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The Chinese developer that reckons it can take on Tesla

By Emma Dong  /  Bloomberg

A Chinese developer known for its investments in everything from soccer clubs to spring-water companies is taking on Elon Musk in the electric-vehicle (EV) arena, declaring it can be the biggest manufacturer in the world within three to five years.

China Evergrande Group (恒大集團), the country’s second-largest property developer, has been moving further away from its real-estate roots for years, but this might be its boldest departure yet.

The firm said in a statement on its Web site on Tuesday that it plans to start selling EVs “soon.”

“Evergrande has positioned across the electric-vehicle industry chain and is now armed with advanced technology,” chairman Hui Ka Yan (許家印) was cited by the company as telling a supply-chain conference held by the group in Tianjin on Saturday last week. “Evergrande will strive to become the world’s biggest, and the strongest, electric-vehicle group within three to five years.”

Musk, the chief executive officer of Tesla Inc, has been churning out EVs for years and has only recently been able to make a profit.

Besides Tesla, Evergrande would come up against all the world’s major automakers, which are plowing tens of billions of US dollars into EV production and research.

Tesla’s latest Model Y crossover, unveiled earlier this month, has rekindled concerns about the company’s cash position and analysts are skeptical of executives’ claims that they can service debt obligations.

Nissan Motor Co, meanwhile, unveiled a new version of its Leaf plug-in electric car in January, while Daimler AG in December last year announced plans to buy US$23 billion worth of battery cells by 2030 to bring electric and hybrid vehicles to market.

Evergrande would feel the pressure too from local players, such as BYD Co (比亞迪), which is backed by Warren Buffett and which has been a big beneficiary of electric-vehicle subsidies from Beijing. However, those handouts are expected to be heavily cut this year.

“Aiming to produce at such speed is like imagination,” said John Zeng (曾志凌), the managing director of LMC Automotive Shanghai (LMC汽車市場諮詢). “I haven’t seen very strong technology or products from the firms they’ve bought.”

Evergrande did not disclose any details of the vehicles it aims to manufacture by June, or whether those vehicles would be for mass production or just samples.

It takes at least two years to produce a new electric-vehicle model from scratch, Zeng said.

Still, it is not the first time the property developer has dabbled in automotive technology. This year alone units associated with Evergrande’s health division have spent more than US$1.1 billion buying stakes in an array of EV-related companies, including an interest in a maker of in-wheel motors, a stake in a battery maker and part of a Swedish firm focused on intelligent cars.

Evergrande Health Industry Group Ltd (恆大健康) also last year pledged US$2 billion to EV start-up Faraday Future (法拉第未來), the firm founded by Chinese ex-billionaire Jia Yueting (賈躍亭) that has been expanding in the US.

After a legal fight over whether Jia could take on new investors, Evergrande Health agreed to a reduced stake. The interest does at least give Evergrande a production base for its own cars.

Hui, who is China’s third-richest person, also said over the weekend that Evergrande believes that the EV industry has “enormous market potential” and that the company aims to make a contribution toward China’s goal of becoming a “powerful economy in automobile.”

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