Evergrande Auto, the automotive division of the Evergrande Group, has announced the arrest of Liu Yongzhou, president of Evergrande New Energy Technology Group, director of the Vehicle Research Institute, president of the Hengchi brand established in 2021, and executive vice president of Evergrande itself. The reasons are linked to alleged illegal activities.
The scandal is the latest disaster that has been involving the Evergrande group for two years, the owner, among others, of New Electric Vehicle Sweden (NEVS), the remnants of Saab Auto, and it firmly places China in the true global automotive arena. Yongzhuo’s arrest comes as Tesla grapples with how to handle Elon Musk and his drug-related issues, just a few years after the financial troubles of former Renault CEO Carlos Ghosn, who is still a fugitive in Lebanon, and nearly 10 years after the infamous Volkswagen dieselgate.
Evergrande and the Chinese economy
For some time, the Evergrande group’s crisis has been a symbol of the Chinese real estate crisis, which has dealt a considerable blow to the Mandarin economy along with the Covid pandemic. But it’s also “unusual” at the top of a Chinese company, as typically, individuals selected for such positions are often members of the Party itself.
Liu Yongzhuo was considered a key figure in Evergrande, ranking as the company’s number two behind only President Xu Jiayin. He wielded significant influence, leading the Guangzhou Evergrande Football Club during its rise in Asian football, a period that was already marked by controversies.
His arrest does not bode well for the Chinese giant, which has already seen the suspension of debt negotiations, financial discrepancies, and the failure of agreements with investors, notably the Newton Group, which collapsed at the end of December and promised to bring $500 million to the company.
The end of Hengchi and Saab?
The president’s arrest and the group’s financial problems will undoubtedly have repercussions on the automotive division. Hengchi, not to be confused with Hongqi, has faced significant problems since its establishment in 2021. In May 2023, the company had announced the resumption of Hengchi 5 production, but sales were poor, with less than 1,000 units per year, far from the ambition to sell 1 million units by 2025.
The same goes for NEVS, formerly Saab Automobiles. For over 10 years, Evergrande has been attempting a revival, but all efforts have been in vain. In the fall of 2023, things seemed to be improving; however, while Lui Yongzhou’s figure does not appear directly linked to that of the Swedish brand, it is unlikely that there will be a positive outcome for this unfortunate company.
Especially because Evergrande seems to be increasingly struggling, with the chances of overcoming these obstacles and regaining investors becoming slimmer.
Source: NBD.com.cn
