Connect with us

Emerging Markets

China Evergrande’s electric-vehicle ambitions stall



A $4bn factory in central China has come to symbolise the world’s most indebted property group’s moonshot attempt to become a leading electric-car brand.

The unfinished Evergrande Auto plant in Lu’an, a city of 5m in Anhui province, is a far cry from the futuristic structure depicted on a faded billboard near the site’s entrance.

When the Financial Times visited in December, the site was home to a single steel skeleton. It “has basically been on hold since the [coronavirus] epidemic started”, said a truck driver, who declined to be named, of the project that was announced in September 2019. 

Evergrande New Energy Vehicle Group, whose Chinese parent owes about $120bn, has invested billions of dollars into developing its electric-vehicle capabilities as it anticipates a boom in the sector. The moves also come as China’s property market faces pressure.

But the venture has been hit by setbacks, including possible government scrutiny of its investments, and is yet to release a vehicle commercially. While two other factories in Shanghai and Guangzhou near completion, work on another three has been slow.

According to Chinese media reports, the group was named in a directive in November from China’s National Development and Reform Commission that asked local governments to investigate land use, investment and progress of EV projects initiated since 2015. The directive is part of an attempt to rein in largesse in the sector.

Evergrande told the Financial Times that the Lu’an factory construction was progressing as planned and the company had not received “any inquiry from any authorities”. The NDRC did not respond to requests for comment.

Evergrande’s EV strategy is unusual compared with many of its smaller competitors in China. Many have been reluctant to build their own factories, instead outsourcing production to established carmakers. Evergrande has vowed to splash Rmb30bn ($4.6bn) on production capabilities between 2019 and 2021.

Evergrande Auto’s plans may have raised suspicions with the government because they look like a “land grab”, said Deng Haozhi, an independent commentator and economist.

Government policies designed to limit aggressive expansion by property developers have restricted land sales, he added. By designating land for electric-car production, Mr Deng believes, Evergrande is able to acquire it more cheaply and it may also help the group negotiate separate deals for other land nearby that it can later build properties on.

Line chart of Share price for Evergrande Health/China Evergrande New Energy Vehicle in HK$ showing Evergrande Auto's stock revs up on electric car push

Some analysts are less sceptical. They point to Evergrande’s growing technical acumen, such as through its acquisition of UK-based component maker Protean Electric and a majority stake in Swedish carmaker NEVS AB, which included intellectual property for an EV model made by Saab.

Analysts believe that Evergrande could also benefit from huge investor interest in the sector, shown by the rocketing share prices of US group Tesla and Chinese rivals like Nio and Xpeng.

Hong Kong-listed Evergrande Auto has raised hundreds of millions of dollars from investors including internet group Tencent and car-hailing platform Didi Chuxing. It is also considering a secondary listing on Shanghai’s technology-focused Star board.

Beijing is keen to cool China’s property sector, in August announcing its so-called “three red lines” approach, which limits how much developers can borrow.

That raised the impetus on debt-laden Evergrande to explore interests outside of property. The company owed $120bn as of June and last March unveiled a plan to reduce its debt by Rmb150bn a year through to 2022 partly by selling assets.

Evergrande’s first EV model, the Hengchi 1 (pictured), is intended to compete with Tesla’s premium Model S when it goes into mass production later in 2021
Evergrande’s first EV model, the Hengchi 1, pictured, is intended to compete with Tesla’s premium Model S when it goes into mass production later in 2021 © Evergrande New Energy Vehicle Group

But Evergrande’s record of swapping between sectors is a reason for caution, believes Nigel Stevenson, an analyst at consultancy GMT Research in Hong Kong. The car unit’s listed entity was known as Evergrande Health until August last year.

“You feel a sense of déjà vu with Evergrande. A few years ago they were investing in solar panels. None of these spin-offs have made a significant contribution to resolving the parent’s debt problems,” he said.

Evergrande Auto’s losses are mounting, reaching Rmb2.5bn in the first half of 2020, up 24 per cent compared with the same period a year before. 

