Electric dreams in danger as funding dwindles for China's Tesla challengers
HONG KONG/BEIJING (Reuters) - Last year, Wei Qing and his private equity investment team visited more than 20 Chinese electric vehicle manufacturing startups.
The end result? They decided not to invest in any.
“There are too many uncertainties from when a company tells a story in the early stage, to when it produces a sample car and raises funds, to the eventual mass production,” said Wei, managing director at Shanghai-based Sailing Capital.
Wei, who declined to name the EV makers his team visited, said he thinks only a few of them will survive. Sailing instead decided to invest in an EV parts supplier, he added.
His concerns reflect what bankers describe as increasingly tough funding times for Chinese EV makers which must jostle for attention in a crowded sector and produce convincing arguments about future profitability despite government cuts to EV subsidies and plans to phase them out.
Numerous setbacks plaguing Tesla Inc in its quest for sustained profitability as well as a dramatic slide in sales and problems with some cars at Chinese startup Nio Inc have also put investors on their guard.
This year, Chinese EV makers have raised just $783.1 million as of mid-June compared with $6 billion for the same period a year earlier and $7.7 billion for all of 2018, according to data provider PitchBook.
One Hong Kong-based banker said he had been approached by at least a dozen EV makers seeking new funds but had to pass on most of them as they were not able to set themselves apart from the crowd.
Even fundraising efforts that have gotten off the ground are not moving as fast as EV makers would like.
“It is challenging,” said the banker who began working on one fundraising this year. “If you can get a meeting with investors, you can always tell a story, but some don’t even reply to your requests for a meeting.”