What's up guys and welcome back to wall street millennial on this channel, we cover everything related to stocks and investing by this point, i'm sure most of you are familiar with evergrand the massive chinese real estate developer. That's been sitting on the brink of bankruptcy. For the past few months, but evergrand is far more than just a real estate developer. They are a diversified conglomerate with a broad range of business interests, including mineral water and even a professional football team.

Historically, their non-core business expansions have all been cash incinerators, but their core real estate business was so profitable that it could more than make up for those losses, or at least this was the case in the past. Perhaps their most significant venture was into electric vehicles from 2018. Through 2020, they had invested billions of dollars in ev capabilities and planned to invest tens of billions more over the coming years. Evergrand put all of its ev operations into a subsidiary called china evergreen new energy vehicle group, which is separately listed on the hong kong stock exchange.

But it is still majority owned by and received substantially all of its funding from the main evergrand parent company from 2017. To its peak in april 2021, the stock was a 40 bagger as the eev bubble inflated. This gave it a market cap of almost 90 billion dollars. This made it worth more than 400 gm, despite still being pre-production, but when the parent company's financial problems were exposed.

In the summer of 2021, all of its subsidiaries came crashing down with it. The new energy vehicle stock is down 95 from the highs, and many market observers fear the company could go bankrupt, along with the evergrand group, they've been hampered by development delays and cost overruns. Other ev factories a couple weeks ago, they raised a few hundred million dollars by issuing new equity shares, but they they'll probably burn through this as well in a matter of months and given how low their stock price is now, their ability to raise new capital has Been greatly reduced in this video we'll go over how evergreen got into the eevee business and how likely it is that we'll ever see an evergreen manufactured car on the road throughout the 2000s and 2010s evergreen grew rapidly and eventually became china's second largest property developer. With hundreds of billions of dollars in assets and tens of billions in annual revenue by 2017, founder and chairman xiujian was at the top of the world, he became the country's richest man with a net worth of 45 billion dollars, given how well he had done in The real estate industry, he decided to multiply his wealth even further.

By diversifying into unrelated sectors. Around 2018 elon musk's tesla was picking up steam. It was becoming increasingly apparent that evs are the future. Shears saw this and wanted to get a piece of the action for his own company, so he agreed to acquire a 45 stake in struggling ev company faraday future for two billion dollars.

However, after receiving the first 800 million dollars of the investment, faraday's, ceo had a falling out with evergrant and the deal fell apart. Faraday has since gone public via a spec, but has underperformed expectations and the stock price has fallen more than 30 from the initial stack price of ten dollars. But shear was committed to entering the eev business and he wasn't about to let this setback derail his ambitions. Over the next two years, evergreen committed to spending close to 10 billion dollars to develop their own ev business.

In 2019 they bought a swedish ev company called new electric vehicle, sweden or nevs for sure. Nevs was formed out of the remnants of saab after their 2012 bankruptcy after their acquisition by evergrand, they developed an all-electric budget sedan for the chinese market, evergreen consolidated nevs into their evergrand health subsidiary, which operated nursing homes and other things of that nature. They rebranded the subsidiary as the new energy vehicle group and change his strategy to focus on evs as well. The fact that they turned their nursing home unit into an ev business shows how willing evergreen was to completely change their business strategy at the drop of a hat.

They also announced a brand new ev brand called hung chi in 2020 and committed to investing seven billion dollars over the next three years to develop mass production capabilities. They also invested 2.1 billion dollars to acquire a 41 percent stake in guanghui group, which is a massive car dealership company in china. The rationale may have been that they can use guanghue's dealerships to distribute their own cars in the future, but it seems a bit aggressive to acquire a car dealership network before you even have production cars to sell they unveiled their prototypes at the 2021 shanghai auto show They had sleek, futuristic designs and promised to have autonomous driving capabilities. Evergrande said they aspired to surpass tesla and become the largest and most powerful electric vehicle group in the world by 2025 and for a while it looked like the stock market believed them at the peak.

In april 2021, their market cap stored to almost 90 billion dollars, making them more valuable than ford or gm, but development was still in the very early stages. The models at the auto show were empty shells. Without batteries or breaks they published commercials showing the cars driving, but they were cgi rendered videos. In 2019 evergrande said they would build three new ev factories in the mega cities, tianjin, guangzhou and shanghai.

They plan to begin production of their first hung, chi evs in 2020, and have their full lineup of nine cars coming off the assembly lines by the end of 2021. While evergrand has deep experience in real estate, they have zero experience in automobile production. Evergrand trying to take on tesla would be like walmart building their own smartphone in the hopes of taking on apple. Unsurprisingly, production of their new cars were delayed multiple times and to date they have not delivered a single hangchi vehicle, as reported by the south china morning, post their massive shanghai factory is sitting idle, with no cars being produced.

They've pushed back their target for mass production to 2022, but most analysts think that even this is unlikely given how far behind they are. It also doesn't help that their parent company is on the brink of bankruptcy and won't be able to give them any new funding. In the first six months of 2021, the new energy vehicle segment produced 37 million yuan or roughly 6 million dollars, and this didn't come from delivering vehicles. It came from selling technical services, batteries and vehicle components, but regardless it's minuscule compared to how much cash they're burning.

During the same period, the segment recorded a net loss of more than 600 million dollars or roughly 100 times, their revenue, their health management segment, which includes nursing homes and other elderly healthcare services at least had some significant revenue, but also reported net loss. They plan to launch a total of 14 models with 1 million in annual sales by 2025 and 5 million by 2035.. To get to this scale will take many billions of dollars of investment. They recently raised 347 million dollars by issuing new shares, but at the current rate of cash burn, this will only last them a few months.

Their only real hope is to be acquired by another company that has deep pockets and is willing to invest the necessary capital. But this is also looking like a slim chance. In august, evergrande tried to sell the business to chinese smartphone manufacturer xiaomi, but they were ultimately unsuccessful. China's ev industry is becoming saturated, just like the us new ev companies are being founded on an almost monthly basis and the big players like byd, neo, xpung and lee auto are already mass producing vehicles.

They will also have to contend with competition from foreign brands like tesla, which is producing and selling cars within china. Evergrand's ev business doesn't have any special technology or production capabilities, given how far behind the curve they are. There's no reason to believe that they'll be able to take on the likes of tesla, neo and exponent. That's why nobody is willing to acquire them.

Evergrand's ev business was probably doomed to fail from the beginning founder and chairman xiujian success in the real estate. Business gave him hubris and he thought that he could replicate his success in a completely unrelated industry. The story of evergreen new energy group should serve as a cautionary tale to all investors interested in the ev space. When these pre-production companies show their new fancy-looking cars at auto shows.

Investor hype can push their stock prices parabolically. That's how you get a situation where evergrand's new energy auto was briefly more valuable than ford or gm. You could probably make the argument that we're seeing a similar bubble in the us, with the likes of lucid and rivien, alright guys that wraps it up for this video. What do you think about evergrand's foray into electric vehicles? Do you think they have any chance of succeeding? Let us know in the comments section below, if you enjoyed this content, make sure to hit the like button and subscribe.

So you don't miss future uploads as always. Thank you so much for watching and we'll see in the next one wall, street millennial signing out.