New players are piling into the world’s largest electric vehicle market—no auto experience required

April 10, 2021, 12:00 AM UTC

China is the world’s largest market for electric vehicle (EV) sales, but it still has enormous room for growth. Beijing has set a target for EVs to account for 40% of all passenger vehicles sold in 2030, up from roughly 5% today. According to McKinsey, EVs were only 0.01% of the market between 2009 and 2012.

The strong government directive—backed up by consumer subsidies that helped China sell 1.3 million electric vehicles last year—spurred a slew of local startups into the auto space. Three EV unicorns—Nio, Xpeng and Li Auto—have raised a combined $3.6 billion through IPOs since 2019.

Satisfied that the domestic auto industry is trending toward EVs, Beijing plans to phase out consumer subsidies by 2022. But even with subsidies ending, new companies continue to enter the EV realm—companies with backgrounds ranging from real estate to smartphones—and few with any experience in making cars.

On Tuesday, telecom equipment manufacturer Huawei Technologies announced its first EV would be available on April 17. The same day, local media reported Chinese ride-hailing giant Didi was launching an EV business unit, too. A week earlier, smartphone maker Xiaomi said it would invest $10 billion into EV development over the next 10 years, creating a new subsidiary dedicated to the venture.

The new EV players will face stiff competition from Tesla, which accounted for 21% of the value of all passenger EVs sold in China during 2020, plus the established local players like Xpeng and Nio and the steady electrification of traditional automakers too.

“I don’t expect all the players who are rushing in now will still exist in the auto market in five to 10 years,” says Raymond Tsang, a partner at consultancy Bain & Co. But the stream of entrants clearly see reason to try.

Evergrande

The Financial Times calls real estate developer Evergrande the “world’s most indebted property group,” sitting about $120 billion in the red. Electric vehicles make up at least $10 billion of the imbalance on Evergrande’s books. The conglomerate began pouring money into the sector in a bid to diversify away from a maturing property market.

Evergrande moved into EVs in 2018 and restructured its health unit as a New Energy Vehicle (NEV) wing in 2020. The same year, Evergrande unveiled six EV models and vowed to become the world’s largest EV producer within five years. The first model is due for release in the second half of this year.

Unlike other new entrants to the auto industry that are partnering with manufacturers, Evergrande has insisted on building its own factories, breaking ground in Shanghai, Guangdong, and east China’s Anhui province so far. The Anhui factory has cost roughly $4 billion and was announced in September 2019 but, as of December last year, was incomplete.

Evergrande has also broken the mold by acquiring companies across the EV supply chain, from battery manufacturing to charging facilities to auto designers and dealerships. Evergrande raised $3.35 billion through a share sale in January and is preparing to list its NEV unit on the Nasdaq-like Shanghai Star Market.

Huawei

Trade blocks imposed on Huawei Technologies by the U.S. since 2018 have decimated the company’s smartphone sales, prompting the telecom equipment manufacturer to sell off its budget smartphone brand Honor last November.

The same month, Huawei consolidated its smart car ventures—which include hardware and software services for autonomous and electric vehicles—under the banner of its consumer business group, where smartphones had previously reigned supreme.

Reuters reported in February that Huawei plans to launch EVs under its own brand and could release several models this year. But Huawei has always denied rumors that it would enter the EV market on its own. Representatives told local media that Huawei doesn’t want to make cars but will use its tech expertise to “help car companies build good cars.”

Then on Tuesday, Huawei posted an image on its Weibo account that teased the launch of the first smart EV codeveloped by Huawei and Arcfox, a subsidiary owned by Beijing Automotive Industry Holding Co. (BAIC).

The EV, which will debut at the Shanghai auto show on April 17, is equipped with Huawei 5G connectivity and runs on Harmony OS—an operating system designed by Huawei. The smart EV also features an autonomous driving system developed by Huawei, consisting of cameras, computer processors, and lidar.

Tesla CEO Elon Musk has called lidar—a spatial sensor that uses laser pulses to map the field around a car—a “fool’s errand.” But Huawei suspects it knows better. In an interview with Caixin last year, Huawei rotating chairman Xu Zhijun said, “Anything that Tesla can do, we can do better.”

Xiaomi

Xiaomi announced its push into the EV segment on March 30 through a filing with the Hong Kong stock exchange, where the smartphone maker debuted in 2018. Xiaomi founder and CEO Lei Jun elaborated on the brand’s EV dreams during a launch event the same day.

“I am willing to put all my personal reputation on the line and fight for the future of our smart electric vehicle. I am determined to lead my team to fight for the success of the Xiaomi electric vehicle,” Lei Jun said, adding that the Xiaomi EV will be the “final major entrepreneurial project of my life.”

Xiaomi says it will establish a separate subsidiary with an initial investment of roughly $1.2 billion to lead the EV push, and will invest a total of $10 billion in the project over the coming 10 years. Lei Jun will head the new unit.

Xiaomi pitches itself as an Internet company bolstered by hardware sales, and its “Mi-EV” will join a long list of smart devices bundled under the Xiaomi banner. The brand’s expansive portfolio runs the gamut from smartphones and wearables to dehumidifiers, kettles, webcams, scooters, and even non-smart items like backpacks and toothbrushes.

“Smart electric vehicles represent one of the largest business opportunities in the next decade and represent an indispensable component of smart living,” Lei Jun said. “Entering this business is a natural choice for us.”

Didi

Chinese media reported Tuesday that China’s leading ride-share company Didi Chuxing had launched an EV unit to be led by company vice president Yang Jun. But the report was light on details of what the new EV unit will do. Didi officially entered the EV space late last year, unveiling an electric vehicle developed especially for ride sharing, called the D1.

Didi built the D1 in partnership with Warren Buffett–backed automaker BYD. According to Didi, the company already has a million electric vehicles registered to its platform, making it the “world’s largest shared-vehicle network.” Didi sourced data from its 550 million passengers to design the D1, which, Didi says, puts a focus on customer safety. The ride-hailing service was rocked by safety concerns in 2018 after two passengers were raped and murdered by their drivers.

Didi has taken numerous measures to improve customer safety since then—such as upgrading a distress button that enables customers to call the police through the app. The D1 builds some of those features into the car. Touch screens fitted in front of the back seat allow riders to monitor their journey, while an A.I.-powered in-car surveillance system monitors voice and video to check the driver’s identity and whether passengers are dropped off successfully.

The D1 is also equipped with level 2 autonomous driving capabilities—meaning it can steer and adjust speed itself. In January, Didi raised $300 million for its autonomous driving unit, led by IDG Capital.

“We all know that for autonomous driving, the first commercially viable use case will be robot taxis,” says Tsang of Bain & Co. “So for players in the mobility industry, the shift to AV is basically a make-or-break moment.”

Forward drive

These companies aren’t the only new and unexpected entrants to the EV market—in China or elsewhere. Apple, Tencent, Alibaba, and Baidu all have some skin in the game: either providing operating systems to power onboard tech—as Baidu has done through its Apollo OS—or in designing and building hardware—as Apple confessed it was doing on Monday.

But really, these companies are all investing in the next generation of connected tech. Not EVs.

“The car is the next frontier in the Internet of Things, and is the platform for connecting us between the places we live, work, and play,” says Bill Russo, founder and CEO of Shanghai-based auto-market consultancy Automobility. “Most of these companies are interested in making smart devices, which cars are becoming. The fact that they are EVs is incidental.”

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