Why is Evergrande Auto's market value so high?
3 Answers
Evergrande Auto, which has not yet delivered a single vehicle, has stunned the industry with its performance in the capital market. Evergrande Auto: Although Evergrande Auto has not officially started sales, its market influence has already been established. Whether it's the massive marketing impact from earlier or the fact that Evergrande Auto's new vehicles have already entered mass production and road testing, the company has demonstrated its market influence. In a sense, Evergrande Auto is just one step away from official sales. Development: Evergrande Auto's CFO Pan Darong stated at last year's interim results presentation that the company planned to invest 2.7 billion yuan in the second half of 2020, primarily for equity acquisitions. In 2021, it expected to invest 9 billion yuan, covering factory construction, land acquisition, and R&D. By 2022, Evergrande Auto's total investment in the automotive sector would exceed 29.4 billion yuan.
I remember Evergrande Auto's market value once soared incredibly high, mainly due to excessive market speculation. Riding the wave of new energy vehicles, Evergrande Group, with its substantial financial resources, rolled out luxurious concept cars and battery technology promotions, prompting investors to rush to buy its stocks, driving the share price to astronomical levels. Policy tailwinds—China's strong government push for electric vehicles, subsidies, and green license plate policies stimulated demand, fueling fantasies that it would become China's version of Tesla. Moreover, during bubble periods in capital markets, concepts take precedence: it didn’t matter that there were no mass-produced cars; having a grand vision was enough to inflate value. But reality delivered a harsh wake-up call—products were delayed, and after the group's debt crisis exploded, its market value plummeted, reminding everyone not to just buy into the hype. Making cars and turning a profit is what truly matters. In my view, this is a classic bubble case—value without substance remains just a fantasy.
The inflated market value of Evergrande Auto is the result of multiple overlapping factors, in my analysis. Evergrande, a real estate giant, ventured into the new energy sector, investing heavily in factory construction and technology R&D. The market perceived its ambition to potentially challenge Tesla, naturally driving up its stock price. Amid the electric vehicle frenzy, capital has been chasing any related targets wildly. Meanwhile, Chinese government policies, such as carbon neutrality goals, have boosted industry growth expectations, further inflating the market value. However, underlying risks are evident: severely lagging production progress and a lack of mass-production capability to support the valuation. After the debt crisis of Evergrande Group itself erupted, investor confidence collapsed, leading to a sharp drop in market value. From this perspective, the surge in market value reflects collective irrational expectations rather than the company's actual strength.
