Battery failure

Byton’s M-byte electric SUV

In Chinese culture, dragons symbolise wisdom, power and luck. But Byton, one of the four ‘little dragons’ trying to fire up China’s electric vehicle sector (EV), seems to have run out of all three after suspending operations at the beginning of July.

The local media has awarded the baby dragon moniker to a group that includes NIO, WM Motor and XPENG. Problems at one of the firms stimulates questions about the financial health of the others, but they all face the challenges of tougher competition from traditional car manufacturers releasing their own EVs, plus a less favourable sales situation after a pull-back in government subsidies.

Then there’s Covid-19, which is accelerating a shakeout of weaker players from the 500 registered start-ups in the EV sector last year.

Byton had been struggling for a while. At the beginning of 2019, it lost one of its two founders, Carsten Breitfeld, who had made his name overseeing BMW’s ‘i programme’. He didn’t like the direction that Byton was taking after state-owned FAW Group purchased a strategic stake. His departure prompted a round of litigation and Byton struggled to close a $500 million fundraising it launched in early 2019. It furloughed its staff at its Californian design centre this March, at which point its first model, the M-byte SUV, was still waiting to go into fuller production.

Byton then closed its Nanjing plant at the beginning of July. The company says this is a temporary measure while it reorganises. However, the Detroit Bureau, an auto industry news site, cites former employees as saying that the closure of the factory marks the end of Byton’s business.

Smaller EV brands such as Saleen and Bordrin have been struggling with near death experiences. New York-listed NIO had also been all but written off after burning through its cash trying to take on Tesla at the premium end of the market. But this spring it was thrown a lifeline by the Hefei government, which is taking a 24.1% stake through staggered capital injections totalling Rmb7 billion ($1 billion). NIO’s share price roared back from a low of $2.4 at the end of March to $11.74 in July (nearly double its 2018 IPO price of $6.26).

Then there’s Faraday Future (FF) whose founder, Jia Yueting, has expended more corporate lives than the proverbial cat. This month a $2 billion personal bankruptcy case relating to his LeEco group of companies was finalised in the US courts. His Chinese creditors are now dependent on the success of California-based FF, as Jia’s shares have gone into a trust intended to pay them back. Last year he brought Byton founder Breitfeld on board as CEO at FF and Jia put out a statement saying that fundraising for the car firm is “going well”, with an IPO on the horizon. If it can raise the cash, it will begin production of its long-awaited luxury EV, the FF91.

All the start-ups are keenly aware that they need to scale up, and quickly. That’s what makes Byton’s stoppage all the more damaging as it gives larger incumbents more opportunity to launch rival brands of their own.

One of the unknowns at Byton is FAW’s willingness to invest further. Breitfeld had claimed that its strategy was to force Byton to a stage where “the whole thing will be shut down,” allowing FAW to “keep the plant and the platform”. But on a more positive note for the sector, there are now five start-ups in CleanTechnica’s China EV sales rankings, compared to just one a year ago. In May, NIO held fifth spot with its ES6 model, followed by Lixiang with its One EREV (10th), WM Motor’s EX5 (14th), Hozon Auto’s Neta No1 (16th) and XPENG’s G3 (17th).

Hozon and Lixiang are both relatively new manufacturers. The former is an offshoot of Shenzhen-listed LED manufacturer, Hongli Zhihui, while Lixiang is one of Baidu’s partners in its autonomous driving unit and the brainchild of NYSE-listed Autohome founder Li Xiang. Meituan Dianping is another Lixiang investor, stumping up $500 million in the latest fundraising.

The start-ups will also take heart from sales figures that turned positive on a year-on-year basis in May. This week WM Motor announced it had delivered its 30,000th EX5 and XPENG could climb the rankings after starting to deliver its G7 model. It hopes the G7 can overtake Tesla’s Model 3, thanks to its lower cost and longer driving range.

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