Oct 23, 2019 07:34 PM

As Subsidies Subside, So Does Investor Interest in Electric-Car Startups

The Xpeng G3 electric car sits on display in Guangzhou, South China’s Guangdong province, on Oct. 3. Photo: VCG
The Xpeng G3 electric car sits on display in Guangzhou, South China’s Guangdong province, on Oct. 3. Photo: VCG

China’s new-energy vehicle startups are facing a lean winter, industry insiders said, as investors grow less interested in throwing cash at an industry that has seen sales plummet as subsidies recede.

Venture capitalists are more cautious than they were two years ago, Brian Gu, president of one of China’s Tesla wannabes, Xiaopeng Motors, said at an industry forum in Beijing last week.

The 5-year-old startup has been looking for 600 million yuan ($84.8 million) of funding since early this year, but hasn’t announced any progress yet. Xiaopeng, which secured 4 billion yuan in a fundraising round led by private equity firm Primavera Capital Group in August last year, was at the time valued at more than 25 billion yuan.

The scale-back trend raises the specter of more companies laying off employees amid sputtering operations. Nio, another Chinese startup inspired by Tesla, said last month it planned to slash around 20% of its global headcount after the New-York listed electric-car maker reported a wider-than-expected loss in the second quarter.

Cooling investor sentiment comes as Beijing slashes national financial subsidies that created the industry at the first place. Since the start of this decade, China has been promoting the industry as part of the government’s campaign to clean up the country's polluted air and also develop cutting-edge technologies that can be exported.

This helped China pass the U.S. as the world’s largest electric car market in 2015 and attracted a wave of new entrants as well as venture capitalists betting on the next big thing.

But as the central government looks to make these firms less reliant on handouts, subsidies have been slashed and nationwide assistance will be completely phased out by the end of 2020.

As prices have risen, China’s overall sales of new-energy vehicles — a category that includes pure, hybrid electric, and fuel-cell cars — fell by 34.2% in September, a third-consecutive month of contraction this year, according to the China Association of Automobile Manufacturers.

As cash-strapped startups struggle to find funding, local governments are stepping in, an EV startup executive told Caixin.

In May, Nio announced that it would create a joint venture with state-owned fund Beijing E-Town Capital, with the government entity agreeing to invest 10 billion yuan.

The same month, Shanghai-based Always Auto raised 300 million yuan from a fund set up by East China’s Jiangxi province, which was the first tranche of funding it obtained this year.

Contact reporter Tang Ziyi (

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