Why can't Chinese electric car start-ups fail?

The local government has made the mobility of the future a strategic sector and is devoting a profusion of funds to it. As a result, companies in crisis are being rescued.

By: Francesco Barontini

Mar 24, 2024 at 7:52am ET

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When the electric car revolution began, hundreds (if not thousands) of start-ups launched themselves into the sector, hoping to ride the great wave of the ecological transition.

Unfortunately, after the initial enthusiasm, many of these start-ups encountered insurmountable difficulties and closed their doors. It is estimated that in China alone, 500 manufacturers were created in just a few years, and today there are only around a hundred left.

But if you're a Chinese car brand dedicated to electric cars and you haven't yet taken your case to court, there's a good chance you've avoided closure once and for all. That's according to Bloomberg, which points out that the Chinese government has made zero-emission mobility a strategic growth sector and a new production force by granting aid to everyone. Here are a few examples.

Aiways 2.0

The first car manufacturer to receive government aid. It is called Aiways and has also tried to sell in Europe. It presented the U5 and U6 models but, due to insufficient sales, stopped production and even stopped paying salaries to its employees in mid-2023.

The Aiways U5 electric SUV

However, it may soon be able to restart production and try out a new strategy, all focused on exporting cars. All, of course, with the support of the local government. The aim is to live up to what was set out in 2021, the year of its Western debut: to establish itself as an alternative to established brands such as Kia and Hyundai.

The State is in charge

The future could also be bright for Zhidou Electric Vehicles, a company that produces electric microcars and went bankrupt several years ago, in 2019. Thanks to the new impetus given by the Chinese government, Zhidou Electric Vehicles is implementing a vast restructuring plan in which Geely is also participating. After years of stoppage, it has resumed production and is preparing to launch a brand new product on the market.

Then there is the case of Haima Automobile, a company in perpetual loss due to poor commercial results which, since the beginning of the year, has transferred its management to a company backed by the government of the province where it is based. The local authorities have taken charge and financed an ambitious recovery plan that should boost production to 1.4 million vehicles a year.

La Haima H1, monospace électrique vendu en Chine et sur certains marchés asiatiques

The situation in the rest of the world

What do you think?

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Apart from China, the situation in other markets is not easy. Demand for electric cars is growing, but more and more slowly, and this slowdown is prompting many manufacturers to review their plans. The cases of Renault and Volkswagen are the most striking in this respect.

As for start-ups, their fates are uncertain. On the one hand, we are witnessing the expansion of Rivian, which has yet to put its money where its mouth is. On the other, to cite the most recent case, the difficulties of Fisker, which is literally running out of money.