Budapest Post

Cum Deo pro Patria et Libertate
Budapest, Europe and world news

China races to build its own Tesla as economy slows and subsidies dry up

China races to build its own Tesla as economy slows and subsidies dry up

About a decade ago, Wan Gang, a former Audi engineer in Germany, convinced the Chinese government to roll out a national strategy to develop new energy vehicles and spend billions of dollars.

As a result, the country became the largest consumer of electric vehicles in the world and a leader in battery technology.

But China’s electric car companies are now struggling as economic growth slows and subsidies are phased out.

When an idea strikes a chord with national ambition in China, the result can be millions of dollars wasted and a handful of start-ups struggling to survive in a cooling economy.

In the last few years, venture capitalists rushed to pour billions of dollars into the emerging electric vehicle industry backed by the Chinese government.

So far, it’s less clear how that bet has paid off. Take a look at the recent headlines:

Shares of U.S.-listed Nio, arguably China’s closest competitor with Tesla, are down more than 50% this year to about $2.70 each.
In November, Alibaba-backed XPeng tapped its own Chairman and CEO He Xiaopeng for a $400 million investment round, in which electronics company Xiaomi participated as a strategic investor.

Shenzhen-based BYD, which counts Warren Buffett as an investor, said in late October that net profits, ex-items, fell 130.1% in the third quarter. The Hong Kong-listed shares are down 25% for the year so far.

These are some of the handful of survivors from Beijing’s efforts over the last decade to accelerate the creation of China’s own electric car.

Now, Chinese auto sales are in a slump, consumer subsidies for new energy vehicles are phasing out next year and economic growth is slowing.

Start-ups didn’t expect the subsidies to last this long, said Rupert Mitchell, chief strategy officer at Chinese electric car company WM Motor, founded in 2015 by a former Volvo and Geely executive.

“What was not in the business plans was that China would have its first fully blown automotive downturn in Chinese history,” he told CNBC in late November.


How it all started

Wan Gang was an engineer for Audi in Germany before he returned to China in the early 2000s. Within 10 years, he became China’s minister of Science and Technology, despite not being a member of the Chinese Communist Party.

Wan convinced the central government to roll out a national strategy for developing new energy vehicles and battery technology. Beijing was eager to jump at an opportunity to become a global leader in an emerging technology, which conveniently tied into efforts to combat pollution.

As a result, the central government spent at least 33.4 billion yuan in subsidies between 2009 and 2015, according to the Ministry of Finance.

At the height of the subsidy-driven boom, the number of new energy vehicles sold in 2014 more than quadrupled from the year before, and multiplied by more than four times in 2015 to more than 330,000 vehicles, according to data from China Automotive Industry Association accessed through Wind Information.

In 2016, the Ministry of Finance said it found at least five companies cheated the system of over 1 billion yuan. That year, new energy vehicle sales grew just 53%, data showed.

High levels of subsidy misuse are not uncommon in China.

Between 2001 and 2011, about half of Chinese companies receiving direct grant subsidies for research and development were non-compliant, using the funds for other things such as private consumption and investments with higher returns. That’s according to a forthcoming working paper from Philipp Boeing and Bettina Peters, both researchers at the ZEW – Leibniz Centre for European Economic Research. The study did not cover consumer subsidies.

The research did indicate that misuse of funds declined with time and that the actual effectiveness in Chinese government policy in spurring research and development, if monitored, increased and non-compliance was wiped out, Boeing said in an interview.

But he noted there is little impact on productivity in the long term, which is a core problem for China’s economy.


Path to profitability

Some young companies that rode on China’s electric vehicle boom, however, are still confident in growth.

XPeng aims to reach breakeven in about two years, with the expectation the company is able to put about 150,000 vehicles on the road, Brian Gu, president and vice chairman of XPeng, said in an interview in late November. That’s about 10 times what the company has sold since it began deliveries last December for its first commercially available vehicle.

WM Motor’s Mitchell expects the company can break-even in the next 12 months, as the start-up puts greater effort into consumer marketing. The company is in the process of raising $1 billion, which he said would “fully finance” the automaker until a public offering.

Other companies are just starting to bring new electric vehicles to the market.

Aiways, a Shanghai-based start-up that touts its certification to sell to the European Union, announced in December it will begin deliveries of its U5 SUV. Guangzhou-based GAC Nio - a joint venture between the traditional automaker and the start-up - is set to reveal its first all-electric SUV under the Hycan brand on Friday.

Nio wasn’t available for comment ahead of the company’s annual product launch event on Saturday.

Meanwhile, the first “Made in China” Teslas are set to hit the market early next year at a lower price that vies with Nio.

“Looking at the last 10 years of Chinese government subsidies, we think their effect is more positive than negative,” said He Hui, senior researcher on China’s new energy policy at The International Council on Clean Transportation.

