CHJ Auto (CHJ), a Beijing-based NEV (new energy vehicle) startup backed by Matrix Partners China’s RMB3 billion (US$435 million) Series B funding, announced on Monday the acquisition of LiFan Motors, a subsidiary of the 26-year-old traditional car manufacturer LiFan Group, in a move that gives it the entrance ticket to China’s NEV market.
The deal costs the startup RMB 650 million (US$94.3 million), but endows it the right to produce EVs. Earlier this year, CHJ debuted their SUV model ‘Leading Ideal One’ which is expected to be put into mass production and deliver by end 2019.
Since early 2017, government authorities halted NEV projects to prevent unregulated production by stipulating two licenses for NEV companies, posing serious regulation challenges to newly established companies. In China, the world’s largest NEV market by sales volume, NEV companies need one license for having their own production line and a second one to sell.
In fact, only eight EV startups secured the two licenses needed to produce EVs as of August 2018. Many of the most discussed Chinese EV companies, including NIO and XPeng, are not on the list.
It is worth to note that this regulation does not apply to well-established carmakers. Hence, some EV startups without the relevant permits got around by acquiring established (and usually state-owned) automakers that are not affected by this law. CHJ is one example. WM Motors, a three-year-old EV startup backed by Tencent, Sequoia and Baidu, also solved the permit conundrum by buying 15-year-old manufacturer ShunQi and transferred the necessary permits to their own plant.
Besides buying companies, other startups such as NIO and XPeng opt for outsourcing to existing manufacturers. Tencent-backed NIO’s EV8 is manufactured by JAC Motor, a state-owned company with half a century history. Alibaba-backed XPeng Motors partners with quarter-century old Haima. Although outsourcing allows flexibility, it may be at the expense of quality and production control – a reason NIO missed its scheduled delivery date for the ES8 model in March.
CHJ Auto is founded by Li Xiang, a serial entrepreneur who had already built a public-listed automobile website AutoHome.com.
Editor: Ben Jiang
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