(Yicai) Sept. 18 -- Aiways, a Chinese new energy vehicle maker backed by internet giant Tencent Holdings, has halted production due to difficulties in raising new finance thanks to its connection to a debt-laden former chairman.

Aiways' plant shut down last month, Yicai learned from a person familiar with the matter.

Aiways, which once raised over CNY10 billion (USD1.4 billion) from Contemporary Amperex Technology, Didi Chuxing and other big companies, was unable to get loans from banks due to its association with former Chairman Chen Xuanlin who has had assets frozen by the courts, a source told Yicai.

Aiways had only CNY54.6 million (USD7.5 million) in cash and had racked up debts of CNY3.4 billion (USD466 million) as of the end of December 2021.

Chen became chairman of Aiways in 2022 after his company Shanghai Dongbai Industrial Group poured CNY2.5 billion (USD342.8 million) into the struggling automaker as a lifeline. But only CNY2.3 billion of the CNY2.5 billion promised was actually invested in Aiways, according to Yicai research.

Chen, who resigned as chairman last November, has had CNY2.4 billion of equity that he owns in different firms frozen by the courts. And investors in Dongbai Industrial complained in November last year that they were not paid the principal and interest on some financial products on schedule due to personal reasons of Chen.

Soon after the cash injection, Aiways said it will recruit 1,000 employees and develop new products. It also unveiled plans to list on the US stock market through a reverse takeover with China Liberal Education Holdings. But the educational services provider pulled out in May.

Airways was set up in 2017 by Fu Qiang, a former senior executive at Mercedes-Benz, Audi and Volvo. Since its formation, it has only released two car models. Mainly focused on the European market, the company has missed out on the growth opportunities brought by the fast development of the Chinese market.

But the Shanghai-based firm is still fighting. “Aiways has more than 100,000 undelivered orders from overseas and will have a chance to survive if it can get money in the future though the firm is in trouble now,” another source said.

Aiways formed an interim working group on shareholder governance in July headed by Fu and with Zhu Xiaohua as the representative of the firm’s investors, to get the firm back into production.

Editor: Kim Taylor