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Chinese real estate developers bet on EV market

Since last year, several major Chinese real estate developers have placed a bet on electric vehicles, seeing synergies between that industry, and their existing businesses towards long-term financial gains

Their investments will help Chinese EV makers better handle high capital expenditures and weather potential market risks.

Among the investments the various real estate companies have made in EV makers, the one that has received the most extensive media coverage was the Evergrande Group—China’s second-largest property developer ranked by sales.

The target company, Faraday Future—is an EV startup founded by Chinese enterpeneur Jia Yueting in Los Angeles. Until two months ago, Faraday Future was teetering on the verge of bankruptcy from a severe cash crunch.

In June, Evergrande Group arranged for a subisidiary, Evergrande Health Industry Group—to acquire 45% of Faraday Future for $863 million. This week, Evergrande Health, now Faraday Future’s largest shareholder, opened a new company, Everygrande FF Intelligent Automotive (China) Co., in the south China city of Guangzhou with a registered capital of $2 bn.

Faraday Future started assembling its first vehicle, the FF 91 luxury crossover, at a leased plant in Hanford, Calif., this month. Evergrande FF is expected to start producing the vehicle at a factory now under construction in Guangzhou in the coming future.Evergrande Group has deep pockets to tap when it comes to financing Faraday Future’s EV output.

It generated a net profit of $7.6 bn on revenue of $44 bn in the first half. With the support of its parent company behind it, Evergrande Health plans to build five assembly plants in China in the next 10 years—with combined annual production capacity of 5 mn EVs.

In addition to Evergrande Group, two other major Chinese property developers have diversified with forays into the domestic EV industry.

 Firstly, China Fortune Land Development Co., China’s largest industrial park developer and operator, in December acquired a 53.4% interest in domestic EV startup Hozon New Energy Vehicle Co.

In the same month, Baoneng Investment Group Co. also purchased a 51% in Qoros, a small Shanghai carmaker to accelerate Qoros’ EV development and production. Baoneng also runs health care, insurance, auto components production and car financing businesses.

In October 2017, Country Garden Holdings, China’s largest real estate developer, had also disclosed plans to partner with domestic battery makers and other parts suppliers to build a large component factory for EVs in Shunde of South China’s Guangdong province.

In 2015, Beijing started reining in domestic real estate investments in a bid to cool the overheated housing market.  In the last few months, the government has further tightened control on property development in China’s major cities.

The policy shift has sent real estate developers in general searching for business opportunities in other sectors, and more of these companies likely will join Evergrande, Fortune Land Development and Baoneng to make their way into the EV industry in one way or another as strategic investors.

-GBO Correspondent

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