HONG KONG -- Shares of the electric vehicle unit of property developer China Evergrande Group fell sharply after reports it would be a target of an industry investigation by China's top economic planning body.
China Evergrande New Energy Vehicle Group, also known as Evergrande Auto, fell as much as 11% in Hong Kong before closing 5.2% lower at HK$22.80.
According to an official document obtained by Chinese business publication Yicai, the National Development and Reform Commission has asked local branches to submit investment and production information for electric vehicle projects in their territories over the past five years.
Specifically, the commission demanded details of projects involving Evergrande Auto and Shenzhen-based conglomerate Baoneng Group, including the amount of land they had occupied, development progress and total investment made.
Industry insiders said the investigation was a signal that Beijing wants to rein in the booming but problematic sector.
"Looks like China is making an effort to regulate" the EV sector, said Cui Dongshu, secretary-general of the China Passenger Car Association.
EV companies have multiplied in China over the past few years thanks to generous government subsidies amid calls from Beijing to fight air pollution and cut fossil fuel use. Local governments raced to host EV projects, hoping to nurture homegrown champions in an industry promoted by Beijing.
In October, China set a goal to push sales of new energy vehicles -- including battery-only EVs, plug-in hybrids and hydrogen powered cars -- to 20% of overall auto sales by 2025.
However, China's eagerness to develop the segment has led to many chaotic practices. Some companies stay afloat solely on government subsidies or are accused of acquiring land at low prices in the name of developing EV projects.
Evergrande, founded and controlled by Xu Jiayin, China's third richest man, has positioned itself as a serious competitor in China's EV race.
Despite venturing into the sector just two years ago, the property developer has spent tens of billions of dollars on acquisitions, research and building factories, setting the goal of becoming the "world's largest and most powerful" new energy vehicle group within 3 to 5 years.
In August, Evergrande NEV unveiled six models covering all major passenger car categories, including a sedan, an SUV and a multipurpose vehicle. The first model is expected to reach the market in the second half of 2021.
The company is also planning to issue shares on Shanghai's STAR Market, hoping to capitalize on growing investor interest in green vehicles.
The stock prices of Tesla, and Chinese startups Xpeng Motors, Li Auto and Nio have surged in the U.S. this year, taking their market capitalization above that of many much larger, traditional automakers.