle assembly.
The company said the refund “may have a material impact on the financial position and business of Evergrande New Energy Vehicle or each of its relevant subsidiaries,” adding that it would apply for an administrative review of the decision.
China Evergrande shares have fallen 99% over the past four years and trading has been suspended since January 29, when shares closed at HK$0.163.
The automaker’s subsidiary in Tianjin was also ordered to stop producing and selling electric vehicles, according to a separate statement. Evergrande New Energy said it had “proactively rectified the issues after the inspection” and planned to appeal the stop-work order.
