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RM16.2b

Tesla foe in China hits RM16.2b valuation before selling cars
Xpeng has Alibaba and the govt in its corner. Can it start selling electric cars before Musk builds his factory? By BLOOMBERG Henry Xia jumps into the burnt toast-coloured electric car he helped build as co-founder of Xpeng Motors Technology Ltd and commands it to play Green Day’s “21 Guns”. He asks the car about traffic conditions and starts driving. The 35-year-old is the most senior car executive at a Chinese automaker that hasn’t delivered a single vehicle, doesn’t own a factory and hasn’t obtained a production licence from the government. At least, not yet. What the four-year-old start-up has is backing from tech giants Alibaba Group Holding Ltd, Foxconn Technology Group and Xiaomi Corp founder Lei Jun. Xpeng expects to raise more than US$600 million (RM2.42 billion) this month from investors that include Alibaba, valuing it close to US$4 billion, according to a person familiar with the fundraising. In a test drive of Xpeng’s first crossover around a drab cement office park in Guangzhou, the roomy SUV drives smoothly, with a Tesla-like panoramic windshield and sleek exterior. But it’s the voice controls, streaming music, live video, driver-tracking maps and other software that reveal the auto ambitions of the company’s Chinese tech backers. Xpeng is making the equivalent of a smartphone with a steering wheel. The Tesla-like dashboard and centre console of Xpeng’s 1st model, the David 1.0 Xia explains why the company nicknamed this car David: “We’re going up against Goliath,” he says, referring to the hundreds of automakers churning out electric vehicles (EVs) in China, where half of the world’s EVs are sold. “It’s not about the physical car anymore, which anyone can now manufacture,” Xia says, “but about building a robot on wheels.” Xpeng is primed to capitalise on a trade tussle that is already jacking up car prices. As China hits back against the US with retaliatory tariffs, import duties on American-made cars have increased to 40%. But perhaps the bigger opportunity comes from Tesla Inc’s still-diminutive presence in China, creating an opening for local start-ups to hawk cheaper, technology-centric EVs. Tesla reached a preliminary agreement last week with the Shanghai government to build China’s first car-production facility wholly owned by a foreign automaker. Tesla expects car production to start within two years of starting construction and to churn out 500,000 cars per year in China two to three years after that. It won’t be easy: Tesla’s made lofty promises before, only to delay plans. It will also have to clear hard-to-navigate government approvals and obtain permits. With just US$2.7 billion in cash, Tesla must absorb what Bloomberg Intelligence estimates to be a US$10 billion cost to build the plant and hasn’t specified where it will get the money. “Tesla is running out of time,” says John Zeng, MD of LMC Automotive Shanghai. He estimates that the American automaker sold fewer than 15,000 cars in China last year, claiming just 3% of the battery-powered market. In total, 25 million cars were sold in China last year. Finding capital is less of a concern for the local start-ups trying to outrun Elon Musk. China’s government is offering financial and political support for EV companies as it attempts to lead the world in the field, fuelling the rise of Xpeng and hundreds of other rivals. China President Xi Jinping pledges to open markets and curtail protectionism, even as he lavishes assistance on domestic makers of electric cars, artificial intelligence (AI) and semiconductors. China’s electric- car buyers get price subsidies of as much as US$10,000 per vehicle, for example, and can also dodge licence plate restrictions that impede sales of petrol-powered cars. That support, combined with ample cash from China’s tech leaders and the comparative ease of building EVs instead of traditional cars, has seeded a crop of start-ups competing with such established automakers as BYD Co, Beijing Automotive Group Co and Zhejiang Geely Holding Group Co. Those established Chinese automakers have also benefitted from Tesla’s slow arrival. Beijing Automotive sold 78,000 units of the budget BAIC EC180, China’s bestselling battery-powered car last year, five times Tesla’s China sales. Its sticker price in Beijing starts at 49,800 yuan (RM30,378). The price of Tesla’s bigger Model S increased to 1.47 million yuan after the recent tariff hike. At least four other EV start-ups have already joined Xpeng in surpassing US$1 billion valuations, according to research firm China Money Network, including NIO, WM Motor Technology Co Ltd, Byton and ShangHai YouXia Motors Co Ltd. The larger group of start-ups can’t all survive, warns Bloomberg New Energy Finance analyst Nannan Kou, especially as China phases out EV subsidies in the next two years. “Tesla has shown building a car company is a cash-burning operation,” Kou says. “Only those start-ups with the most capital from big backers will fend off the intense competition.” It didn’t have to be this way. Shortly after Tesla started selling its Model S in China in 2014, Shanghai officials asked Musk to build a factory, with one proposed location in its Pudong district, said Ding Lei, one of the negotiators. Tesla insisted on sole ownership, rather than working with a Chinese partner, the auto manufacturing norm in China for the past few decades. Neither side budged. “If Musk agreed with the proposal Pudong offered at that time, Tesla could have been totally different,” says Ding, who founded EV start-up Huaren Technology R&D Co Ltd last year and credits Tesla’s absence for the opportunity. He Xiaopeng first took notice of Tesla in 2014, after Musk publicly shared some patents. That was the year He sold his web browser, UCWeb Inc, to Alibaba for close to US$5 billion. Tesla’s patent trove convinced him that selfdriving cars would inevitably become data-collecting hardw [...]
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