That could increase the urgency for Evergrande to get a vehicle to market. The company’s first model, the Hengchi 1, is intended to compete with Tesla’s premium Model S when it goes into mass production in 2021, about a year later than initially expected. The company has a total of 14 Hengchi-branded models in the works.

Delays have not helped. A technician at Evergrande’s factory workshop in Guangzhou, southern China, told the FT in early December that a trial of production at the facility had been pushed back because of equipment adjustments.

Evergrande will have also have to deal with concerns that the Chinese market has already been flooded with electric vehicles, which still only make up about 5 per cent of the country’s car sales.

About $60bn in state support for EVs, mostly in consumer subsidies, between 2009 and 2017 prompted hundreds of new companies to spring up. Many pocketed these sweeteners without ever manufacturing a car.

The withdrawal of much of this support in 2019 prompted a year-long downturn in the EV market.

However, sales have since been reinvigorated by the release in China of new, tech-laden offerings such as Tesla’s Model 3 and Xpeng’s P7.

The onus is now on Evergrande to prove it has a concept that can sell. “The market and opportunity is too big for them to abandon their investments now,” said Tu Le, founder of Sino Auto Insights, a consultancy.

Additional reporting by Emma Zhou in Beijing and Qianer Liu in Guangzhou

Source link

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Emerging Markets

Narendra Modi’s popularity slips as Covid crisis hammers India




Narendra Modi’s popularity has fallen during India’s deepening Covid crisis, according to an opinion poll, as the country reports more than 400,000 daily infections in a brutal second wave.

The prime minister’s approval rating fell to 65 per cent on May 4, down from 74 per cent at the end of March, according to Morning Consult, the US data company — the lowest level since the agency began tracking Modi’s rating in August 2019.

The Indian leader’s disapproval rating also rose to its highest level since the tracker was launched, climbing to 29 per cent from 20 per cent.

Modi’s approval rating remained high compared with other global leaders, but the country’s health and humanitarian crisis has taken a toll.

The prime minister has a strongman reputation but has been accused of indifference in the face of the Covid-19 disaster as he campaigned in state elections even as the outbreak worsened.

“One of the things that Modi has really been good at is perception management. He’s always been very good at messaging,” said Ronojoy Sen, senior research fellow at the Institute of South Asian Studies in Singapore. “This is the first time I would say that his messaging has been awry.”

India’s death toll from the second wave has reached about 4,000 people per day © AP

Modi’s government has sought to deflect blame for the calamity on to state governments and the public for failing to follow pandemic protocols.

As deaths have risen, Harsh Vardhan, the health minister, has also cited official data to boast that India’s fatality ratio was lower than those of richer countries.

However, in a stinging letter to Modi on Friday, Rahul Gandhi, leader of the opposition Congress party, sharply criticised the government for a “lack of a clear and coherent Covid and vaccination strategy as well as hubris in declaring premature victory”.

The letter called for more decisive action to control the spread of the virus, as well as greater scientific tracking of the virus and its mutations.

“Allowing the uncontrollable spread of this virus in our country will be devastating not only for our people but also for the rest of the world,” Gandhi wrote, adding that India was a fertile ground for the virus to mutate into “a more contagious and a more dangerous form”.

India reported a record 414,188 infections and 3,915 deaths on Thursday. There have been more than 234,083 confirmed deaths from the disease in the country.

However, most experts believed the figures severely undercounted the magnitude of the crisis because of a lack of testing, especially in small towns and rural areas.

“Right now, data is very corrupted,” Gautam Menon, a professor of biology at Ashoka University, told a recent seminar. “It’s good in some states and it’s very bad in other states.”

Many epidemiologists believe India’s latest outbreak is set to peak in the coming weeks and caseloads will gradually fall, partly helped by lockdowns implemented by some state governments.

The country’s vaccination campaign is losing momentum, however, because of an acute shortage of jabs. The Modi government has been accused of failing to adequately plan its inoculation campaign.

