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Tesla Execs Bail As Cash Flow Hits Record Lows

Amid a rough second quarter…

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Who’s Winning The Electric Vehicle Race?

Automakers and suppliers of automotive…

Irina Slav

Irina Slav

Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.

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Chinese Investors Looking To Dethrone Tesla As Electric Car Kingpin

Electric Vehicle Charging

Tesla is still a synonym for luxury electronic vehicles (EV), but this may change in the not-too-distant future as fresh competition emerges—not just from the likes of BMW and Mercedes-Benz—but from startups that are poaching engineering and management talent from Tesla and using it to challenge the company on its home turf.

Besides their goal, these companies have another thing in common: Chinese money.

Atieva, one of those startups, recently unveiled plans to release a luxury EV sedan dubbed Edna within two years. The company, whose Chief Technology Officer is Peter Rawlinson, who led the engineering of Tesla’s Model S, is funded by a variety of investors, among them Beijing Auto and LeEco—a software company owned by entrepreneur Jia Yueting.

Another Tesla competitor hopeful, Faraday Future, also based in California, like Tesla and Atieva, is funded by Jia as well. The company, which has announced plans to start production of its EV in the U.S., recently snapped up top Ferrari manager Marco Mattiacci to oversee everything from branding to sales and customer experience. Faraday Future, like Atieva, doesn’t yet have a car ready for mass production, but it’s in the process of building a plant in Nevada where it will make its FFZero1.

Two other young companies that have significant involvement from Jia Yueting and other Chinese sources of funding are NextEV and LeSEE. Actually, the latter is a creation of Jia, a unit of his conglomerate LeEco. The former has financial backing from a number of Chinese internet majors, among them co-founder William Li, founder of online marketing giant Bitauto. Related: Why Has There Been So Little M&A Activity During The Oil Crisis

All these companies are using similar tactics: get the talent from the big guys and don’t spare the money. The race is on and it’s a fast one, in more than one sense. The luxury segment of the EV market has been pretty empty until recently but now, it seems, it has started to become more lucrative and investors—private equity and venture capital, as well as industrial giants such as Japan’s Mitsui, for example—are pouring billions into it. That’s one reason, with production costs falling and the popularity of EVs growing. The other is that luxury car buyers easily get bored and need new features that make these cars stand out from the mainstream production.

Tesla is not complacent—far from it. Elon Musk’s company just last month raised $1.7 billion in fresh funds with a share placement that will be used for expanding the production of its best-seller in the luxury segment, the Model S sedan, due to high demand.

One recent study from Lux Research notes that innovations in luxury EVs are trickling down to the mainstream. Slowly, the study’s authors acknowledge, but steadily. This means that to stay on top of things, luxury EV makers need to constantly come up with new and better features to satisfy demand in this segment—demand which is apparently pretty solid, judging by all these startups blossoming here and there, or rather, in the U.S. and China. The fact that Chinese businesses are investing so heavily in this industry is no coincidence or the latest example of the Chinese joining the latest hype. The U.S. and China are the two largest markets for EVs. Markets that are still relatively young and offering sweet opportunities. It would have been obscene to fail to take advantage of this.

By Irina Slav for Oilprice.com

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Leave a comment
  • Mitchell Burns on June 16 2016 said:
    They have a long way to go to catch up to Tesla.
  • Jonathan Morgan on June 16 2016 said:
    Kandi (KNDI) is a key player here. They are doing great things and have an excellent partnership with Volvo and solid management in place
  • JHM on June 16 2016 said:
    The Chinese are the ones to watch for scaling up EVs. Once they get exportable products going, they will scale up manufacturing at blinding speed. Traditional automakers will lose share very fast in emerging markets. Fortunately, the US can count Tesla among its EV makers, but I doubt the big three will be able to keep up with the Chinese. It takes GM about 7 years to develop a new model, and they are not aiming at anything close to competitive with Tesla. This gives the Chinese a huge opening. Seven years is enough time to put GM, Chrysler and Ford all into bankruptcy for lack of a compelling electric vehicle. Even Toyota thinks it's got several decades to work this out. They could all be caught flatfooted. Once China exports EVs into developing countries this will deprive traditional automakers growth opportunities, and they will quickly find that it is hard to attract capital and talent when sales are in decline. The illusion that they have plenty of time could be their downfall.
  • Philip Branton on June 17 2016 said:
    Hmm.........lets hope the Chinese and Musk realize what's really getting ready to happen. They all had better make their cars "modular" so that 3rd party spec companies can easily trick out the cars to meet the customers real demand. Just like no subdivision in America has been approved to have the homes that are sold to PRODUCE energy. These car manufacturers need to think more like golf cart modification centers. Do the roofs on 99% of the golf carts actually charge the golf cart..? If Musk and the Chinese make actual EV models that "clone" similar models already built and can be "tricked" out very cheaply...lookout. As an example, if Musk and the Chinese can offer Honda Odyssey and Town and Country clone models that have modular batteries, with roofs and hoods that are actual solar panels under 18K, that would be a market driver. Then let the new owners trick out the EV minivan shell with their own seats, wheels, carpet, ...etc. (from salvage no less).
  • Dav on June 19 2016 said:
    Peter Rawlinson;; I hope the Chinese get what they deserve by hiring a traitor.
    Overall it sounds like to me that these companies missed the boat. Tesla is making cars, these guys are just talk, which, if I remember correctly, is easy.

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