Over the past 10 years, local governments in mainland China have been rushing to grab a piece of the “cake” in the new energy vehicle sector, providing funding, land, and tax support to car companies that are trying to establish themselves. However, the new energy vehicle industry continues to face cutthroat competition, leading to a continuous price war. A large number of new car companies with unstable foundations have gone bankrupt, resulting in wasted production capacity and billions of dollars in failed investments.
From 2014 to 2019, the market saw over 60 new car companies, but now only 8 remain, with 2 almost disappearing from the market and 1 deeply mired in wage arrears and losses. These stalled new car companies were estimated to have planned production capacity of 3.89 million vehicles, with total financing reaching 107 billion yuan. Both NIO, which is still operating, and Evergrande Auto, which has gone bankrupt, have accumulated losses exceeding hundreds of billions of yuan.
In Zhejiang, Jiangsu, and Jiangxi provinces, 18 local governments successfully attracted new car companies, with a total planned investment exceeding 150 billion yuan. However, in Zhejiang, only Lixiang Auto remains, while in Jiangsu, only Ideal Auto remains, and almost all new car companies in Jiangxi have disappeared.
According to a report by Yicai on Wednesday (4th), in the past 10 years, 23 new car companies in China planned a combined production capacity of 13.55 million vehicles, with planned investment reaching 685.3 billion yuan. The new car companies that have clearly stalled had a planned production capacity of 10.3 million vehicles, with total planned investment of 606.58 billion yuan; estimated production capacity that has been realized is 3.89 million vehicles, with accumulated financing of 107 billion yuan.
In 2014, inspired by Tesla, China launched a massive and profound new car manufacturing boom. Led by NIO, a large number of new car companies emerged rapidly, with the number peaking at over a hundred.
Ten years later, in 29 prefecture-level cities surveyed by Yicai, apart from cities like Changzhou in Jiangsu, Jinhua in Zhejiang, Zhaoqing and Guangzhou in Guangdong, Hefei in Anhui, and Beijing where most new car companies have gone bankrupt and closed, most other surveyed cities have found it increasingly difficult to recoup their investments in new car manufacturing bases.
Representative bankrupt car companies include Evergrande Auto, Baoneng Auto, and Reading Auto. Evergrande Auto had planned total investments exceeding 280 billion yuan, targeting an annual production capacity of 5 million vehicles by 2035, but sales have plummeted to zero starting this year.
Baoneng Auto aimed for an annual production capacity of over 3 million vehicles, with total planned investments exceeding a trillion yuan. However, after the acquisition of the Qoros brand, Baoneng’s sales soared to 63,200 vehicles in 2018 but dwindled down to 5,200 vehicles in 2021 and dropped to only 720 vehicles in 2022 before disappearing completely.
Reading Auto, a company that transitioned from low-speed electric vehicles, also planned an annual production capacity of 1.85 million vehicles, but its sales plummeted to 3,000 vehicles in 2022 and hit zero in 2023.
Nowadays, there are only 8 new car companies with significant shareholders from non-traditional car manufacturers that have visible sales data, including Ideal, Lixiang, NIO, Xpeng, Xiaomi, Neta, Jidu, and Hechuang. As of October this year, Jidu and Hechuang had monthly sales of less than 50 vehicles each.
From 2014 to 2019, there were over 60 new car companies registered but never actually produced any cars, totaling up to 400 companies.
Nezha Auto is a brand under Hechuang; with Hechuang collapsing this year, Nezha Auto has plunged into the whirlpool of wage arrears and losses.
Since October this year, an increasing number of Nezha Auto employees have been demanding back pay and have set up a “rights protection group”. Nezha Auto incurred losses of 6.867 billion yuan in 2023, accumulating losses of 18.38 billion yuan in the past three years. Whether Nezha Auto can survive this “winter” remains uncertain.
In November, Hechuang Auto laid off all employees in its Shanghai branch and withheld compensation for laid-off employees. Currently, Hechuang Auto’s Guangzhou headquarters has just over 50 employees maintaining basic operation.
Wei Jianjun, Chairman of Great Wall Motors, stated in October that between 2020 and 2023, closed new car companies include Weimar, Ai Chi, Skyline, Baoding, Voyager, Yun Du, Ziyou, Reading, Hanlong, Lifan, Bojun, Sailin, and Qiantu. Those companies on the brink of collapse, including Gaohe Auto and Hechuang Auto, are struggling on the “verge of life and death”.
On July 1 this year, Gaohe Auto’s Huaren Yuntong (Jiangsu) Technology Co., Ltd., the operating entity, officially applied for bankruptcy reorganization.
