What's the Chinese Electric Car Startup Survival Rate? One Percent, An Investor Predicts
China has bit of a gambling problem when it comes to electric car manufacturers, though it should probably be referred to as a “gambling solution.”
The country dumps vast sums of money into hundreds of EV startups, effectively hedging its bets by placing chips on absolutely everyone. With $15 billion already invested, the nation intends to put another $47 billion toward the cause — plus whatever funding investment firms decide to contribute. While the strategy has definitely stimulated the economy, created jobs, and supersized the industry, there’s growing concern that creating a battle royale between startups could blow up in China’s face.
Even if it doesn’t, there’ll still be a bunch of automakers eating each other until only a handful remain. Previous estimates had that number riding around 5 percent of the whole. But NIO Capital, the Chinese investment firm that’s already invested a gratuitous amount of funds into advanced automotive tech, claims the actual number will be far lower — probably around 1 percent.
Based on the ever-growing number of Chinese EV companies, that amounts to five firms.
“It’s a very complicated system that needs abundant investments and a large group of people to be able to build a car from scratch,” NIO Capital’s Managing Partner Ian Zhu in interview with Bloomberg. “Therefore, the survival rate of all these EV startups will be very low.”
He also said his firm prefers to fund cooperative projects between startups and traditional carmakers because they combine innovation with real manufacturing capabilities. Most new EV companies are nowhere near ready to build a car capable of being mass produced. That’s true for some of the more established automakers, too.
However, the mere prospect of delivering an electric vehicle seems enough to blow these new firms’ share prices through the ceiling. Meanwhile, traditional Chinese car makers lacking a slick (and largely hypothetical) EV have watched their stock valuation dwindle through 2018. That trend is expected to continue until all but a few of these companies go out of business.
[Image: Byton]
A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.
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I think we're overdue for a serious article from TTAC on NEVS, the Chinese group that bought up Saab assets and is slowly ramping up production of their electric 9-3 for Chinese car-share firm and the Swedish market. For all the beautiful wacky Swedish engineers, auto jobs and future new kooky autos, for thee, I pray. Well I'm agnostic but you get the idea.
Well...in the smog choked Chinese megacities, a few electrics could definitively help.