How Are Chinese VCs Affecting American EV Startups?
Combined with rapid industrialization and a fast-growing economy, China has a pollution problem that is nearly out of control. Plaguing Beijing’s everyday, smog and dust particulates can sometimes get so thick that a noxious fog rolls throughout the city. Air quality is hitting never-before-seen lows, prompting Beijing officials to issue its first ever red alert — closing schools, halting construction projects, and advising citizens to stay indoors.
China’s air pollution is fueling a host of cleantech ventures — such as electric vehicles — and pushing innovation in the EV industry faster than expected. Many EV startups in the U.S. are seeing the effects of Chinese venture capital on new innovations and market priorities.
Electric Vehicles to the Rescue
When Tesla announced its Model S in 2012, it kick-started the electric vehicle revolution. By showing that EVs could not only save the earth but also outperform internal-combustion vehicles in just about every possible scenario, Tesla disrupted a market that was once untouchable.
Tesla isn’t the only player in the EV market though. Several Chinese-backed companies have emerged in recent months to take bites of the ever-growing EV apple. Faraday Future, NextEV, the recently purchased Atieva, and the back-from-dead Fisker all have yet to release even concept drawings but have made major moves on high-level Silicon Valley talent and boast deep pockets from highly interested Chinese investors.
Chinese billionaire Jia Yueting is the founder and CEO of the “Chinese Netflix” LeTV, which intends to take on Tesla. As a Fortune article explains, LeTV owns EV startup Faraday Future, touting an investment of $1 billion in a Nevada production facility that has yet to be designed. Poaching former Tesla talent, Faraday seeks to break into the EV market in the coming year, and a safe bet is China will be one of its major market focuses.
While Faraday has been pounding its war drum, former Tesla VP Bernard Tse quietly founded Atieva and hired high-profile CEO Denise Gray, who formerly oversaw General Motor’s battery lab. Seeing Atieva’s potential, Chinese automaker Beijing Automotive Industry Corp (BAIC) recently bought a majority share in the company, turning Atieva into a major player overnight.
Investments Driving Innovation
The heavy investment from China and others in the electric vehicle market has not only bred a bright future for new EVs but also an explosion of innovation in the market place.
Tesla has been the major innovator and sees China as its next conquest. Look no further than the recently released Model X, with its much-discussed bio-weapon defense mode. While the U.S. and European markets saw the new mode as nothing more than a gimmick, China sees it as a true problem-solver. Imagine sitting in traffic on a hot day of high pollution with the air conditioning sucking in all that pollution and blowing it directly into your face… Now you’ll have an easier time imagining why that HVAC system built into the Model X is looking a lot sweeter to the Chinese elite, who can afford it.
Tesla, looking to maintain its industry stronghold, once again stepped in to make the first advancements. By building the first of its kind DC fast charge network across both Europe and North America, Tesla signaled its intention to push the industry by allowing its drivers not only the ability to drive just about anywhere but to charge up fully in under an hour. With more to develop, Tesla recently announced autopilot — autonomous driving capabilities — to many of its vehicles, bringing a future of self-driving cars squarely in reach.
However, Tesla is not the only one innovating. Taipei-based Gogoro is building out a massive battery-swapping network for its insanely powerful all-electric scooter. Gogoro is taking charging times completely out of the question by allowing drivers to simply change the entire battery out for a new fully charged one. While still only available in Taipei City, Gogoro recently announced its intention to expand into Europe sometime next year.
Even governments are pushing the boundaries of innovation as the U.K. pledged to test roadways that charge electric vehicles as they drive down the highways. While adding such an advanced capability to all roadways would be a massive undertaking, it does show that governments are now taking EVs very seriously.
While such innovative examples spell good news for the future of EVs, outside-the-box thinkers need to innovate further to really push electrics into the mainstream in the U.S. and across the globe.
Finding a Market Half the World Away
Perhaps unsurprisingly by now, one of the next big startup hotbeds will be cleantech and electric vehicles.
Hundreds of startups are working to help solve unique issues that face EV drivers and EV adoption and tackling new ways to drive innovation toward an all-electric future. While many of these cleantech startups reside in the U.S., most will see the greatest growth potential and investment dollars coming from the other side of the world. EV startups will certainly put down roots in cities across the U.S., but they need to make plans to break into the Chinese market as soon as possible.
Beyond its market potential, China suffers from a catalogue of energy issues that make EV adoption much more difficult there than in the U.S. Although modernizing fast, China still faces energy shortages and infrastructure issues due to the ever-growing population coupled with skyrocketing energy demand. EV startups will need to address these unique needs before possibly standing a chance in the Chinese market.
China In Cleantech, Cleantech In China
The good news — for both Chinese consumers and EV startups — is the Chinese government has been supremely aggressive in funding new energy projects. Having bet big in the renewables industry to the tune of $56.3 billion in 2014 alone, China far outpaces any other country in developing energy from alternative sources. By dumping billions of dollars into solar, wind, hydro, and nuclear power over the past several years, China is quickly trying to fix its energy needs and this spells huge opportunity for startups and established companies alike.
As we see more Chinese backing of EV companies and more EV companies entering the race to an all-electric future, those players will have unique challenges to face in China. Still, China clearly realizes its pollution problems are not going away without significant investment, and EV startups hoping to further develop cleantech, renewable solutions would be smart to prioritize the Chinese market.