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China Evergrande Group’s electric-vehicle unit jumped in Hong Kong trading after the chairman of the indebted property giant said making such cars would become its main business within a decade.

Shares of China Evergrande New Energy Vehicle Group Ltd. climbed as much as 17% on Monday, the most in three weeks. Evergrande rose 6% before paring the gain to 0.7% at 3:01 p.m. The Securities Times reported Friday that Evergrande Chairman Hui Ka Yan said he plans to scale down real-estate operations to focus on new energy vehicles. 

The reported shift to the electric car business will be a challenge given that Evergrande has yet to deliver a single vehicle, despite Hui’s ambitions to take on industry giants such as Tesla Inc. The world’s most indebted developer is struggling with a cash crisis that has led it to consider selling stakes in units including Evergrande NEV. 

Evergrande NEV was up 11% in afternoon trading, but remains about 94% off its peak in February. The company last month warned of a “serious shortage of funds” and said there was no guarantee it could meet financial obligations. The liquidity shortage meant it stopped paying some operating expenses and some of its suppliers turned away. 

Read about Evergrande NEV’s pledge to deliver its first vehicle

The company’s first electric car — “Hengchi” — will be delivered from its Tianjin factory at the start of next year, according to an Oct. 11 statement on Evergrande’s website, which also referred to a “three-month war” to tackle the main challenges in EVs. In August, the firm cautioned that it might have to delay mass production of cars unless it can secure more capital in the short term. 

A pivot to electric vehicles “won’t necessarily cut risk,” Bloomberg Intelligence credit analyst Adrian Sim wrote in a note. “EVs are just as competitive as property; there’s no guarantee Evergrande can catch up to incumbents.”

Evergrande, which also has operations ranging from a soccer club to mineral water, was recently criticized by China’s central bank for “failing to manage its business well.” In an usually harsh comment, People’s Bank of China official Zou Lan said earlier this month that the developer “blindly expanded and diversified” in recent years, instead of operating prudently amid changing market conditions.

Read More: China’s Electric Car Giant Hasn’t Sold a Vehicle Yet 

Evergrande spent more than $3.7 billion on an array of EV-related companies after announcing in 2019 it wanted to be the world’s premier manufacturer of green cars. That has yet to pay off, with Evergrande NEV reporting a 4.8 billion yuan ($752 million) loss in the first half of this year. In September, the unit scrapped a proposed listing on Shanghai’s Nasdaq-style Star board. 

Less Land 

In principle, Evergrande won’t buy any land over the next 10 years, Hui said at an internal meeting, according to the Securities Times report. Annual sales of real estate will drop to about 200 billion yuan in 10 years from 700 billion yuan in 2020, he was quoted as saying. Evergrande declined to comment. 

Evergrande said construction at more than 40 projects in Guangdong province is proceeding smoothly and the homes will be delivered. The developer owes more than $300 billion to banks, bondholders, suppliers and investors. It pulled back from the brink of default last week, paying an $83.5 million bond coupon just before the deadline

The assurance on the projects “is a sign it seeks to ease investors’ frayed nerves,” BI real estate analyst Lisa Zhou said in a separate note. “Liquidity woes still loom, which it may address by disposing of its investment properties and listed shares of subsidiaries, despite plans to scale back its real estate operations by taking a 10-year break from land buying.”

— With assistance by Charlie Zhu, and Emma Dong

(Updates with comment from Bloomberg Intelligence in sixth paragraph)

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