Evergrande Group Photo: CFP

The electric vehicle division of China's embattled real estate developer Evergrande Group saw its shares fall by over 7 percent on Monday morning, as the unit announced on Sunday that the creditors of its two subsidiaries had asked a court to start bankruptcy proceedings.

Evergrande New Energy Vehicle (Guangdong) Co and Evergrande Smart Automotive (Guangdong) Co have received a notice from local court on Friday saying that creditors of the two companies have applied for court-ordered bankruptcy and reorganization, China Evergrande New Energy Vehicle Group said in a filing with the Hong Kong Exchanges and Clearing Ltd.

"The notice has a material impact on the production and operating activities of the company and its relevant subsidiaries," the EV auto said in the statement.

Following the announcement, China Evergrande New Energy Vehicle Group saw its share drop by 7.46 percent to as low as HK$0.31 ($0.04) by noon on Monday.

The development adds growing pressure on the cash-strapped carmaker. The EV business had racked up a total loss of 110 billion yuan as of the end of last year, according to the company's financial report. And it only had 129 million yuan left in its bank accounts.

China Evergrande New Energy Vehicle Group said in January that its Vice Chairman Liu Yongzhuo was detained and is put under criminal investigation, adding more chaos to the troubled firm.

In May, China Evergrande New Energy Vehicle Group said liquidators had agreed on behalf of the key shareholders to sell a stake of 29 percent of the EV unit, and may also extend a new line of credit to support car production.

In May, the China Securities Regulatory Commission fined Evergrande 4.175 billion yuan for fraudulent bond issuance and information disclosure violations, while imposing a lifetime ban on Hui Ka Yan, also known as Xu Jiayin, the founder of the real estate developer, from the securities market. Hui Ka Yan was also fined 47 million yuan. 

The penalty marked "the strictest law enforcement" since 2019, when China's financial sector regulators set up a unified law enforcement mechanism of the country's bond market.

Global Times