Auto Industry

Moganshan mission

LeEco inks Eco-Park deal to boost its electric car ambitions

Jia Yueting, co-founder and head of Le Holdings Co Ltd, also known as LeEco and formerly as LeTV, unveils an all-electric battery "concept" car called LeSEE during a ceremony in Beijing

Man in a hurry: LeEco’s boss Jia Yueting

Back in January Wang Jianlin impressed onlookers by singing at a staff event held by his company, Dalian Wanda. Belting out rocker Cui Jian’s tune Fake Monk, Wang was surrounded by twirling dancers. The rather provocative lyrics included: “I want everyone to watch me, but not know who I am. If you’ve fallen in love with me, then please kiss my mouth.”

Wang isn’t the only corporate crooner. LeEco’s founder and chairman Jia Yueting also likes to grab the mike. During an event to unveil his company’s latest products earlier this year, Jia surprised his audience by taking to the stage to sing a song that he claimed had “really spoken to him”.

Called Wild Child, it goes like this: “The more ruthless the wind is, the stronger my heart will beat… I will hold onto this determination in my clenched fist, even if courage may be elusive. I shall rise and become a giant.”

A little courage may be required among Jia’s investors too, as his company diversifies – like many others – into electric cars. Critics of the move have suggested that his plans for mass production are more PowerPoint plans than actuality. Nonetheless, LeEco’s dream of becoming a carmaker may have moved a step closer to fruition, following the announcement of a new “Eco-Experience Park” to be built in Zhejiang.

Jia’s career started out with video streaming but has since travelled well beyond into business sectors as diverse as virtual reality and property development. And in another bold move in August he announced that he will spend Rmb20 billion ($2.99 billion) on the construction of an Eco-Park in Moganshan in Zhejiang (a mountainous area where wealthier locals go to escape the summer heat – indeed some have likened it to Shanghai’s version of the Hamptons, because of all the lavish mansion-building going on).

The park, a joint venture with the Huzhou government, will include an electric vehicle factory to make LeEco’s own brand LeSEE car, which was first unveiled in April. It will also house an R&D centre and facilities for making batteries and motors.

Away from the manufacturing, there is a tourism angle, albeit a slender one. Part of the plan is a theme park where visitors will experience LeEco’s environmentally-friendly vehicles, as well as some of its digital content offerings, like the sports platform LeSports and the music streaming service Le Music.

“With the development of the internet and technology, the traditional car industry, which has been around for over a century, is now at a turning point,” Jia claimed during a press conference in Hangzhou, the capital city of Zhejiang province. “We hope that our strategic cooperation will be a model for the next era of joint ventures for internet ecosystems between businesses and governments.”

LeEco added that construction of the park will begin by early next year. Phase 1 will cover an area of 4,300 acres and lead to carmaking capacity of 200,000 units annually. Phase 2, which is expected to start two years after the completion of the first phase, will see capacity double to 400,000 units.

The company was vaguer about when it expects to see the first electric car produced in the park, and analysts are already warning that the plan sounds ambitious.

After all, Tesla delivered about 50,000 cars over the whole of last year. LeEco is envisaging sales that are much greater. Xinmin Evening News was doubtful too, venturing that the park could turn into a giant parking lot for unsold vehicles.

The company has countered that the numbers aren’t unrealistic as it plans to be a contract manufacturer for other electric carmakers in addition to manufacturing its own branded vehicles.

For instance, the Beijing-based firm inked a deal with Aston Martin in February for a joint venture to bring the UK carmaker’s first electric car to market in 2018, says Time Weekly. Jia is also an investor in two California-based EV start-ups, Faraday Future and Atieva.

But the LeEco boss has a problem on his hands. Despite the hype surrounding its ambitions in the auto industry, LeEco is yet to secure the appropriate licences from the government to make electric vehicles, says Securities Daily.

LeEco claims that the approvals are “pending” and it has assured investors that the lack of a licence is “not a big problem”. That said, some of the more pessimistic analysts reckon that it could take five years before it completes all the quality tests to receive the permit.

Could those concerns have contributed to LeEco’s enthusiasm for the Eco-Park deal with the Huzhou government?

Jia may be hoping that the joint venture will get him on the fast-track for the necessary licences. After all, at the press conference, Chen Weijun, the mayor of the city, promised that he would see to “quick preparation, quick approval and quick investment”.

Naturally, the joint venture is being positioned as a win-win for both sides.

For the local government, the deal brings investment to the area. For LeEco, the company gets cheap land and (hopefully) supportive polices for the electric car venture.

In fact, LeEco isn’t the only carmaker talking about building eco-villages.

A few days before Jia unveiled his ambitions for Moganshan, Geely made a separate announcement saying that Volvo – a Swedish brand that it purchased in 2010 – will be building its own energy-efficient ‘city’ in Taizhou, also in Zhejiang.

Like LeEco, the project will include a car factory, a research centre and – you guessed it – a Volvo theme park.

© ChinTell Ltd. All rights reserved.

Sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.