Further investigation by Epoch Times revealed that both NIO and Xpeng, two new car companies, have incurred losses exceeding hundreds of billions.
Data shows that from 2018 to the first half of 2024, NIO’s net losses totalled over 96 billion yuan. Adding a 44.13 billion yuan loss in the third quarter of this year, the total loss has exceeded 100 billion yuan.
On November 20, NIO released its third-quarter financial report, showing revenue of 18.67 billion yuan and a net loss of around 44.13 billion yuan.
The financial report of Evergrande Auto for 2023 showed that as of the end of last year, the company had accumulated losses of 110.841 billion yuan, with a 2023 loss of about 12 billion yuan. In the first half of 2024, the company incurred an additional loss of 20.256 billion yuan.
As of June 30, 2024, Evergrande Auto’s total assets were 16.369 billion yuan, total liabilities were 74.35 billion yuan, and they had delivered over 14,290 new energy vehicles. This means Evergrande incurs a loss of 79.8 million yuan for every car sold.
In 2018, Evergrande’s Xu Jiayin founded Everchix Auto, which formally filed for bankruptcy protection in July 2024.
Due to the significant impact of the automotive industry on the local economy and its long industrial chain, automotive projects have always been considered lucrative by local governments. However, many investments in new car companies have turned out to be futile.
In May 2024, Evergrande Auto announced that it had received a notice from the local administrative department in Tianjin to return around 1.9 billion yuan in previously awarded incentives and subsidies. In July 2024, Evergrande Auto applied for bankruptcy protection.
In September 2020, Weimar Auto completed a 10 billion yuan Series D financing, setting a record for the largest single round of financing in the new car manufacturer history; this financing involved many traces of local government, including Kunshan in Jiangsu, Hefei in Anhui, and Hengyang in Hunan. However, three years later, in October 2023, Weimar Auto Technology Group Co., Ltd. officially applied for bankruptcy reorganization to the Shanghai Third Intermediate People’s Court.
An audit document for a new energy vehicle project in a certain city in Jiangxi provided by Yicai reveals that the provincial development zone provided 2.7 billion yuan in fixed investment for the first phase project of the new energy vehicle company and agreed to provide an additional 1 billion yuan for purposes such as research and development of vehicle models, intelligent equipment (robots) input, brand building, market development, and network expansion. In addition, the zone commission offered special subsidies for the company’s application for entire vehicle manufacturing qualifications, totaling 600 million yuan.
In Zhejiang Province, Jinhua, Tongxiang, Hangzhou, Wenzhou, Shaoxing, and Huzhou planned a combined annual production capacity exceeding 2 million vehicles, with total planned investments nearing 59 billion yuan. However, the actual annual production capacity eventually exceeded 1.3 million vehicles. As of now, the only new car company from Zhejiang still in operation is Lixiang, while companies like Weimar, Skyline, LeEco, Voyager, and Baoneng have vanished from the market, with Nezha still struggling with operational risks.
Eight prefecture-level cities in Jiangsu introduced production bases for new car companies, including Changzhou, Suzhou, Nanjing, Changshu, Kunshan, Rugao, Huai’an, and Yancheng. They planned a combined annual production capacity exceeding 2.4 million vehicles, with total planned investments of 63 billion yuan. However, aside from Ideal, all other new car companies such as Qidian, Qiantu, Baoding, Sailin, Bojun, and Gaohe have all failed.
In Jiangxi Province, four prefecture-level cities set up production bases for new car companies, including Yichun, Shangrao, Jiujiang, and Ganzhou. They planned a combined annual production capacity of 900,000 vehicles, with total planned investments reaching 30 billion yuan. However, Ai Chi, Lvchi, and Guoji Zhijun have already declared failure. Nezha’s Yichun factory started reducing production in the second half of this year and is now close to a halt.
Chinese affairs expert Wang He previously told Epoch Times that the automobile industry is highly competitive, and the funding support for these new car companies is insufficient. Many companies are far from achieving economies of scale and lack strong technological reserves and capabilities. Some companies have shady intentions, and faced with the fierce market competition, it is inevitable that many new car companies in China would go bankrupt.
Wang said, “Each province and region thinks that the car industry is a good business and has provided a lot of financial support. Therefore, the situation here is very complex.”
Ding Shufan, honorary professor at the Institute of East Asia Studies at National Chengchi University in Taiwan, told Epoch Times that some car companies in China are supported by local governments and are products of regional economic interests.
He said that many local governments in China are almost bankrupt, unable to pay salaries, and “local governments cannot subsidize for the long term. It is very difficult to change this wave of closures.”