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Analyze the current situation of China's Small Street Legal Electric Cars Manufacturer
- Aug 24, 2018 -

Recently, the Wall Street journal published an analysis of the current situation of China's electric vehicle industry.

Thanks to strong policy and financial support from national and local governments, China now has 487 Small Street Legal Electric Cars manufacturers, most of them new.

But with so many competitors, oversupply seems inevitable.

It's a crowded industry, but how many companies will actually survive in the coming years?


Tongling is a mining city with a long history.

Two years ago, the tongling government provided $535 million worth of land and money for a start-up to build an electric car plant.

Before that, they knew next to nothing about electric vehicles.


The company, known as Singulato Motors, was founded by a group of technology professionals, and its CEO and co-founder, shen haiyin, a former vice President of an Internet security company, had never run a car company before.


Start-ups like zhiche are springing up across China, thanks to the Chinese government's support for electric vehicle technology and an eager response from local governments.

The made in China 2025 plan, launched three years ago, aims to promote "" domestic dominance and global competitiveness" "in 10 industries such as electric vehicles.

China now has 487 electric car manufacturers, according to the latest official statistics, and most of them are new.

In June, China's national development and reform commission and China construction bank announced the launch of a new $47 billion fund for high-tech industries such as electric vehicles.

Regional governments are working on similar funds.

Direct government subsidies for electric vehicle sales have totalled $15bn over the past five years.


Mr Shen estimates that only 10% of today's electric car start-ups will survive in the next five years.

Some auto analysts put that at only about 1 percent.


"" there's a lot of money going into this industry," "said Paul Gong, an analyst at UBS collective." "a lot will be wasted." "


Tempted by the prospect of government subsidies, says Scott Kennedy of the center for strategic and international studies, many companies have concluded that "even if you never put an electric car in, you can operate on a reasonable business model by just giving it a shot and getting government support.

The truth will come when national and local governments decide whether to let failed businesses fail or just hang on.


China's ministry of industry and information technology, which oversees the auto industry, declined to comment.


Even successful mass-production electric car start-ups need to compete with established domestic and foreign automakers.

The Chinese government has set production and sales quotas for new energy vehicles, requiring all automakers operating in China to meet them by 2019.


Tesla recently signed a deal to build its first overseas plant in Shanghai, where it plans to produce 500,000 all-electric vehicles a year.


Part of China's push for technological edge is an escalating trade dispute with the United States.

In march, U.S. trade representative Robert Lighthizer pointed to made in China 2025, saying that China's huge investment and attempts to push for technology transfer would threaten foreign companies.


About 777,000 electric vehicles were sold in China last year, accounting for almost half of global car sales.

But with so many electric car companies joining the fray, oversupply seems inevitable.


"One of the costs of China's desire to be a high-tech powerhouse and catch up on the technological frontier could be overcapacity," says Dan Wang, a hong kong-based technology analyst at Gavekal Dragonomics, a research firm.


'made in China 2025' is triggering a new round of overcapacity problems in China's past in heavy industries such as steel and shipbuilding, Mr. Wang said.


"This could be the price China is willing to pay," he said.


The company has raised about $1.2 billion from private investors and is relatively well-funded, making it one of the few startups to survive, Mr. Shen said.


Mr Shen said he eventually chose tongling, anhui province, for the site.

This is a city of 750,000 people.

At least 20 other cities and provinces were bidding.


"We didn't contact the local government," he said. "the local government came to us."


Like hundreds of Chinese cities, tongling is trying to boost its economy and shed traditional heavy industry.


"The auto industry reflects the strength of a city," says liu yi, director of the tongling investment bureau.

I don't think we have to worry about overcapacity."

China has more than 100 traditional carmakers, most of which are unprofitable and subsist on local government subsidies.


Before meeting Mr. Shen for the first time, Mr. Liu carefully read books about electric vehicles to learn about the technology.

She says that when she meets the smartcar team, it's clear: their electric car concept is easy to personalize and, like a smartphone, sounds like a winner.

They signed the agreement soon.


Both sides acknowledge the competitive risks in this crowded industry, but also highlight the potential of earnings.

Tongling could have used the money to build a new section of highway.

Tongling, however, chose to bet on electric vehicles, a future strategic industry.


The iS6 sport utility, its first car, will cost about $43,000 and will debut in showrooms later this year.

It hopes to sell 60,000 by 2020.


"We need to seize the opportunity," liu said.