HONG KONG / BEIJING (Reuters) – Last year, Wei Qing and his private equity investment team visited more than 20 Chinese startup manufacturing electric vehicles.
The final result? They decided not to invest in anything.
"There are many uncertainties from when a company tells a story in the early stages, when it makes a sample car and raises funds, in the final mass production," said Wei, managing director in Shanghai-based Sailing Capital.
Wei, who refused to name the EVs his team visited, said that only a few of them would survive. The voyage made a decision to invest in a supplier of the EV part, he added.
His concerns show what illustrates bankers as the more time-consuming funding for Chinese EV workers who should hurry for attention in a tight sector and make convincing arguments about future profitability despite government cuts EV subsidies and plans to phase out them.
Many setbacks plaguing Tesla Inc. in his search for long profitability as well as a dramatic slide on sales and problems with some cars in Chinese startup Nio Inc. has also put investors on their guard This year , Chinese EV manufacturers have raised just $ 783.1 million in mid-June compared to $ 6 billion for the same period a year earlier and $ 7.7 billion for all 2018, according to the PitchBook data provider.
One Hong Kong-based banker told him he was approached by at least a dozen EVs who were looking for new funds but had to pass most of them because they could not set themselves apart from the crowd
Although funds recovery efforts taken from the ground do not move as fast as EV manufacturers do not.
"It's hard," said the banker who started working on a fund raising this year. "If you get a meeting with investors, you can always tell a story, but some will not even respond to your requests for a meeting."
He declined to be known as negotiation was not public.
The eager to eliminate smoke and start own auto industry, China has said it wants the so-called new energy vehicles (NEVs) – which also includes hybrids, plug-in hybrids and fuel cell cars – for account The fifth part of auto sales by 2025 compared to 5% today.
Ambitions have begun many EV startups competing not just one at a time, but also with global automakers and Tesla, who plan to start production in China this year.  About 330 EV firms are registered for a kind of subsidy, showing government data, even though the number of better established startups is smaller, around 50.
But amid the criticism that some companies are relying heavily on government funds, Beijing reduces subsidies, raises standards N eeded for vehicles to be eligible and flag them will end up entirely after 2020.
That leads to sharp slowing as transport prices rise. The sale of NEVs in May grew at only 1.8% from a year earlier compared to 18.1% in April, and 62% growth for 2018.
Surviving the current funding environment, requires a lot of discipline at cost, Daniel Kirchert, CEO of Nanjing told by EV maker Byton, Reuters
"Due to the current situation, it is not enough for any startup to produce good products and be fast in the market. At least it's important to manage the cost. "says Byton, supported by state-owned automaker FAW Group and battery supplier. Contemporary Amperex Technology Co (CATL) is one of the few EV manufacturers with a fundraising round on the train, looking for $ 500 million.  Others include Leap Motor, supported by state-owned Shanghai Electric Group Corp and Sequoia Capital China, seeking $ 372 million as well as CHJ Automotive, founded by serial entrepreneur Li Xiang, who wants rising $ 500 million.  People with successful funding under their belts this year include Baidu Inc. backed WM Motor Technology Co Ltd which closed a $ 446 million round in March, according to PitchBook.
Some have earned money out of private equity. E-Town Capital, an investment firm of Beijing's government, will invest 10 billion yuan ($ 1.4 billion) in a joint venture with Nio, which can help Nio build its own plant.
TESLA, NIO WEIGH
Founder Elon Musk told Tesla employees last month that the company's $ 2.7 billion downgraded recently gave it only 10 months to break even at the rate that cash was burned first quarter.
Nio's share was harder, dropping 60% this year to a decrease in its delivery perspective, a halving of first-quarter sales from the previous quarter, increased competition and reduced subsidies. Its reputation was also hurt after three vehicles caught in the fire and unintentionally shutdown of the car at Beijing's prestigious Changan Avenue after the driver started a software update.
"Some of the listed EV industry leaders are currently inefficient in the secondary market trading and have created pressure for short-term sector outlook," said Brian Gu, president of EV startup Xpeng Motors and a former senior JP Morgan banker.
"We see investors becoming more careful, selective and very popular in the frontrunners. I think this trend is likely to continue," he said.
An investor in WM Motor is less downbeat about the willingness of private equity investors to fund the industry. "Nio is probably the best in Chinese start-ups of EV. Find where it stands today – how can this be comfortable with us in writing checks for other EV start-ups?" Investors also said that Nio was managing but sold it this year.
(Reporting by Kane Wu and Julie Zhu in Hong Kong and Yilei Sun in Beijing; Further reporting by Norihiko Shirouzu in Beijing; Editing by Jennifer Hughes and Edwina Gibbs)