Evergrande Health pays US$930 million to buy control of carmaker in its foray into mass production of electric vehicles in China

Evergrande Group, China’s third-largest property developer by sales, has bought control of a producer of electric vehicles in the country, bolstering its founder’s ambition to diversify from real estate into the emerging industry of next-generation automobiles.

The developer will use its subsidiary Evergrande Health Industry Group to pay US$930 million for 51 per cent of National Electric Vehicle Sweden (NEVS), according to a statement to the Hong Kong stock exchange, where it is listed. Evergrande Health has paid first instalment of US$430 million on Tuesday, while the remainder of the transaction will be completed by the end of January, according to the statement.

The purchase gives Evergrande’s founder Hui Ka-yan – also known as Xu Jiayin on the mainland – an extension on his foray into electric vehicles (EVs). Evergrande Health already owns 32 per cent of Faraday Future, after a US$2 billion investment in the electric carmaker founded by Chinese entrepreneur Jia Yueting.

NEVS itself is a Chinese consortium owned by Tianjin’s municipal government and a research outfit of the Chinese cabinet’s think tank and the country’s second-largest phone company Unicom.

NEVS, which filed for bankruptcy protection in 2014, had tried to buy control of the iconic Swedish vehicle marque Saab Automobile two years earlier. The initial purchase would have licensed NEVS to use the Saab brand and its griffin logo on vehicles assembled in China.

After Tianjin Binhai Hi-Tech Industrial Development Area and the State Research Information Technology emerged to become owners of NEVS, the carmaker dropped its plan to use the Saab trademark, and would instead assemble cars in Tianjin under its own brand, based on Saab’s 9-3 platform. Two of NEVS’ models meet the standards of mass production in China, according to local media reports.

“Through acquiring corporations possessing leading new energy automotive technology and production capacity, the board believes that the group’s growth capabilities can be strengthened, and a strong competitiveness in the fast-growing new energy automotive industry can be obtained, capturing market share and diversifying the businesses of the group,” Evergrande Health said.

This is the second attempt by Evergrande Health to get into electric vehicles, following a months-long dispute with Jia, the founder of the LeEco Group, a video streaming company that was saddled with debt after ventures into movie production and electric cars.

Evergrande Health, which had committed to an investment of US$2 billion over three years in Faraday Future, had been embroiled in disputes over the past few months with the California-based carmaker.

Evergrande had accused Faraday Future of manipulating it into paying US$700 million ahead of schedule, while the carmaker said Evergrande was deliberately delaying investment to starve it and obtain its intellectual property.

To date, Evergrande has invested US$800 million in Faraday Future.

On December 31, Evergrande said it agreed to restructure its investment pledge in Faraday Future, and both sides agreed to drop all allegations against each other.

Evergrande Health now holds a 32 per cent stake in Faraday Future without any additional investment in the start-up.

Evergrande’s shares rose 3 per cent in Hong Kong to HK$22.35 while Evergrande Health fell 0.7 per cent to HK$14.82 before the purchase was announced.