Drive I/O | Meet the newest upstarts likely to grab chunks of China’s EV market

Tesla and General Motors Wuling are the two undisputed leaders of the pack in China’s $49 billion electric vehicle (EV) market, together holding nearly a 20% share this year. But more than a dozen legacy and infant automakers are in hot pursuit. All emerging from rough patches, three US-listed domestic makers—Nio, Xpeng, and Li Auto—now comprise the second tier of contenders. Riding on high-growth trajectories, the trio are tipped to be Tesla’s most formidable domestic challengers.

Yet with a flood of new money supercharging the industry, third-tier EV makers are coming on as powerful forces as well. Reporting deliveries in significant numbers and backed by a growing list of reputable investors, several pose a real-time threat to the US-listed trio, and speculation is building that some are preparing for listings in Hong Kong.

The third-tier upstarts have been buoyed by strong growth in domestic electric passenger car sales this year. Sales of 321,000 EV units in the first ten months of 2021 represented a 141% year-on-year increase from the same period in 2020, when the overall auto sales slumped 14% from the year before, data from the China Passenger Car Association shows.

Here is our roundup of the four most competitive upstarts emerging in China’s EV space.

WM Motor – First mover making a comeback

Along with Nio, Xpeng, and Li Auto, WM Motors was once one of Deutsche Bank analysts’ “Fab Four” of likely candidates to grab the non-Tesla piece of China’s EV market. 
 
Founded in 2015 by Freeman Shen, a former top Volvo executive, WM Motor was one of the earliest EV startups to deliver production vehicles to Chinese customers, reporting a quite respectable delivery number of around 22,000 cars back in 2019. That was a few thousand more than Nio’s numbers that year, and far eclipsing Xpeng’s, which delivered just over 5,000 vehicles. Trailing far behind, Li Auto churned out its first model Li One later that year.
 
While WM Motor took an early lead in entering initial production, it was quickly overtaken as its sales growth remained virtually flat. Meanwhile, rival Xpeng jacked up deliveries almost five-fold in 2020. Now WM Motor’s delivery numbers of 34,068 vehicles for the first ten months of this year are only half of those of Nio’s and Xpeng’s.

How did WM Motor lose its first-mover advantage in a fast-growing market? There is a consensus that the automaker presents itself as a rather faceless brand (in Chinese): Its cars are functional but middle-of-the-road. Meanwhile, peer Nio is increasingly perceived by customers as a high-quality premium brand with top-of-the-range services. WM Motor has also lagged behind Xpeng in the autonomous vehicle space. Then in late 2020, it was plagued by a recall affecting over 1,000 of its vehicles following several reports of fires within a single month in late 2020.
 
Nonetheless, many venture capitalists are still anticipating great things for WM Motor. The Baidu-backed EV maker in October said that it was near wrapping up its $500 million Series D funding round led by PCCW, a Hong Kong telecom company owned by the family of local business magnate Li Ka-shing. WM Motor is aiming to launch its fourth production model and first sedan, the M7, by next year. The model will face off against the likes of Tesla’s Model 3, Nio’s ET7, and Xpeng’s P5.

Hozon – Closing in on Xpeng and Li Auto

Surpassing Nio and Li Auto in monthly vehicle deliveries for the first time in October, the lesser known Hozon may soon be a rising force to be reckoned with in the Chinese EV market.
 
With three affordable entry-level cars in its portfolio, the Zhejiang-based automaker handed over 8,107 vehicles to Chinese customers in October, marking a stunning growth of 294% compared to its deliveries in October 2020. Deliveries for the first ten months of this year totaled nearly 50,000 vehicles, closing in on the numbers of Xpeng and Li Auto. Each delivered more than 60,000 units during the same period.
 
A strong sales recovery in China’s EV market as a whole is a key factor fostering the rise of the likes of Hozon, said Cui Dongshu, secretary general of the China Passenger Car Association, during an online conference last month. China witnessed strong growth in electric passenger car sales, recording a 141% year-on-year increase in October to 321,000 units, when the overall auto sales slumped 14% from a year earlier, data from the industry body showed.
 
