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.
Consumer advocate tracking industry trends, regulation, and the bitter-sweet nature of modern automotive tech. Research focused and gut driven.
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