BAIC Eyes 2018 IPO for Vehicle Unit, Making Employees Stockholders

(Beijing) — The new-energy vehicle unit of auto giant BAIC Motor Corp. Ltd. is aiming to list as a separate company next year as it becomes one of China’s first state-run companies to experiment with employee ownership, a top executive told Caixin.

The spinoff and separate listing could make the unit, BAIC BJEV, China’s first publicly listed pure play for traditional-style cars powered by new-energy sources, similar to U.S. superstar Tesla Inc., General Manager Zheng Gang said in an interview.

Most of China’s major automakers have launched new-energy car initiatives in the last five years, responding to Beijing’s call to build up the sector in a bid to clean up the nation’s air and create cutting-edge technology that can be exported. But most or all of those units would be money-losing without strong government support they receive, and they remain part of their profitable parent companies.

Zheng said BAIC BJEV raised an initial 3 billion yuan ($435 million) in funding at the time of its inception as a separate company last year, and plans to raise another 8 billion yuan this year before an initial public offering.

In addition to its potentially groundbreaking status as China’s first new-energy car play, BAIC BJEV is also one of a handful of firms participating in a national pilot program that allows employees to receive shares in state-owned companies. The program allows workers to hold up to 30% of a company’s stock, mimicking a well-entrenched system in the private sector that motivates employees by giving them a stake in their employers.

“The amount of shares held by our employees isn’t high, the ratio is still less than 1%, but still this is a historical breakthrough for enterprises owned by the Beijing government over the last 60 years,” Zheng said.

BAIC BJEV sold 52,000 new-energy cars last year, up 159% from 2015, making it one of the nation’s top sellers of pure electric vehicles. Zheng said the company plans to roll out at least five new models this year, with a goal of being able to go at least 300 km on a single charge.

Zheng pointed out that 55% of his company’s sales last year went to private individuals, far higher than the average for an industry where average consumers have been slow to embrace the new technology despite strong government incentives.

Such support for both vehicle developers and buyers led to widespread abuse of the system, as both groups looked for ways to obtain generous government subsidies, often by fraudulent means. Beijing has recently rejiggered many of those programs to weed out cheaters, causing electric car sales to plunge 74% in January as manufacturers and buyers waited for the release of a new list of models eligible for subsidies.

Contact reporter Yang Ge (geyang@caixin.com)