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 Chinese-owned National Electric Vehicle Sweden (NEVS) - the company
that acquired Saab's assets, though not its name - said it received
an order for 250,000 EVs in December from a little known Chinese
company. The size of the deal -- and the sketchy information about
the companies involved -- prompted some initial scepticism in the
industry over its feasibility.
Yet NEVS is one of a group of Chinese-funded start-ups that aim to
capitalize on disruption in the auto industry as governments around
the world create regulatory incentives for electric or hybrid
vehicles. Beijing has created a range of incentives to both attract
technology-oriented firms into the EV sector and get the public to
buy them.
NEVS $12 billion order for EV cars came from a Beijing-based
start-up called Panda New Energy Co.
Jiang Dalong, a 51-year-old Chinese-born businessman who acquired
Saab in 2012, said the deal with Panda New Energy requires little
upfront money from the start-up. Panda said it plans to lease the
cars for commercial fleets, such as taxis and courier services.
Jiang owns 43 percent of NEVS, based in Trollhattan, Sweden, through
his Beijing-based company, National Modern Energy Holdings. The city
of Tianjin has a 30-percent stake through Tianjin Binhai Hi-tech
Industrial Development Area. The rest is owned by Beijing State
Research Information Technology Co and Teamsun Technology Co, an
information-technology company.
The Chinese-born, Swedish businessman sold his bio-power generation
business in China to help fund and focus on NEVS.
Jiang said he sees a big opportunity for the technology given the
enormous policy help Beijing has lined up for it.
“China is going to be the world’s biggest market for electric cars,”
Jiang said in an interview in his office in Beijing. “China has no
choice. They have to wean themselves from conventional gasoline
combustion cars,” he added, describing the recent sharp uptick in
air pollution levels in China's capital as “terrible" and "crazy”.
"Big existing automakers are too big. They cannot stop producing
conventional gasoline combustion cars. But we can ... switch to new
energy cars.”
LOW ENTRY BARRIER
Beijing's new green car policy is based on the idea that a low entry
barrier for electric car technology will allow late-comers to the
automotive industry to close a competitive gap with global rivals
who have a century's head-start in traditional combustion engines.
China, a major oil importer and blighted by air pollution, has
offered generous incentives to the public to buy green cars and
forced global automakers to share their EV technology.
The policy has helped spawn more than a half-dozen Chinese-funded EV
startups in and outside China, whose financial backers includes
Baidu , Alibaba , Xiaomi[XTC.UL] and Tencent , as well as LeTV , a
streaming video and Internet television provider.
Start-up electric car venture Faraday Future, funded by Chinese
Internet billionaire and LeTV founder Jia Yueting, on Monday
previewed a technology-heavy concept race car. California-based
Faraday hopes to develop it into a range of battery-powered vehicles
that can challenge luxury rivals such as Tesla Motors Inc. in the
growing market for electric cars.Jiang said NEVS is exempt from
China's regulations requiring a foreign automaker to have a local
partner because it plans to produce only electric cars for sale in
China.
Jiang said NEVS is building an EV factory in the northeast coastal
metropolis of Tianjin. He said he expected to soon get an auto
manufacturing license to start producing EVs for Panda New Energy.
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FINANCING THE DEAL
Panda New Energy, which is funded by a Beijing investment fund
called Hasun Asset, won’t have to pony up the whole $12 billion for
the cars, according to Jiang and Panda's Sun Wei.
The two executives said Panda New Energy will pay NEVS for the cars
from a four-to-five-year stream of revenue it expects from leasing
those 250,000 EVs. All Panda New Energy will have to come up with is
a deposit as little as 10 percent, Jiang said. Panda New Energy
initially expects to receive an all-electric minibus that seats 38
passengers and an electric commercial van. Jiang said production of
the minibus and the MPV cars are due to start gradually in 2016 at
the Tianjin factory, which he said is already half-completed.
Over the next four to five years, Panda New Energy will buy 50,000
minibuses and 50,000 courier vans, Jiang said. Sun said courier
service companies in China ,such as one run by 58.com, will use the
commercial vans .
The rest of the deal – 150,000 vehicles – are all EVs based on the
Saab 9-3, a sedan. Panda New Energy plans to lease them to taxi-like
chauffeur service companies. Jiang said NEVS plans to start shipping
those EV sedans to Panda New Energy in 2017. The sedans will be
assembled at the Tianjin factory.
LARGEST EV MARKET
Government subsidies and other measures helped all-electric car
sales soar nearly five-fold in China to 113,810 in the first 10
months of 2015. That puts China on track to soon overtake the United
States as the largest market for electric cars.
It is unclear, however, how competitive China's new EV startups will
be.
"Even if technical hurdles can be overcome, Tesla has significant
first-mover advantage, especially in terms of branding and share of
mind as an innovator in the industry," said James Chao, Asia-Pacific
managing director of consulting firm IHS Automotive. "Others who
come later risk being seen as lagging followers by consumers." The
chief executive of an auto company, who did due diligence for
possible investments in China's automotive start, said he decided
against it.
"Those startups perhaps have talent good enough to design and
engineer electric cars," he said. "But they lack the full breadth of
expertise, which includes being able to procure a full range of
components and systems to commercialize their design and manufacture
them properly, and that's not easy."
A key question remains over whether the battery-powered EV is the
right path for the future.
Japan and its automotive firms, for example, are jostling for
supremacy in how future electric cars should generate power. Unlike
China, which is pushing for battery-powered cars, Japan is betting
on other sources of electricity, including hydrogen fuel cells.
"I could see the attraction of heading into Tesla territory now, but
I am not sure if the herd is following the right horse," IHS’s Chao
said.
(Reporting By Norihiko Shirouzu in Beijing. Additional reporting by
Xinning Liu in Beijing. Editing by Bill Tarrant.)
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