India administered 1.6m vaccines on Thursday and the seven-day moving average of daily vaccinations has fallen to 1.4m, down from a peak of 3.6m in mid-April.

Many Indians were incensed to see Modi boasting of the huge sizes of crowds gathered for his recent election rallies in West Bengal state as the country struggled to access life-saving drugs, hospital beds, oxygen and vaccines.

The prime minister’s Bharatiya Janata party lost its bid to seize power from the Trinamool Congress party in Sunday’s election despite Modi’s efforts.

Source link

Continue Reading

Emerging Markets

Africa celebrates suspension of Covid vaccine patents




African health officials were on Thursday celebrating what one called a “bold and wonderful” breakthrough after the Biden administration threw its weight behind a temporary suspension of intellectual property rights on Covid-19 vaccines.

African Union officials hope that at least three countries — South Africa, Senegal and Rwanda — will develop the capacity to produce vaccines for the continent, including the mRNA-type vaccines that emerged as an innovative technology against Covid-19.

John Nkengasong, director of the Africa Centres for Disease Control and Prevention, welcomed the US administration’s backing of an IP waiver, a position that is supported by dozens of developing countries led by South Africa and India.

It would, he said, “definitely be a great influence to facilitate the mRNA manufacturing agenda”, adding that there are “very focused discussions” about producing vaccines on the continent.

South Africa has some of the continent’s most advanced vaccine knowhow, including Aspen, a Durban-based company that plans to “finish and fill” — though not make from scratch — 300m doses of Johnson & Johnson’s vaccine this year. The Pasteur Institute in Dakar, Senegal, also has vaccine-producing experience, making small quantities of yellow fever jabs each year.

John Nkengasong, director of the Africa Centres for Disease Control and Prevention, welcomed the Biden administration’s backing of an IP waiver © Zacharias Abubeker/FT

In addition, Paul Kagame, president of Rwanda, suggested Kigali could become a vaccine hub. “It is important for Africa to forge public-private partnerships for vaccine manufacturing on our continent,” he said last month, adding that Africa needed to accelerate a continental approach to medicines regulation. “Vaccine equity cannot be guaranteed by goodwill alone,” he said, adding that it was time for African countries to stop “being sorry for ourselves” and act.

Africa is extremely dependent on India for its vaccine production, a weakness that has been exposed by a temporary Indian government ban on the export of Covid-19 jabs. Less than 1 per cent of Africans have received a single dose of Covid-19 vaccine and new supplies have all but dried up.

Officials warned there was still a long way to go before African manufacturers could start production. “The fact that the US has indicated it is willing to waive IP rights does not mean that it is actually going to happen,” said Ayoade Alakija, co-chair of the Africa Vaccine Delivery Alliance, who anticipated pushback from pharmaceutical companies and perhaps other countries in the EU and elsewhere.

The first step, said Rebecca Enonchong, a Cameroonian technology entrepreneur and board member of the World Health Organisation Foundation, was to “ensure the patent issue was not an issue”. But even then, she said, it would take time to build up the physical and skills capacity necessary to make mRNA vaccines. There is also a global shortage of vaccine inputs, including nucleotides, enzymes and lipids as well as of vials, caps and syringes. “I think it is unlikely that we will be able to ramp up for this pandemic,” Enonchong said.

Kiran Mazumdar-Shaw, chair of Biocon, a Bangalore-based biotech company, said she did not see IP as the biggest obstacle. “Today, everybody is talking about patents, patents and patents. Even if they don’t enforce patents, how many people can produce Moderna vaccines at scale?” she said, referring to one of the mRNA vaccines.

Building manufacturing capacity in the developing world was “the next big issue”, said Fatima Hassan, founder of the Health Justice Initiative, a South African campaigner for access to vaccines. There had been at least 50 applications already to a WHO hub for transferring mRNA technology, she said, which “indicates that there is definitely interest around the world”.

