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Driving Change

China's EV gold rush

Internet innovators from Alibaba and beyond are eyeing low-carbon transportation for new avenues for wealth-building opportunities.

This article is drawn from the new Transport Weekly newsletter from GreenBiz, running Tuesdays.

Tesla’s Model 3 burst (or bust) in Fremont, California, might dominate the electric vehicle headlines this month, but the Chinese market is truly the massive force right now. It’s not just its sheer size but also the government’s aggressive mandates and subsidies.

As many of you know, investors and automakers around the world are investing big sums in China, and entrepreneurs and companies far (FAR!) outside of the auto sector are trying their hand at building an EV company. As we’ve seen with other "gold rushes" — such as Silicon Valley’s pre-millennium dotcom boom, China’s solar manufacturing push or the actual gold rush in the American West — many folks are eager to rush in who have little prior experience but are following the money. That can lead to some interesting innovations but, of course, some spectacular failures, too. 

Elon Musk had no previous auto industry background before starting Tesla — just funds from PayPal and physics studies. As with Tesla and Musk, many of the new EV brands coming out of China have funding and leaders from the internet world.

Xiaopeng Motors (brand name Xpeng) is backed by Chinese e-commerce gorilla Alibaba and manufacturer Foxconn. It was founded by Alibaba exec He Xiaopeng. (The Information recently reported on the company's colossal new funding round). Faraday Future was created by LeEco creator Jia Yueting (Chinese brand LeEco makes smart TVs, online content and more). That company already has struggled but just reportedly got a lifeline.

NIO (formerly called NextEV) seems to have more momentum than most, and it reportedly seeks an IPO after raising funding from internet conglomerate Tencent. NIO was created by Chinese internet entrepreneur William Li.

There are dozens of others — some that might break through and build a new EV brand in China, and many others that won’t make it past the high capital requirements. A model apparently has emerged for how to launch these companies in the United States and China: Hire developers in the Valley, handle auto design in Los Angeles and manufacture in China. What could go wrong, right?

At the same time, U.S. automakers are aggressively trying to figure out their China strategies. This week, Tesla's Musk is supposed to visit Chinese cities and work on its plan to set up a production facility in China.

However, the Chinese battery makers will be the real winners in these EV brand wars. Bloomberg New Energy Finance’s awesomely named Logan Goldie-Scot told me recently that BNEF is tracking 54 gigawatt-hours of additional lithium battery cell manufacturing capacity under construction in China, and 128 GWh of announced capacity to come online in the country by 2021. 

Yowsers. No wonder Warren Buffett is long on BYD, despite the company’s recent profit warning, and CATL is all the rage.

We’ll discuss all things electric vehicles, batteries and government policies at VERGE 18 in Oakland, California, in October. (Our excellent summer rate expires July 20.) 

Two other things I wanted to note: First, we invite you to suggest visionary individuals and companies for our VERGE Vanguard Awards. This group will be at the forefront of innovative technologies, policies and market development for clean energy, sustainable transportation and mobility, and the circular economy. Woot!

Second, we're also collecting nominations for VERGE Accelerate, the fast-pitch startup competition that will take place on the mainstage at VERGE in front of thousands of attendees. This year, we're holding three Accelerate sessions. One, in particular, will focus on mobility and transportation startups. If you're part of a young and hot mobility company or know of one that should be involved with VERGE Accelerate, reach out via this link.

And finally, here are 10 stories I’ve been reading recently:

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