HONG KONG: Some of China’s wealthiest tycoons steered billions of dollars into electric-car companies in order to fuel the country’s dreams of becoming a leader in the field.
Now a reckoning may be looming as car sales slow and the government reduces subsidies for the nascent industry.
That leaves the flagship companies of Jack Ma, Pony Ma, Hui Ka Yan and Robin Li facing an increasingly steep path to profitability on their bets that electric vehicles (EVs) can be smartphones-on-wheels connecting passengers to other businesses. Their capital, along with dozens of startups raising US$18bil, helped inflate an electric bubble that now looks to be in danger of popping.
China’s car market is experiencing a prolonged sales slump, prompting EV makers to slash earnings outlooks. With China considering further cuts to the subsidies for consumer purchases in order to force automakers to compete on their own, a shakeout is looming that not even the tycoons’ support may be able to prevent, said Rachel Miu, an analyst with DBS Group Holdings Ltd in Hong Kong. “For the new kids on the block in the EV space, it’s a steep uphill climb, ” she said.
Jack Ma stepped down as chairman of Alibaba Group Holding Ltd in September after amassing a US$40bil-plus fortune, but China’s richest man retains his board seat – and influence – at the e-commerce emporium he created. Alibaba has participated in several funding rounds for Guangzhou Xiaopeng Motors Technology Co, or Xpeng Motors, including one in 2018 that raised 2.2 billion yuan (US$313mil) for the carmaker co-founded by former Alibaba executive He Xiaopeng.
Xpeng launched its first vehicle, the five-seat G3 SUV, last year and has sold 11,940 vehicles so far this year, according to data compiled by Bloomberg.
The company, founded in 2014, also is teaming up with more-established automakers. A factory built with Haima Automobile Co can produce 150,000 EVs annually. Another should soon begin assembling the P7 coupe, scheduled to begin deliveries next year.
Xiaomi Corp, the consumer-electronics company, participated in another US$400mil fundraising round, the automaker said Nov 13.Pony Ma’s Tencent Holdings Ltd, whose WeChat messaging app helped make him China’s second-richest person, led a US$1bil investment round in NIO Inc in 2017. With more than 26,000 vehicles sold, NIO’s one of the few Chinese startups making multiple models, and it beat rivals with an initial public offering in New York last year.
But losses piled up with the overall sales slump and as the company, which has been described as “China’s Tesla, ” plowed money into marketing and real estate. It sponsored a Bruno Mars concert and opened luxury clubs for NIO owners that feature showrooms, coffee bars and performance spaces. — Bloomberg
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