Provinces Roll Out Red Carpet for Electric-Car Makers

China’s relentless push for the development of new-energy vehicles has prompted a race among local governments to nurture promising firms or make their region the best place to grow such a company.

In 2017, 528.3 billion yuan ($76.7 billion) in private and public money was earmarked for new-energy vehicle projects across 21 provincial-level regions, according to statistics provided by Shi Jianhua, deputy secretary of the government-backed China Association of Automobile Manufacturers. The statistics did not break down how much of the money came from private sources and how came much from government coffers.

New-energy vehicle is a term the Chinese government uses to describe those using pure electricity, hybrid and hydrogen technologies.

“Governments pick some companies with reliable technologies and business models and offer direct capital support,” said Bu Xianghong, secretary of Zhejiang province’s New Energy Vehicle Industry Group, “they tend to believe that the companies will eventually bring in tax revenue — if they are successful.”

In the Xiaoshan district of Zhejiang’s capital Hangzhou, a special fund worth 3 billion yuan was set up to promote the development of innovative industries, including new-energy cars.

Local industry leader Dearcc, which raised 2.5 billion yuan in total funding in the first half of 2018, has been chosen for a “special industrial project.” As part of this project, Zhejiang will provide land and policy support for a 5.5 billion yuan factory in the city of Shaoxing.

Zhang Hailiang, chairman of Dearcc, recently said the factory is expected to be near completion by the end of the year.

Fellow Zhejiang startup Leap Motor, founded in 2015, has secured interest-free loans from the province to build its own factory in the city of Jinhua, according to its vice president, Zhao Gang.

The NextEV factory is first shown to the public in Hefei, Anhui province, on June 8. Photo: VCG

In neighboring Jiangsu province, startup Future Mobility Corp. signed a deal with the eastern city of Nanjing early last year to build an 11.6 billion yuan factory with a planned initial capacity of 150,000 units a year.

Scrambling for pioneers

In July, U.S. electric-car pioneer Tesla signed an agreement with Shanghai to set up a vehicle assembly plant in the metropolis. But Caixin has learned that several other local governments have previously reached out to Tesla.

For example, the government of the southern metropolis of Guangzhou set aside a potential factory site to woo Tesla, a source close to the government told Caixin. “But the opportunity was seized by Shanghai,” the source added. The land was then allocated to another U.S.-based peer Faraday Future, backed by property giant Evergrande.

With both governments and private capital scrambling to get a piece of the sector, Beijing has begun to worry the gold rush could lead to a glut.

In July, the National Development and Reform Commission, China’s economic planner, released a policy (link in Chinese) for public comment that aimed to guide government investments in new-energy vehicles. The policy listed several conditions under which local governments would not be allowed to build electric-car projects, including assessments of the function and capacity of existing projects.

Contact reporter Mo Yelin (yelinmo@caixin.com)