“We can’t say our new energy vehicles are number one,” she said. “But our batteries are.”

AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
Newsletter

Related Articles

0:00
0:00
Close
Altman Says GPT-5 Already Outpaces Him, Warns AI Could Automate 40% of Work
Russian Research Vessel 'Yantar' Tracked Mapping Europe’s Subsea Cables, Raising Security Alarms
Global Cruise Industry Posts Dramatic Comeback with 34.6 Million Passengers in 2024
U.S. Demands Brussels Scrutinize Digital Rules to Prevent Bias Against American Tech
Private Equity’s Fundraising Surge Triggers Concern of European Market Shake-Out
Tokyo’s Jimbōchō Named World’s Coolest Neighbourhood for 2025
European Officials Fear Trump May Shift Blame for Ukraine War onto EU
The Personality Rights Challenge in India’s AI Era
Italy Considers Freezing Retirement Age at 67 to Avert Scheduled Hike
Italian City to Impose Tax on Visiting Dogs Starting in 2026
Study Finds No Safe Level of Alcohol for Dementia Risk
Trump Says Ukraine Can Fully Restore Borders with NATO Backing
Europe Signals Stronger Support for Taiwan at Major Taipei Defence Show
Germany Weighs Excluding France from Key European Fighter Jet Programme
Cyberattack Disrupts Check-in and Boarding Systems at Major European Airports
Björn Borg Breaks Silence: Memoir Reveals Addiction, Shame and Cancer Battle
When Extremism Hijacks Idealism: How the Baader-Meinhof Gang Emerged and Fell
JWST Data Brings TRAPPIST-1e Closer to Earth-Like Habitability
Trump Orders $100,000 Fee on H-1B Visas and Launches ‘Gold Card’ Immigration Pathway
France’s Looming Budget Crisis and Political Fracture Raise Fears of Becoming Europe’s “Sick Man”
Three Russian MiG-31 Jets Breach Estonian Airspace in ‘Unprecedentedly Brazen’ NATO Incident
European manufacturers against ban on polluting cars: "The industry may collapse"
Turkish car manufacturer Togg Enters German Market with 5-Star Electric Sedan and SUV to Challenge European EV Brands
Christian Brueckner Released from German Prison after Serving Unrelated Sentence
World’s Longest Direct Flight China Eastern to Launch 29-Hour Shanghai–Buenos Aires Direct Flight via Auckland in December
New OpenAI Study Finds Majority of ChatGPT Use Is Personal, Not Professional
The conservative right spreads westward: a huge achievement for 'Alternative for Germany' in local elections
Pope Leo Warns of Societal Crisis Over Mega-CEO Pay, Citing Tesla’s Proposed Trillion-Dollar Package
Poland Green-Lights NATO Deployment in Response to Major Russian Drone Incursion
U.S. and China Agree on Framework to Shift TikTok to American Ownership
Le Pen Tightens the Pressure on Macron as France Edges Toward Political Breakdown
Czech Republic signs €1.34 billion contract for Leopard 2A8 main battle tanks with delivery from 2028
Penske Media Sues Google Over “AI Overviews,” Claiming It Uses Journalism Without Consent and Destroys Traffic
Indian Student Engineers Propose “Project REBIRTH” to Protect Aircraft from Crashes Using AI, Airbags and Smart Materials
One in Three Europeans Now Uses TikTok, According to the Chinese Tech Giant
Could AI Nursing Robots Help Healthcare Staffing Shortages?
NATO Deploys ‘Eastern Sentry’ After Russian Drones Violate Polish Airspace
The New Life of Novak Djokovic
German police raid AfD lawmaker’s offices in inquiry over Chinese payments
Volkswagen launches aggressive strategy to fend off Chinese challenge in Europe’s EV market
France Erupts in Mass ‘Block Everything’ Protests on New PM’s First Day
Poland Shoots Down Russian Drones in Airspace Violation During Ukraine Attack
Apple Introduces Ultra-Thin iPhone Air, Enhanced 17 Series and New Health-Focused Wearables
Macron Appoints Sébastien Lecornu as Prime Minister Amid Budget Crisis and Political Turmoil
Vatican hosts first Catholic LGBTQ pilgrimage
Apple Unveils iPhone 17 Series, iPhone Air, Apple Watch 11 and More at 'Awe Dropping' Event
France joins Eurozone’s ‘periphery’ as turmoil deepens, say investors
France Faces New Political Crisis, again, as Prime Minister Bayrou Pushed Out
Nayib Bukele Points Out Belgian Hypocrisy as Brussels Considers Sending Army into the Streets
France, at an Impasse, Heads Toward Another Government Collapse
×