Two decades ago, South Africa led the battle, along with Brazil, against pharmaceutical companies’ defence of patents on HIV medicines. Legal victories finally forced companies to slash prices of antiretroviral drugs for developing countries, but not before millions of people had died of the disease. South African diplomats pressing for the temporary suspension of patents on Covid-19 vaccines said that “passing this waiver makes ethical, epidemiological, and economic sense”.

Additional reporting by Amy Kazmin in New Delhi

Source link

Continue Reading

Emerging Markets

A harrowing brush with Covid as India is ravaged




As a foreign correspondent, my job is to tell India’s stories, not be part of them. But when I started feeling feverish while writing an article about Covid-19 vaccine policy last month, I had a gut feeling that the Sars-Cov-2 virus had found me.

I hoped it was exhaustion that I’d sleep off but the next day, still feverish, I was urged to take a Covid test. A leading diagnostic lab chain, which earlier had run an efficient home-testing service, had stopped answering its phones and responding to online requests. But a doctor friend persuaded one of the lab’s phlebotomists to collect my sample. Two days later, the results confirmed I was part of the ferocious coronavirus wave battering India and pushing its healthcare system to breaking point.

Over the following days, my physical symptoms remained mild. But it was still harrowing to be sick from a notoriously unpredictable virus knowing that drugs, hospital beds and oxygen were scarce. I suffered constant anxiety knowing I’d struggle to get medical help if I took a turn for the worse.

I quickly discovered that I’d been so focused on avoiding infection that I had no clue what to do once sick. A friend connected me to a Kolkata-based infectious disease specialist, who felt I was at low risk for severe illness. I’d had the first dose of a Covid vaccine 10 days before my fever started. But the doctor urged me to treat the illness aggressively from the start, given the chaos at hospitals.

He prescribed the antiviral drug, favipiravir, now undergoing clinical trials in the UK as a potential Covid-19 therapy but already approved in India for emergency use. Many of his patients had taken it, he said, and none suffered severely, including people in their 90s.

Normally, I’m reluctant to medicate. I knew favipiravir’s effectiveness as a coronavirus treatment wasn’t yet scientifically validated. But with hospitals turning away ailing patients, the logic of taking an experimental drug made sense. The challenge, I discovered, was to get hold of it.

I called five pharmacies, but all had run out of stock. A friend called six more to no avail. I panicked — the doctor wanted me to start the drug fast and Delhi was hours from the start of a weekend curfew. Then a friend, who’d heard I was Covid-19 positive, called.

“I’m looking for this drug,” I told her. “Any idea where I can get it?” She said she’d check. It turned out that people with foresight had prepared small emergency drug stashes. Her friend had such a stash and was willing to share it.

I was elated to get the pills to start treatment that night. But it wasn’t enough for the prescribed course. Days later I spent hours calling pharmacies in an unsuccessful hunt for more, before finally begging an industry friend to help.

My difficulties pale in comparison with the desperation, anger and grief beyond my sickroom. My Twitter feed was filled with pleas for hospital beds, oxygen cylinders, the antiviral remdesivir, plasma or a place in an intensive care unit. Top hospitals begged on Twitter for refills of dwindling oxygen supplies. Friends and many professional contacts were fighting for their lives. Doctor friends were weeping with impotent rage.

There was much grim news of death. A former Indian ambassador died after hours waiting in a hospital parking lot for admission; inpatients whose oxygen ran out; a top politician’s 34-year-old son, young journalists. Crematoriums struggled with an unprecedented flow of bodies.

I decided I had to tune out of the unfolding crisis, to ensure my physical recovery and to protect my mental health. I stopped checking Twitter. Newspapers piled up, unread.

Once I felt better and tuned back, I saw Narendra Modi’s government had cynically expanded eligibility for vaccination to all over the age of 18, despite an acute shortage of jabs.

And with thousands dying daily, often for want of medical help, the health minister was callously citing dubious official data to claim India’s Covid fatality rate was lower than richer countries — hardly consolation to grief-stricken families.

Today, I’ve recovered from my encounter with the virus. It will take far longer to get over the trauma of watching this calamity engulf the place I call home.

Source link

Continue Reading