Evergrande takes majority stake in Chinese auto battery maker

January 25, 2019 15:11
Despite a soured collaboration with Faraday Future, Evergrande Group, led by Chairman Hui Ka-yan, is continuing its efforts to diversify into the electric vehicle industry. Photos: Reuters, Bloomberg

China's Evergrande Group is acquiring majority stake in auto battery maker Shanghai Cenat New Energy in a deal worth US$156 million.

The property developer-turned conglomerate is purchasing the stake through its Hong Kong-listed unit Evergrande Health Industry Group (00708.HK), a regulatory filing showed.

According to the filing, Evergrande Health will pay 1.06 billion yuan to electrical instruments maker Shenzhen Clou Electronics in exchange for a controlling stake of 58.07 percent in Shanghai Cenat.

Shanghai Cenat, which turns out pouch-type batteries, has four major production bases in Shanghai, Jiangxi, and southern Guangxi. Established in 2010, it was co-founded by state-backed China Automotive Technology and Research Center and Japanese lithium battery company ENAX.

Caixin reports that Cenat expects its annual battery production capacity to reach 6 gigawatt hours by the end of 2019, and expand further 10 gigawatt hours by 2020. As of November last year, the annual capacity was said to be only 0.75 gigawatt hours.

Cenat posted a loss of 117 million yuan in 2018, according to the Evergrande Health filing.

Following the acquisition, Evergrande plans to build several mega-factories in the next 10 years, each with an annual battery production capacity of 60 gigawatt hours.

The latest deal comes on the heels of Evergrande's acquisition of 51 percent stake in National Electric Vehicle Sweden (NEVS), a mature Swedish electric carmaker, for US$930 million.

Evergrande expects to gain strong competitiveness in electric vehicle-related business by acquiring NEVS’ production capacity in Sweden and China, as well as its technology and proprietary intellectual properties covering electric battery, powertrain and control systems, in-car connectivity and production.

According to the Evergrande filing, NEVS is one of the ten qualified new energy automobile companies that had been approved by China’s National Development and Reform Commission and the Ministry of Industry and Information Technology.

Evergrande is continuing its push into the new-energy auto industry despite a soured partnership with US-based startup Faraday Future, helmed by embattled tech entrepreneur Jia Yueting.

In 2017, Evergrande agreed to invest US$2 billion over three years though Evergrande Health into Faraday Future. But the collaboration fell into dispute since August 2018.

Last December, Evergrande reached a settlement with Faraday and restructured its investment pledge, releasing its control over Faraday’s assets, which were considered collateral under the original investment deal.

Instead, Evergrande gained control of the startup's Chinese operations and assets, including a 401,000-square-meter land plot in Nansha, Guangzhou, paving the way for Evergrande to use the carmaker's technology in production in mainland China.

With over US$3 billion commitment into auto-related ventures, Evergrande has been shifting its business focus to the booming electric-car sector as the group's core property business faces a slowdown.

Prior to the recent acquisitions related to electric vehicles, the conglomerate had tapped into the automobile sales and dealership business by acquiring 41 percent interest in China’s Guanghui Group in 2018.

Guanghui controls China's largest car dealer, Grand Automotive, along with the world’s largest BMW dealer, Grand Baoxin Auto, operating over 700 authorized auto dealerships across the country.

Market observers believe the multiple auto-related investments are helping Evergrande build a complete industry chain in the new-energy automotive segment.

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