BEIJING: The electric vehicle (EV) arm of embattled property developer China Evergrande Group says that two subsidiaries have started bankruptcy procedures, in the latest blow to the failing automaker.

China Evergrande New Energy Vehicle Group Ltd said a court hearing held Aug 2 ruled the subsidiaries have entered into bankruptcy and reorganisation proceedings.

This follows a July 28 filing that said creditors had applied to a local people’s court for the bankruptcy and reorganisation of Evergrande New Energy Vehicle (Guangdong) Co and Evergrande Smart Automotive (Guangdong) Co.

In June, the EV unit said it was severely short of funds, and faced obligations not only to creditors but also a local government which had asked it to return about 1.9 billion yuan (US$266mil) in incentives and subsidies. The company also faced losing the rights to land where some of its plants are located.

In May, it said liquidators had reached a preliminary agreement with an unidentified buyer who could take an initial 29% stake in the unit - causing its languishing stock to more than double. However, the deal hasn’t been finalised and there’s been no update in more than two months.

The fall from grace is a stark contrast to the ambitions that founder Hui Ka Yan, who’s now being detained in China, once had for the company.

Hui vowed to take on Elon Musk’s Tesla Inc and become the world’s biggest EV maker within three to five years.

A huge share rally in 2021 saw Evergrande new energy vehicle’s market value exceed Ford Motor Co and General Motors Co, despite the company not having sold a single car under its own brand at that point.

 - Bloomberg