◼ TECHNOLOGY Bloomberg Businessweek August 3, 202017PHOTO
ILLUSTRATION
BY
731;
PHOTOS:
GETTY
IMAGES
(2);
COURTESY
HOZON
(1).
OF
CHINA’S
LARGEST
CITIES,
COMMONLY
DEFINED
AS
TIER
1 OR
NEW
TIER
1,DATA:
BLOOMBERGNEF
THEBOTTOMLINE Morethan 500 millionpeoplelivein China’s
ruralareas.Givenlowcarownershipratesamongthem,automakers
seeanopportunitytomarketaffordableEVsoutsidebigcities.accordingtoadvisorycompanyAutomobilityLtd.
Addingtothepressure,inJanuary,Teslabegan
deliveringEVsfromitsnewShanghaiplant.
Thecoronaviruspandemicismakingthesit-
uationevenworse.Salesofnew-energyvehicles
droppedmorethan37%inthefirstsixmonthsof
2020 afterfallingsharplyinthesecondhalfof2019.
ChinesePresidentXiJinping’sgovernmentis
tryingtoboosttheindustrybyhelpingautomakers
sell in areas they’ve usually overlooked. In July,
Beijing announced an initiative involving 10 com-
panies, including Hozon, to promote EV sales in
villages, towns, and small cities with subsidies and
other incentives such as preferential loans.
At a time when China’s relations with the U.S.
and other countries are deteriorating, EV makers
including Hozon are part of a broader push by Xi
to build Chinese alternatives to Western compa-
nies. “We must ensure key and core technologies
are in our own hands and aspire to build strong
domestic automobile brands,” Xi said on July
while touring a facility of state-owned FAW Group,
another automaker that’s targeting prospective
rural buyers.
More than 500 million people live in China’s
rural areas. Although their incomes generally are
lower than those of city dwellers, some have cash to
spend, according to China EV100, a think tank that
focuses on EV development. In the countryside, res-
idents own fewer than 150 cars per 1,000 people,
about half that of residents in China’s biggest cit-
ies, according to BloombergNEF. “There’s a huge
market for such vehicles in the rural market,” says
Xu Haidong, deputy chief engineer of the China
Association of Automobile Manufacturers, a trade
organization that’s helping organize campaigns to
encourage promoting electric-vehicle sales.
There are advantages to owning an EV in the
countryside. Because most rural Chinese live in
a house rather than a high-rise, an EV owner can
simply plug the car into an ordinary outlet and
doesn’t need the charging infrastructure more
common in big city apartment buildings. With
the company offering a subsidy of as much as
7,000 yuan for buyers, a consumer can purchase
an EV with as little as 18,000 yuan down—and
farmers with a good credit history are eligible to
drive away without any initial payment.
Even with this marketing push, challenges
remain. Hozon, like the rest of its direct EV com-
petitors, needs more capital. “This industry
by nature requires huge investment in product
development and manufacturing,” says Charley
Xu, managing director and partner at Boston
Consulting Group in Shanghai.Fangis movingaheadwitha $428millionfund-
raisingroundannouncedonJuly20,tobefollowed
by an initial public offering, possibly in 2021. Rivals
including NIO Inc. and Xpeng Motors already have
had IPOs or big-name corporate investors such
as Alibaba Group Holding Ltd. enabling them to
moreeffectivelycompeteagainstforeignautomak-
ersexpandingintothemarket.LiAutoInc.filed
onJuly24 for a Nasdaq listing to raise as much
as$950million,andWMMotoris consideringa
ShanghaiIPO.Moreover,there’sa limittohowfar
automakerscangowithlow-margin sales in less
affluent parts of China, says Jing Yang, director for
corporateresearchwithFitchRatingsinShanghai.
“Thisis a short-termremedyforthemarketweak-
nessandfordomesticbrandEVmakers to clear
some inventory,” she says. “They still have to work
onthehigherend.That’stheultimatetrendforthe
developmentofEVs.”
Fangarguesthatthere’sspaceinthemarket for
an EV maker selling less expensive cars. All the atten-
tion within China on Tesla has helped educate con-
sumers about the potential of EVs, he says. “There’s
sucha hugepopulationinChina,andevenif Tesla
couldsell1 millioncarsa yearhere,”Fangsays,“that
wouldstillbeonly 1 million.” �Chunying Zhang and
Bruce Einhorn, with Ying Tian● Munich startup Sono has developed a diminutive car that can
be charged by solar panels embedded in its roof, doors, and hoodEven Better Than a
Convertible on a Sunny Day
You can’t say Laurin Hahn lacks drive. While still
in high school, he founded what has since become
the most popular dance club in Munich. Then, with
no real engineering skills, he and a buddy set out
to build a car powered by solar panels on its roof.
Four years later they had a working prototype, so
they formed a company to sell it. A few years on,
when key investors declined to put in more money,
the pair turned to crowdfunding. Within two months
they’d raised €53 million ($62 million). “I guess I’m
fairly ambitious, but the point of the car was to help
the world,” Hahn, now 26, says with a laugh.80%5020
2016 2019▼China’sannual
passengerEVsales
Majorcities*
Rest of the country