The world has been in debt to the Chinese electric vehicle (EV) industry because of the governments push for emission reduction and clean technology and the early forays of Tesla’s electric vehicles in China. However, as China experiences severe power shortages, the EV sector is struggling to keep pace with the hype around the booming sector, as the bubble is waiting to be burst sooner than later.
China is notorious for creating a lot of hype around its major projects and scientific and technological ambitions. However, these projects often prove to be a mere eyewash and a big scam, and the health of the Chinese EV industry is no exception.
China’s real estate giant Evergrande’s fall from grace also contributed to this mess. The company is in a deep debt crisis, and its fall is causing deep impacts on the Chinese economy.
Evergrande made news last year because of an unsuccessful electric car company. Bloomberg had reported in April this year that the China Evergrande New Energy Automobile Group, an electric car startup founded by a real estate tycoon, is worth $87 billion, which is bigger than Ford Motor Company and General Motors, but it is even one. None of the cars was sold.
Bill Russo, the founder and CEO of Shanghai-based Automobility Ltd, had told Bloomberg that “this company is too strange. They have invested a lot of money, but they have not got any rewards, plus they are entering an industry that they understand very little, and I’m not sure if they have the technological advantages of Nioand XPeng”.
At the end of last month, the ‘Nikkei Shimbun’ disclosed that the electric division of China Evergrande Group had terminated its stock issuance plan because people were worried that the parent company of the electric vehicle division would be doomed.
Failure of Chinese EV industry common
If Evergrande’s electric vehicle startup is called “strange” by Russo, then the failure of China’s electric vehicles on the road is a common phenomenon with a high probability.
China’s electric vehicle industry is dying due to severe domestic power shortages. Since mid-September, some charging stations have suspended operations due to power outages during peak hours, causing some electric vehicles to not be on the road. The South China Morning Post (SCMP) has reported that China’s electricity curtailment may impact the booming electric vehicle industry.
In addition, power outages in more than 10 provinces in mainland China may hinder the Chinese people from choosing to buy electric vehicles. Zhang Fan, an auto insurance broker in Jilin Province, said that “for many years, electric vehicles have been coldly treated in Northeast China. Power outages may further scavenge people’s interest in purchasing electric vehicles”.
The irony is that electric vehicles should be the world’s answer to unclean energy and burning fossil fuels, but they have failed in China because China cannot produce enough electricity when it lacks coal supplies.
Drying foreign investment
Chinese electric vehicle startups, such as WeilaiAutomobile, which are listed in New York, have not been profitable since their establishment. Other Chinese companies like Nio, XPeng and Li Auto Inc could not be comparable to Tesla or any iconic German car brands such as BMW AG, Volkswagen AG, and Mercedes-Benz AG, the owner of Daimler AG, as they have begun to expand their business scale of the EV automotive sector.
Tesla is a pioneer in the electric vehicle industry and has built a high-end brand image. China’s electric vehicles must win people’s trust to compete with the global giants. It is highly unlikely that the Chinese EV market could instil confidence among its customers.
Except US auto major Tesla, not a single reputed automobile startups have shown interest in investing in China. The recent power outages are undermining the country’s ability and infrastructure to maintain a huge electric vehicle industry. Suddenly, the Chinese electric car bubble seems to have burst, which will keep the foreign investors away from Chinese market for sure.
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