HONG KONG, Oct 25 (Reuters) – Shares in China Evergrande Group’s electric vehicles (EV) unit <0708.HK> rose on Monday as the embattled property developer moved to prioritise the growth of its nascent EV business over its troubled core real estate operations.

Evergrande (3333.HK) , reeling under more than $300 billion in liabilities, averted a costly default last week with a last-minute bond coupon payment, buying it more time to head off a looming debt crunch with its next major payment deadline on Friday. read more

An announcement by its chairman, Hui Ka Yan, reported by state media on Friday, that it would make its new electric vehicle venture its primary business, instead of property, within 10 years, cheered investors on Monday.

Evergrande rose as much as 6% during the session before closing down 0.7%. China Evergrande New Energy Vehicle Group Ltd (0708.HK)rose 11.4%. The benchmark Heng Seng Index (.HSI) was flat.

Raymond Cheng, CGS-CIMB Securities’ head of China research, said the business shift makes sense given Beijing’s growing support for EVs and its increased tightening of the frothy real estate sector. “This is the best outcome, if it just focuses on existing developments and maintains the operation,” Cheng said.

While the move would help Evergrande deleverage by gradually scaling down its massive undeveloped land holdings, Cheng said it was unclear how it would affect the company’s planned disposals including stakes in the EV unit.

Evergrande’s new vehicle business, founded in 2019, has yet to reveal a production model or sell a single vehicle. Last month, the unit warned it was still seeking new investors and asset sales, and that without either it might struggle to pay salaries and cover other expenses.

Hui expects property sales will slow to about 200 billion yuan ($31.31 billion) per year within the 10-year period, compared to more than 700 billion yuan last year, China’s Securities Times reported on Friday.

Reporting by Clare Jim and Donny Kwok in Hong Kong, Andrew Galbraith in Shanghai, Jing Xu in Beijing; editing by Richard, Pullin, Sam Holmes and Christian Schmollinger