On the evening of June 11, Evergrande Motors announced that the company had recently received an administrative penalty decision and another notification from relevant local administrative departments. The administrative penalty decision required it to refund 1.9 billion yuan in subsidies within 15 days, and the notification required it to stop production and sales. Judging from the management authorities involved in the content of the two documents, the issuing agencies were the Guangzhou government and the Ministry of Industry and Information Technology (MIIT).

Hengchi 5's Tianjin factory is currently the only factory qualified to produce complete vehicles for Evergrande Motors. Due to Evergrande Motors' financial issues, the factory has been停产. The notification issued by the MIIT aims to further clarify that it cannot produce and sell products without authorization. Guangzhou government's demand for a refund of 1.9 billion yuan in subsidies is an urgent issue that Evergrande Motors needs to address. The local government has a reasonable basis for this, which is a double blow for Evergrande Motors. The first document is an administrative penalty decision. Evergrande Motors stated in the announcement that the relevant local administrative departments believed that the relevant subsidiaries had failed to fulfill their contractual obligations in accordance with the terms of the relevant agreements, which constituted a breach of contract. Therefore, the following handling decisions were made: 1. Terminate three related agreements; 2. The relevant subsidiaries shall refund all rewards and subsidies issued within 15 days from the date of receipt of the administrative decision letter, totaling approximately 1.9 billion yuan.

The reasons for the breach of contract are:

First, failure to complete the investment scale, planned production capacity, and annual sales targets related to the establishment of the group headquarters, global R&D center, and global production base within the agreed time limit in the area under the jurisdiction of the relevant local administrative departments;

Second, failure to complete the construction of production bases and R&D centers on schedule, put them into production, and complete the R&D of new energy vehicle models;

Third, judging from the operating status of the relevant subsidiaries, the purpose of the relevant agreements has objectively become unachievable.

According to public reports, the city where Evergrande Motors will carry out the above investment projects is Guangzhou. As early as June 11, 2019, the Guangzhou Municipal People's Government signed a strategic cooperation framework agreement with Evergrande Group. The agreement shows that in the future, both parties will establish a comprehensive, in-depth, and multi-field strategic partnership. Evergrande will invest 160 billion yuan in Nansha District, Guangzhou, to build three new energy vehicle bases. After the completion of the new energy vehicle R&D and production base, it will have an annual production capacity of 1 million vehicles; The new energy battery R&D and production base will build a super factory with a production scale of 50GWh; while the motor R&D and production base will build a production base for motors and electronic control systems that can support 1 million vehicles.

According to the public information at the time when Evergrande Motors obtained land in Nansha, Guangzhou, the industrial agreement signed by both parties clearly stipulates the investment intensity of the land. If Evergrande Motors cannot fulfill the above commitments, Nansha District can unilaterally terminate the "State-owned Construction Land Use Right Transfer Contract." Subsequently, Nansha District also implemented the land leveling project for Evergrande's global R&D center for new energy vehicles in accordance with the agreement.

According to netizens' on-site investigations, Evergrande's car city is now in ruins. Many projects along the main roads inside the car city are still unfinished, and the entire park looks very desolate, with empty buildings and weeds everywhere. Initially, it was advancing vigorously, but now it has left Nansha, Guangzhou, in a mess. It is reasonable to demand a refund of the corresponding subsidies. However, it is still unclear whether Evergrande Motors can come up with this money now. The second document is a notification. Evergrande New Energy Vehicles (Tianjin) Co., Ltd. recently received a notification from relevant departments. According to the notification, after reviewing the maintenance status of the production access conditions for new energy passenger cars of Tianjin Evergrande, the department proposed three issues requiring rectification and intended to order Tianjin Evergrande to stop producing and selling new energy passenger cars and carry out rectification.

During the rectification period, the department will suspend the acceptance of new product declarations for Tianjin Evergrande's new energy passenger cars and the electronic transmission of product qualification certificates for new energy passenger cars. It will be restored after the rectification is completed and passes the review to meet the production access conditions. Obviously, the competent authority responsible for accepting new vehicle access and vehicle product qualification certificates is the MIIT. Regarding Evergrande Motors' current issues, if it rashly carries out the production and sales of new energy vehicles, it may lead to a series of problems subsequently. The MIIT cannot sit idly by.

Moreover, such requirements are also legally based. The "Regulations on the Admission Management of New Energy Vehicle Manufacturers and Products" clearly stipulate that if new energy vehicle manufacturers cannot maintain the "Admission Review Requirements" and pose potential safety hazards to public safety, personal health, and life and property, the MIIT shall order them to stop production and sales activities and immediately correct them.