The local court has ordered two units of China Evergrande New Energy Auto to enter bankruptcy and reorganisation proceedings. This decision comes after individual creditors of Evergrande New Energy Vehicle (Guangdong) and Evergrande Smart Automotive (Guangdong) filed for such proceedings last week.
Shares of the electric vehicle maker plunged 7 per cent on July 29 following the creditors' move. The court hearing on August 2 resulted in the ruling to initiate the bankruptcy process for the two units.
This ruling adds to the challenges faced by the EV unit of China Evergrande Group, the embattled real estate developer. In May, the company updated the market on ongoing discussions between its liquidators and a potential buyer. The outcome of these talks, which is crucial for extending a new credit line to support the firm's production activities, could significantly shape the company's future.
This significant development has come at a time when, at the beginning of 2024, it was predicted that the demand for aluminium would be driven largely by the transportation sector, with EVs playing a major role.
Furthermore, aluminium is a key material for electric vehicles (EVs), a market that has experienced a substantial surge in recent years. Numerous downstream companies have proactively invested in facilities to provide products, specifically catering to battery casing and battery foils within the EV industry.
China accounts for about 56 per cent of the global aluminium extrusion usage in transportation and contributes to about 15 per cent of domestic extrusion consumption. Automobile production in China recovered in 2021 after a continued decline since 2018. Several extruders have collaborated with major domestic automobile manufacturers, including Chery, BYD, and FAW, to develop aluminium alloy bodies for new energy vehicles.
The Chinese automotive market is poised for significant growth in 2024. Total vehicle sales are expected to reach 31 million units, marking a 3 per cent increase from the previous year. Notably, new energy vehicle (NEV) sales are projected to surge to 11.5 million units, representing a substantial 20 per cent year-on-year rise.
