Quick Take: Electric-Car Maker Gets $146 Million Investment From Rental Firm

Car rental specialist Shenzhou Zuche plans to invest as much as HK$1.14 billion ($146 million) through a share-and-convertible-bonds purchase in an electric-car manufacturer to tap the booming market.

Shenzhou, also known as Car Inc., is buying a total of 9 billion newly issued shares from FDG Electric Vehicles Ltd. for HK$540 million, as well as its convertible bonds for HK$600 million, the firm said in a notice to the Hong Kong Stock Exchange on Wednesday. After the deal, Shenzhou will own around 37% of FDG’s shares.

Beijing-based Shenzhou is a subsidiary of Ucar Group, a chauffeured-car service provider that also offers ride-hailing and car-financing services. Hangzhou-based FDG was founded in 2010, and also sells lithium-ion batteries used in electric cars.

The investment in FDG will help Shenzhou expand its car fleet and gain a foothold in the country’s burgeoning new-energy vehicle sector.

The deal will create synergy for both companies and “lay a strong foundation” for Shenzhou’s foray into the sector, the notice said.

The auto industry in China has seen increasing tie-ups between car-services companies — in ride-hailing, renting and financing — and electric-car makers which have yet to find strong demand from consumers.

In June last year, Ucar Group led a 2.2-billion-yuan fundraising in another rising electric-car startup, Xiaopeng Motors.

China has over the years provided generous subsidies to promote the use of new-energy vehicles, in a move to ditch traditional fossil-fuel engines to clean up the country’s polluted air. The policy has drawn in dozens of startups that vie for a share of the sector. However, as the subsidies will soon be phased out in the coming years, the startups are now eager to look for new sources of funding.

Contact reporter Mo Yelin (yelinmo@caixin.com)