A wave of local but big state companies have noted the uptick in EV sales this year and are rushing to back growing EV startups. The government of Yichun city in central Jiangxi province is Hozon’s largest shareholder, taking a 51.31% stake in the company, The Economic Observer reported (in Chinese). And Hozon in October said it closed an RMB 4 billion ($626 million) Series D1 led by Qihoo 360, representing a major endorsement by China’s biggest cybersecurity firm.
 
This was followed by an undisclosed amount of investment by CATL, the first publicly known investment in a young EV maker by the battery giant, Yicai reported in November. (CATL also has invested in Zeekr, a premium EV subsidiary of Geely.) Eyeing a capital raise of $1 billion from an initial public offering in Hong Kong next year, Hozon aims to achieve annual sales of 70,000 vehicles this year and increase that number more than sevenfold to 500,000 in five years.

Leapmotor – Budget buyers’ choice

China’s fast-growing EV market has drawn an array of unusual competitors from television makers to real estate firms. Among them is Dahua, China’s second-biggest surveillance equipment maker. Formed in 2015 by Zhu Jiangming, Dahua’s co-founder and former technology chief, Leapmotor is the newest Chinese EV unicorn, having raised over RMB 11.5 billion ($1.8 billion) amid the flood of new money pouring into China’s EV space.
 
In its most recent funding round, announced in July, the company raised RMB 4.5 billion from heavyweights including state-backed CICC Capital and investment entities led by the municipal government of the eastern city of Hangzhou, where its parent Dahua is headquartered. This was quickly followed with a plan to build a new assembly plant with a production capacity of 200,000 cars annually in Hangzhou, Chinese media reported. The plant is scheduled for completion in 2023.
 
As with Hozon, the current three Leapmotor models are all budget-minded mainstream vehicles, priced between RMB 60,000 and RMB 200,000 ($9,390 to $31,300). And yet, Leapmotor’s budget mini-electric car, T03, has really gained traction in the market. With a starting price less than $10,000, the four-seater mini-electric car claims a range of 403 kilometers (250 miles) on a single charge and offers assisted driving functions such as lane departure warning and automatic emergency braking.
 
With T03 accounting for over 90% of the company’s deliveries this year, Leapmotor has declared a wildly ambitious annual target of more than 800,000 deliveries by 2025. That would account for nearly 60% of all EV sales in the country, according to the China Association of Automobile Manufacturers (CAAM). The Hangzhou-based EV maker is reportedly weighing a Hong Kong listing of more than $1 billion as soon as next year.

Human Horizon – Crazy rich SUVs

Born in late 2017, Shanghai-based Human Horizons is unique among a large pool of EV startups in China: It has never raised any outside investor money. That’s in sharp contrast to the likes of Nio and Xpeng which used to struggle to secure funding for their cash-burning businesses.

Founder Ding Lei also has an unusual background. Ding started his career as a quality engineer for the joint venture set up by Volkswagen and SAIC in Shanghai in 1988, then became a vice president of the state-owned automaker in 2007. Yet his most notable experience occurred in 2013, when he became a deputy head of the city’s Pudong New Area for a two-year period. In 2017, he founded both Human Horizon and an investment firm called East Coast Capital.

The company’s premium EV brand Hiphi attracted many eyeballs by releasing what is believed to be the most expensive made-in-China EV model ever: Hiphi X. The limited edition electric sports utility vehicle costs RMB 800,000 (around $125,000). With a driving range of 550 km (342 miles) on a single charge, the luxury vehicle boasts a stand-out performance and an opulent interior to “a degree at which the [Tesla] Model X looks quite conventional,” as one reviewer put it. 

Human Horizon’s efforts with the Hiphi X were successful. In September it delivered 641 Hiphi X units, becoming the first locally-made car to top sales in China’s premium EV segment, defined as autos priced above RMB 500,000 ($78,450). Its sales beat both Porsche’s electric supercar, Taycan, and Audi’s sports sedan, E-tron, according to CPCA figures. The company last month announced it would launch a second premium SUV model, the GT-Hiphi Z, next April and start delivery within the year. No price details have been released.