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Guangzhou-based electric vehicle maker Xpeng Motors announced Wednesday that it had raised $400 million from investors, including smartphone maker Xiaomi, and won “several billions” in Chinese yuan of unsecured credit lines from lenders including China Merchants Bank, China CITIC Bank, and HSBC.
It’s a rare show of confidence in a sector that has been hit hard by a nationwide slump in demand for cars, not to mention sharp reductions in government subsidies for electric ones.
Some history: China is the world’s largest auto market. In 2018, auto sales topped 28 million vehicles, compared to 17 million sold in the United States.
But this October, total vehicle sales in China declined for the 16th consecutive month, while sales of electric and hybrids cars tumbled to 75,000, down nearly half from a year earlier. Back in June, Beijing began scaling back subsidies for individual purchases of new energy vehicles.
Property conglomerate China Evergrande, which has spent nearly $2 billion on EV-related acquisitions, said Tuesday it plans to slow investment in electric vehicles. True, Chairman Hui Ka-yan, China’s third-richest person, vowed Evergrande will invest an additional $6 billion over the next three years to become China’s largest EV manufacturer and Tesla rival. But the company is scaling back the pace of that investment. It now says it will delay release of its first car until next June—a year later than planned.
Other Chinese EV makers are spinning their wheels:
- The current industry leader, Warren Buffet-backed BYD, has sold more than 185,000 vehicles so far this year. But BYD reported a 51% year-on-year decline in EV sales in September.
- Nio, whose founder styles himself as the “Elon Musk of China,” has burned through billions of dollars in venture funding and, despite a glitzy marketing campaign, reported a $1.4 billion loss last year, forcing the company to scrap plans to build a second factory in Shanghai.
- Nio’s share price, which surged to a high of $12 immediately following the company’s September 2018 debut on the NYSE, has since plummeted below $2.
And China’s EV makers will face added pressure from the real Elon Musk. Tesla’s new Shanghai Gigafactory, which broke ground in January, will start mass production within weeks. Musk expects the factory to produce 1,000 cars per month by year end, and eventually will ramp up to 12,000 cars per month.
So why would anyone bet on Xpeng Motor, a five year-old startup whose founder, 42-year old He Xiaopeng, also has no previous experience in auto manufacturing?
Well, for one thing, that founder—whom I interviewed in Guangzhou last Friday at the Fortune Global Tech Forum—has a pretty impressive track record. In 2014, he sold the popular mobile internet browser UCWeb to Alibaba Group for a cool $4 billion. He co-founded Xpeng Motor that same year and is now CEO.
The venture unveiled its first car, an SUV with a starting price of around $20,000 after government subsidies, at CES in Las Vegas last year. It has since delivered about 12,000 vehicles to customers in China. In the spring, the company will roll out the P7, a four-door sedan with an advanced driver assistance system, automatic parking, and a range of 600 kilometers.
He told me his background as an Internet entrepreneur helped him see that consumers would interact with cars as mobile smart devices, much like how they do with their phones, especially as autonomous navigation and high-speed 5G networks become more popular. If so, he reasoned, big car manufacturers would eventually lose the upper hand to nimble upstarts who understood software, A.I., and how to analyze data.
“If we can survive in China for the next three to five years,” he said, “we believe we can become successful.”
I wouldn’t count him out.
Clay Chandler
On Twitter: @claychandler
Email: clay.chandler@fortune.com
This edition of Data Sheet was curated by Aaron Pressman.
NEWSWORTHY
Flippity-floppity. An icon of cellular phones is coming back–sort of. Motorola, now owned by Lenovo after a quick stop at Google, unveiled on Wednesday night a revamped version of its classic Razr flip phone. The new Android device is all smart and shiny, of course, costs $1,500, and ships in January.
Clickety-clack. Good god, the gods of Apple were kind on Wednesday. After years of ignoring our pleas and cries for a half-decent keyboard on Mac laptops, Apple on Wednesday debuted the 16-inch MacBook Pro with an all-new keyboard design that has early reviewers raving. "It is a bit frustrating that it took them three years to do it, but they did it," wrote longtime Apple watcher John Gruber. "This is what their modern MacBook keyboards should have been like all along."
Organizing all the world's cashflow. In more of a 'you got your chocolate in my peanut butter' move, Google may offer checking accounts via banking giant Citigroup and banking pipsqueak Stanford University Credit Union, the Wall Street Journal reports. “Our approach is going to be to partner deeply with banks and the financial system,” Google executive Caesar Sengupta said.
Unbought and unbossed. Speaking of banking, is the algorithm that assigns credit limits on the new Apple Card biased against women? That was the charge last week that prompted a state investigation. Fortune's own Jen Wieczner conducted her own household experiment and she got almost triple the credit limit of her husband, despite his similar credit profile. Developer and blogger Rakesh Agrawal also explained how the algo may be making weird decisions without being biased.
Early returns. Guess that Mandolorian guy is kind of intriguing behind his silvery helmet. Disney said more than 10 million people signed up for its new streaming service, Disney+, as of day one on Wednesday. But not all of those 10 million got to watch The Mandolorian right away, as the service was also hit with sporadic outages during day one.
Siri, where are you? Sales of smart speakers jumped 45% last quarter to almost 30 million units. Amazon expanded its lead, grabbing almost 37% share, while Google slipped from second place a year ago to fourth place (behind Alibaba and Baidu) with just a 12% share. That was better than Apple, though, which wasn't even mentioned in the report from market tracker Canalys.
FOOD FOR THOUGHT
New theories and innovations happen all the time in many fields, which got Dartmouth math professor Dan Rockmore thinking. In an essay for The New Yorker, Rockmore ponders where he gets his big ideas and whether they arrive slowly or all at once—as in the fabled "eureka" type of moments. It seems like it's a mix of both:
These stories suggest that an initial period of concentration—conscious, directed attention—needs to be followed by some amount of unconscious processing. Mathematicians will often speak of the first phase of this process as “worrying” about a problem or idea. It’s a good word, because it evokes anxiety and upset while also conjuring an image of productivity: a dog worrying a bone, chewing at it to get to the marrow—the rich, meaty part of the problem that will lead to its solution. In this view of creative momentum, the key to solving a problem is to take a break from worrying, to move the problem to the back burner, to let the unwatched pot boil.
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BEFORE YOU GO
A sweet story of salvation about North Carolina's Hurricane Dorian: Some cows washed out to sea and presumed dead in September were just found alive on an island at the Cape Lookout National Seashore Park. “If the cows could talk, imagine the story they can tell you of enduring," park spokesman, B.G. Horvat tells the New York Times.
Aaron Pressman
On Twitter: @ampressman
Email: aaron.pressman@fortune.com
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