When visitors land on Byton’s website, they’re greeted with colorful images of shiny electric cars gliding along the streets, Bloomberg reports. Those who visit Byton’s Nanjing car factory, however, are likely to be less impressed. Byton’s factory is modern and large, standing out in the hot summer sun. But the space is completely silent. Production has been halted since the pandemic began and there is no one here except a security guard.
A similar situation occurs at Bordrin Motors. Weeds are scattered around the factory and there is a notice posted at the main gate about the bankruptcy of the electric car maker.
Bordrin and Byton represent the flip side of China’s electric vehicle (EV) success. While stars like Nio and Xpeng continue to raise billions of dollars and are now selling cars for as many as Tesla, the rest are not so lucky. They were unable to raise the huge capital needed to produce cars at scale.
Initially, these companies were attracted by cash bonuses or other incentives by local governments to make China’s dream of becoming an electric vehicle power come true. Local governments have helped manufacturers set up factories that promise to create jobs and grow – if successful. But that began to change in November, when regulators asked local governments to review and report back on the size of their support for the auto industry.
Alarmed by the uncontrolled investment in this sector, accompanied by bankruptcies, Beijing is adopting measures to stifle the out-of-control growth of the electric vehicle industry.
“We have too many electric car companies“, Xiao Yaqing, China’s Minister of Industry and Information Technology said on September 13.”M&A activities will be encouraged as the market needs more focus“, he added. Bloomberg’s source also said that the government is considering setting production limits for the electric vehicle sector. Accordingly, provinces cannot give the green light to new projects until after excess capacity is put into operation.Resources will also only be channeled into a select few EV hubs.
The moves are a potential warning sign for investors who have poured money into electric carmakers and the technologies that support them over the past year.
There are about 846 registered automakers in China, and more than 300 of them produce new energy cars, loosely defined as electric or hybrid vehicles. Most of them are unknown companies. In 2020 alone, the country added about 5 million new production capacity, about four times the number of electric vehicles actually sold in China that year. According to regulators, nearly half of that capacity has gone unused.
Bordrin, founded by former Ford executive Huang Ximing in 2016, is targeting an annual output of 700,000 cars at three plants. But they ran out of money and closed their doors before even creating a single car. Mr. Huang was also completely missing and could not be contacted.
China has no public record of bankruptcies, but since last year, at least 10 electric vehicle makers are said to have underperformed or had to restructure to avoid default.
Gary Dvorchak, managing director at investment advisory firm Blueshirt Group LLC in Beijing said:This is a classic type of competitive capitalist shake-up. You get a bunch of companies and then there’s oversupply. The failure process is often much slower in China because companies receive government support. But in the end, some companies still have to die“.
Byton at least still exists. The carmaker, co-founded by former BMW AG and Nissan Motor executives, suspended all domestic operations and added staff last July as the pandemic hit its business. they become more difficult. Even before Covid-19, the company struggled to announce production and delivery deadlines for its first model, even though its website still accepts pre-orders.
OVERSUPPLY
Things got off to a good start this year, when Byton signed a strategic partnership agreement with iPhone maker Foxconn Technology Group in January to begin mass production of the Byton M-Byte SUV in the first quarter of the year. 2022. But Foxconn pulled staff from its Nanjing factory after one of Byton’s biggest creditors took over management. The Nikkei newspaper reported that cooperation between the two sides had been suspended due to Byton’s worsening financial situation.
A Byton representative declined to comment on the matter.
Jiangsu province is trying to become an electric vehicle hub, attracting $32 billion in investment in the auto industry in the six years to 2020. Today, it’s home to more than 30 automakers. But the province became the focus of an investigation earlier this year, which found that some local governments have circumvented tax breaks and land incentives to lure out-of-state carmakers. government guidelines. This leads to “outstanding problems of low production capacity utilization rate and idle capacity“, Jiangsu provincial officials said in a statement in February, without elaborating.
“The local government has high expectations for the development of new energy vehicle manufacturing companies, hoping to exploit the industry’s opportunities and promote local economic expansion.“, Cui Dongshu, General Secretary of the China Passenger Car Association, said in an interview.”Investors also see huge profit potential. This has resulted in overcapacity“.
Yinlong New Energy’s Nanjing plant broke ground in 2017 with a total planned investment of 10 billion yuan ($1.6 billion). Output is set to be 30,000 new energy commercial vehicles, mainly electric buses, and there are also plans to produce EV batteries. Production was slated to start in 2018 but the factory is now completely abandoned. Garbage piled up along the walls and roads connecting the buildings.
The company’s largest shareholder, Gree Electric Appliances, says there is still scope for cooperation, either in enhancing the automaker’s capacity utilization and competitiveness or advancing its battery technology. the firm.
Some of China’s established automakers are watching the situation with the feeling it’s inevitable. Zhejiang Geely Holding Group, one of China’s largest privately owned car manufacturers, insists it is witnessing a natural cycle and that will involve some casualties.
“Some people rush to build one, two, three, five factories, even if their first car is not on the market yet.“, Group Lotus CEO Feng Qingfeng said.
“When people think it’s easy to build cars, they all rush to do it. When they realize the car business isn’t so easy, they stop investing. It’s the invisible hand of the economy.” market economy”.
THE WAR OF THE “RICH WOOD”
In fact, the battle for control of the future of the car industry is currently in the hands of those who “have a lot of money”.
Tesla, the pioneer of this battle, dominated the early stages of the new energy era, capturing investors’ imaginations with a vision of what the next generation of vehicles might look like. They are the dominant players in the nascent all-electric car market.
On the other side are literal giants in terms of size: Volkswagen AG and Toyota Motor are the two largest automakers in the world. For every car Tesla made last year, VW and Toyota sold about 10 or 11 of them. Both companies understand that the era of battery-powered vehicles is here and are looking for ways to stay ahead.
Within five days of last month, these mass-produced auto gurus laid out a plan to spend $170 billion over the coming years to maintain their claim to an industry they already dominate. for many decades.
Executives at the top levels of these companies are acutely aware that the transition from the internal combustion engine will not be easy. Even in the worst case scenario, the same thing could happen when Apple enters the mobile phone market and overtakes the once-dominant Nokia. After a massive year of growth in which Tesla increasingly became a manufacturer As the most valuable car producer ever, the trillion-dollar question is whether Musk’s advantages as he moves toward the next generation of auto production outweigh the “banyan trees” in the industry such as: market capitalization of Tesla or not.
Andy Palmer, former manager of Aston Martin and Nissan Motor said:When the world’s two biggest car companies decide to go all-electric, there’s no doubt – the mainstream will be electric vehicles.“. Andy is often referred to as the “godfather of electric vehicles” after being credited with developing the Japanese automaker’s battery-powered Leaf.”I hope the transition to electric cars will be faster than people expect“.
The way VW and Toyota have done to protect their platforms is different from what one would expect from the proud industrial giants of Germany and Japan. One side is rambling, putting Tesla in its sights, and the other is investing heavily in electric vehicles while continuing to bet, timed when the first phase of the revolution begins.
The giants that are going all out to overtake Musk are VW. The company has grown over 84 years into a conglomerate of dozens of brands, manufacturing in about 120 locations around the world, and employing more people than the population of Detroit. The VW Group generates about $280 billion a year, churning out models ranging from the Tiguan and Passat bearing the same badge, to Lamborghini supercars and Scania heavy-duty trucks.
Source: Bloomberg
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