Wanna Buy an EV Company? China Has Some for Sale
Remember when the China market was the golden child of the pure EV world? When U.S. companies wanted to get a piece of the China EV market because it was going to be HUGE? Well, it seems that bubble has burst.
China’s EV market is growing even more slowly than the electric car market in the U.S. American investors aren’t as enthralled by China EV investments as they once were. China’s central government hasn’t given up on electric vehicles. But it has gotten more particular about what companies it supports. So small Chinese EV companies are looking to the U.S. for investors. I think it is a waste of their time and money.
A few days ago, I got several emails from Jiangsu Wonder Electric Vehicle Group. Wonder EV is the subsidiary of a privately-held automotive supplier company based in Beijing. It isn’t producing EVs, at least not in any volume. But it wants to. The letter of solicitation seeks US $50 million to establish an EV production base to produce a plethora of EVs, from low-speed two-seaters to high-speed small sedans to vans and golf carts.
There is a small catch. Wonder doesn’t have a government license to produce vehicles in China. So it proposes to set up the production base in the Cayman Islands, start selling vehicles in the U.S. and Europe, then obtain the license to produce in China.
Around the same time, I also received an email from a foreign financial firm’s China representative asking me if I knew anyone who was interested in buying a Chinese EV maker. Uh, no, I replied. If a company in China isn’t able to get support from its home country, it probably isn’t worth investing in.
Initially, China’s central government pledged a lot of money to jump-start the EV industry. But it has realized that much of that original investment was wasted. So it is focused on the larger companies that have, or can obtain, good technology. “More and more the (central government) support for all automotive seems to be selective based on a defined, long-term plan,” a friend who is a top executive at an international supplier with major operations in China told me.
He agreed with me that a lot of the investment in producing pure electric vehicles will go to waste. Hybrids—plug-in electric and regular—are where companies in China should be focused in the near to medium term, he said. That is in keeping with the most recent central government EV plan. He also said U.S. private equity firms have stopped funding EV projects in China.
So if you get any emails soliciting investment in a pure EV company in China, best to ask if it also has plug-in hybrid technology. Even then, it might be best to hold on to your cash.
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