By on August 13, 2018

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]

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9 Comments on “What’s the Chinese Electric Car Startup Survival Rate? One Percent, An Investor Predicts...”

  • avatar

    China’s at serious risk of economic implosion, and will massively devalue the yuan to try and control the carnage an make it manageable.

    We will see a CNY:USD exchange rate of 9 or even 10 to 1 within a relatively short time frame. CNY is currently at about 6.9 to 1 USD.

    This electric vehicle space is the least of their worries.

    The following events in time will cause major global financial and economic (*and political) disruptions.

    There is such a massive amount of bad, non-performing and never-to-be-repaid debt within the Chinese domestic economy, due primarily to artificial growth targets pushed onto the backs of regional banks, that it boggles the mind (some estimations have it as high as the equivalent of 1.6 trillion USD, but no one knows with certainty due to the opaqueness of the Chinese financial system and lack of disclosure; these estimates are arrived at by analyzing things like capital flight and devaluation rates).

    • 0 avatar

      August 13th, 2018 at 4:13 pm

      For posterity.

    • 0 avatar

      I have a horrible feeling you are right about this. China is relying on tax receipts fuelled by growth to fuel debt. But this whole house will come tumbling down when inflationary pressures start to bite forcing China to revalue the Yuan and become less competitive.

  • avatar

    According to Big3 – Tesla investors don’t want to make money, they just want to save the world. Perhaps it will be the same for Chinese EV investors – they don’t care about dirty profits, they just want to fill the streets of China with coal powered EVs equipped with Chinese batteries designed to explode on Chinese New Year.

    • 0 avatar

      Turkey is hogging the EM headlines as of late.

      China is in incredibly deep trouble, and its troubles are many, many magnitudes of order higher than nearly anyone is discussing openly (we’re talking contraction of growth for an extended period of time, compared to officially listed 7-8% growth rate, and more realistic 3.8-5% one of last 3 years; this contraction could tilt China into actual depression, particularly given its falsified economic data and intra-economy loan portfolio quality – or lack thereof).

      • 0 avatar

        Depression is the natural stage of evolution. Every developing country goes through it. In the West it turned into WW2. I am confident that China will resort to war when depression hits. West better start taking this prospect seriously instead of having fun with Russia which is on decline as s military power.

  • avatar
    SCE to AUX

    “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.”

    If that’s true for China, why do people believe the ‘established automakers’ in the free world can build a ‘Tesla killer’ on a whim?

  • avatar

    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.

  • avatar
    schmitt trigger

    Well…in the smog choked Chinese megacities, a few electrics could definitively help.

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