HONG KONG/BEIJING (Reuters) – Last year, Wei Qing, and its private equity investment team has more than 20 of China electric vehicle production start-ups.
An employee works on the assembly of an electric vehicle (EV) is a plant of the Suda Electric Vehicle Technology Co. in Sanmenxia, Henan province, China, March 19, 2019. Photos-March 19, 2019. REUTERS/Stringer
What is the result? “Well, I do not have to invest in one.
“There are a lot of uncertainties when a company has a story to tell in the early stages, when it produces an example of the car, and the raised funds, up to the final mass production,” said Wei, the managing director of Shanghai-based Sailing Capital of.
Wei, who refused to accept the name of the EV makers, the team had visited, said that he believes that it is only a few of them will survive. Sail, instead, decided to invest in an EV parts supplier, he added.
His concern is to show what bankers describe as an increasingly tough funding times, in the Chinese EV makers, who will need to crowd the focus of attention in an over-crowded industry, and produce a persuasive argument about the future of the bottom line, in spite of the government’s spending cuts and the government’s EV grant and plans to phase them out.
A host of challenges plaguing Tesla, Inc., in its pursuit of sustainable profitability, as well as a dramatic slide in sales and the problems with some of the cars in China starting Nio Inc. are also investors be aware of.
This year, the Chinese EV makers will have increased only to $783.1 million in mid-June, compared with $6 billion in the same period a year earlier, to $7.7 billion all by 2018, according to data provider PitchBook.
A hong Kong-based banker told me that he had been contacted by at least a dozen of EV) makers are on the lookout for new sources of funds, but I had to give up on most of them, as if they were not in a position to stand out from the crowd.
Even fundraising efforts have gotten off the ground and don’t move as fast as the EV makers want to be.
“It’s a challenge,” said the banker, who started working on a fundraiser for this year. “If you’re in a meeting with investors, you will always have a story to tell, but some don’t even have to answer any of your questions to the meeting.”
He declined to be identified because the negotiations are not open to the public.
(For a graphic on fund-raising by the Chinese EV Companies just click tmsnrt.rs/2IjAjYt)
Like to curb the smog, and to jump-start its own automobile industry, it has been said that it is the will of the so-called new energy vehicles (NEVs), which are also hybrids, plug-in hybrids, and fuel-cell vehicles to account for one-fifth of the world car sales by 2025, compared to 5% at this time.
These ambitions have led to a plethora of EV start-ups have to compete not only with each other, but also to global automobile manufacturers, and Tesla, which plans to start production in China this year.
Around 330 EV, the companies have entered into a kind of subsidy, government data show, though some of the more well-known start-ups, it is much smaller in size, around the age of 50.
But in the midst of the criticism that some companies are too dependent on the government, and Beijing have reduced subsidies, increased the standards that are required for a vehicle to be considered and highlighted in them, especially after the year 2020.
This has led to a sharp deceleration as the vehicle, and that the prices will go up. The sale of NEVs in May and rose only 1.8% from a year earlier, compared with 18.1% in April, and the 62% growth in 2018 and beyond.
How to survive in the current funding environment, this requires a lot of cost discipline, with Daniel Kirchert, the CEO of the Nanjing-based EV maker, Byton, told Reuters.
“In view of the current situation, it is not enough for a startup to come up with a good product to the market. Just as important, the costs. Not only are the fixed costs, variable costs,” he said.
Byton, who will be supported by the state-owned automaker FAW Group and a provider of batteries, Contemporary Amperex Technology Co. (CATL) is one of only a few EV makers, with a fund-raising tour on the train, in search of $ 500 million.
The others Jumped out of the transport Motor is supported by the state-owned Shanghai Electric Group Corp, and coast redwood (Sequoia Capital China, which is seeking $372 million, and the CHJ’s commonly called, was founded by a serial entrepreneur, Li Xiang, who wants to raise as much as $500 million.
For people with a successful financing in the context of their belts this year, Baidu Inc.-bond EMA Motor Technology Co. Ltd. completed a $446 million round in March, according to PitchBook.
Some of them have gained money out of private equity. E-Town, the Capital city, a government, a Beijing investment firm, will invest 10 billion yuan ($1.4 billion) in a joint venture partnership with the Nio, who will be able to help Nio with the construction of its own plant.
RATE, NIO TO WEIGH
But, on the whole, industry’s funding outlook is a lot bleaker, especially as a Model, and Nio fighting.
Company founder Elon Musk told Tesla employees over the past month, the $2.7 billion that the company has recently increased, it would give you 10 months to break even on the share price on the burning of cash in the first quarter of the year. Shares in the industrial and pioneer have shifted to 32% in the year-to-date.
Nio’s shares have been hit much harder, down to 60% this year, a cut in the supply outlook, a reduction in the first quarter, the sales revenue of the previous quarter, increased competition, and reduced subsidies. Its reputation has also been injured after three vehicles caught on fire, and due to the inadvertent closing of car in Beijing is a prestigious Changan Avenue, after the driver is started by a software update.
Nio declined to comment.
“Well, some of the above mentioned EV industry leaders are currently underperforming in the secondary market is the market, and that has led to pressure on the sector in the short-term outlook,” said Brian Gu, the president of the EV startup Xpeng Engines, and a former senior banker at JP Morgan.
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“We are seeing that investors are more cautious, selective, and focused on the front runners. I think that this is a trend that will continue,” he said.
As a limited partner in the EMA Motor was more downbeat about the willingness of private equity investors on the financing of the industry.
“Nio is one of the best of the Chinese, the EV start-up. Take a look where it is now, how can that make for a great on the writing of checks, and any other EV start-ups,” said the investor, who is also being held for Nio stock, but sold it this year.
Reporting by Kane Wu and Julie Zhu in Hong Kong and Yilei Sun in Beijing; Additional reporting by Norihiko Shirouzu in Beijing; Editing by Jennifer Hughes and Edwina Gibbs