When it comes to self-promotion, few have mastered the art better than Elon Musk. Last Friday, the billionaire ushered in the festive season with a tweet that propelled both of his two main brands, SpaceX and Tesla, into the stratosphere.
Quite literally, in fact, when Musk announced plans to put a cherry-red Tesla Roadster into a SpaceX Falcon Heavy Rocket, which will be launched into orbit around Mars at some point during the next couple of months. He added that David Bowie’s Space Oddity would play on a loop as the car circuits the red planet for the next billion years or so.
Musk subsequently claimed that the tweet was a joke. But Tesla insiders told tech journalists that the plan to put a Tesla into space is real. If the mission is successful, SpaceX will also become the first private sector firm to propel a rocket beyond Earth’s orbit.
Back on a more terrestrial footing, other news puts Musk more in the bracket of the “Man Who Fell to Earth”. Tesla’s recent sales figures have not been good and its share price has lost a fifth of its value since June. Earlier this year, the company said it planned to sell 5,000 of its “affordable” Model 3 electric cars a week by the fourth quarter. It does not break down sales statistics by model, but Inside EVs calculates that just 345 Model 3s were sold in November. Tesla’s overall US sales, meanwhile, were down 18% year-on-year to 3,590 units.
If Tesla has hit a speed bump on the road to world domination, that is nothing compared to the roadblock Faraday Future seems to have crashed into.
To continue the David Bowie analogy, the Chinese start-up is not only “Under Pressure” but also facing an “Ashes to Ashes” scenario.
Bloomberg reports that Faraday is racing to raise cash before a $400 million convertible bond is due this month.
Its recently departed CFO, Stefan Krause, is said to have presented founder, Jia Yueting, with a number of options (including bankruptcy), which were all rejected. The man who set up and then lost control of China’s answer to Netflix (Leshi Information & Technology) is said to be desperate to stay in the driving seat of California-based Faraday.
Back in 2014, when it was first established, Faraday said it would get a car on the road by 2017 with the aim of rivalling Tesla. As we reported in WiC309, the ambition has always attracted plenty of doubters – one social media commentator dubbed Faraday the “Donald Trump of start-ups” in reference to the US president’s history of business bankruptcies.
Over the past year, Faraday has lost a slew of senior executives and The Verge revealed a company email in November berating staff after Jia turned up to the office to meet potential investors only to discover that just two employees had arrived for work.
Allan Lu, the head of marketing, then reminded employees that work hours were from 9am to 6pm and told them that Faraday was “very close to obtaining investment”. He finished, “WE MUST get back to our fight mode IMMEDIATELY.”
One of those departed senior executives was Jia’s right hand man, Ding Lei. As 21CN Business Herald reports, Ding has resurfaced at another of the industry’s start-ups, or “Absolute Beginners” as the Bowie song goes.
The newspaper says Ding is teaming up with former General Motors’ industry veterans Chen Weixu (who ran its Chinese Cadillac division) and former China president, Phil Murtaugh. Murtaugh was recently the CEO of yet another start-up, Qoros, which he left after less than a year (one of its major backers Chery is currently trying to sell some of its stake).
21CN says the trio aim to get a prototype of their own onto the road by the middle of next year. They are late to the game, it suggests. But if they can learn from Faraday’s mistakes, they might still have an impact.
China Money Network ran a more pessimistic piece recently about the spate of electric vehicle start-ups established three or four years ago. The report looked at how the newcomers had hoped to marry Chinese cash with Western technology, often for sales on US turf. But it concluded, “Considering that no Chinese car brand currently sells in the US, it would require nothing short of a miracle to realise these audacious plans.”
Much of the sales focus for the electric car firms is switching to the potential of the Chinese market. And one of the start-ups that might give Tesla more of a run for its money is Nio, formerly known as NextEV. Founded in 2014 by one of China’s most well-known tech entrepreneurs, Li Bin, it is also its best funded. In November, Nio received a $1 billion cash injection from existing investors led by Tencent, giving it a $5 billion valuation. Other founding investors include JD.com founder Richard Liu, Hillhouse Capital, Sequoia and Joy Capital.
Nio has previously estimated that it costs about $2.9 billion to get an electric car from the design stage onto the road, highlighting the financial risks for start-ups in competition with more established auto manufacturers.
Domestic commentators argue that Nio is starting to gain more traction. It has R&D bases in Shanghai, San Jose, Munich and London and its EP9 model ranks as the world’s fastest electric car. Later this month it will face a crucial test when it launches its first semi-affordable brand, the ES8.
The new car is rumoured to have a price tag around the $100,000 mark, which is a lot higher than the Tesla Model 3’s $35,000 international starting price (in China, where import tariffs apply, Tesla has yet to start selling the Model 3).
Nio sounds confident that it will make sales and it is also trying a new way of selling its cars, drawing inspiration from Apple’s “Town Squares”. A pioneering 3,000 square-metre sales centre has been opened in Beijing which not only sells cars, but also serves as a kind of private members club offering yoga, a children’s play area and function rooms. A further 10 sales centres are planned over the coming year.
In a recent interview with The Economist, Nio boss Li said that traffic jams, pollution and accidents have led to “diminishing happiness” for drivers. Nio aims to reverse the trend, giving them a “smart living space on four wheels”.
A more extensive charging network would alleviate another of the major drawbacks to owning an electric car, of course. The Chinese government is aiming for an almost one-to-one ratio by 2020 (it wants 4.5 million charging points installed). And in the meantime, Nio’s service teams are offering a concierge service – taking cars off to be charged and then returning them to their owners.
Many of the world’s leading car firms have set up EV-related joint ventures in China this year. Volkswagen has hooked up with JAC and expects to sell about 1.5 million electric vehicles in China by 2025, for instance, and Ford launched a JV with Zoyte in August.
Ford also announced this week that it will bring 50 new models to China over the next eight years, and that 15 of them will be battery-powered or plug-in hybrids.“It’s clear China will lead the world in EV development,” the company’s executive chairman, Bill Ford Jr, told delegates at the Fortune Global Forum this week.
The more established players may have dominated the gasoline age, but it may be China’s domestic brands that lead the electric one. Top of the charts so far this year is BAIC’s E-series, followed by Zhidou’s D2 and BYD’s Song.
So who is going to win the race? As one netizen commented, “This is China’s opportunity to overtake around the bend.” But another suggested he was a ”crazy idiot” as “the battery technology propelling our auto manufacturers is dependent on Japan”. (Though that may become less so, see this week’s issue.)
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