Startups

In China’s Vehicle Market, There’s No Need To Add Fuel To The Fire

Ever-larger sums are pouring into electric and autonomous vehicles startups headquartered in China. Over just a few years, investment into the space increased from thousands, to millions, to billions of dollars.

The recipients of this funding frenzy, at least in terms of dollars, are startups looking to build their own fleet of electric and autonomous vehicles. Following car ambitious car manufacturers are startups that provide software and hardware for EV and autonomous vehicles. And in a couple cases, there are even startups in the region that would prefer to ditch the standard vehicular model altogether.

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What and who will win out is not clear. However, the bets are known and the dollars are large. And it might just be enough to give U.S.-based startups operating in the same sectors a run for their money.

China Accelerates

Prior to 2015, round counts and dollars invested into China-based EV and autonomous startups were meager.1 According to Crunchbase, a touch over $23 million was invested across eight deals over a period of seven years. All of the known deals in this period were early stage.

However, deal counts and dollar amounts didn’t stay stagnant forever, as the chart below shows:

A boom of investment started in 2015 with $528 million in known fundings, dwarfing known total investments made into the autonomous and EV sectors from years prior. But the real action into China-based autonomous and EV startups didn’t come until last year.

Known deals made in 2016 doubled compared to the prior year from four investments to eight. Additionally, funding totals hit $2.1—quadrupling the previous year’s totals. But of the eight startups that attracted investor interest, only two—WM Motors and LeSee—walked away with the bulk of known funds, with each receiving investments totaling $1 billion.

Looking at the current year, funding has continued to rise while round counts double year-over-year. A few large deals put 2017 to comfortably ahead 2016’s funding totals. BAIC Group is responsible for a touch over half of the year’s funding with a $1.6 billion haul. Following BAIC is NIO, which pulled in a flat billion as part of its series D funding rounding announced in November.

The Backseat Drivers

So what could possibly account for such a feverish increase in funding? There are a confluence of factors.

China, which suffers from pollution issues, has, in recent years, pushed for the adoption of electric vehicles. The result is that China is now the world’s largest electric vehicle market.

Additionally, as with American tech giants, there is an interest amongst established Chinese tech incumbents to be on the front-end of autonomous driving. Baidu, China’s largest search engine, has made a number of overtures in the autonomous driving and electric vehicle space. Meanwhile, Tencent, the corporate parent behind China’s largest social network WeChat, has not been afraid to pour large sums into the sector as well.

In China, where the state has a will, and tech has the money, funding for the future of transport finds a way. But not all startups in the region are approaching the electric and autonomous vehicle market the same way.

All In One

While Tesla may be the most boisterous electric and autonomous vehicle manufacturer, there are a few firms in China looking to own the road.

The largest recipient of funding in this particular category is NIO. The electric vehicle startup manufacturer, based in Shanghai, has raised a total of $2.1 billion. So far, it has not sold a vehicle; however, the company is aiming to put cars on U.S. roads in 2020, according to Jalopnik. But it’s not the only Shanghai-based startup to compete in the electric vehicle space.

WM Motor has received over $1 billion in funding for its electric vehicle efforts. The startup has attracted interest from Baidu, Baidu Capital, and Tencent Holdings—all of which have ambitions to compete in artificial intelligence, a critical component in autonomous driving. These same investors also partook in NIO’s funding rounds as well.

It’s important to note, however, that large rounds do not guarantee success. A number of electric vehicle startups with big ambitions have struggled immensely to bring their cars to market. However, it’s possible that the mold can be broken—as long as they can look ahead.

Seeing The Road Ahead

For autonomous vehicles to move forward, an array of sensors and software need to work in concert to get passengers to and from their destinations safely. And China’s startups are hoping to make that happen.

TuSimple, based in Beijing, China, has raised $83 million to fund the creation of its “full stack autonomous driving technologies,” according to its website. This includes the development of sensors and algorithms. It counts Nvidia, which has made AI a focal point, as one of its investors.

Also helping put autonomous cars on the road is Momenta.ai. The Beijing-based startup has raised $51 million to develop high definition maps with the help of deep learning and crowdsourced data. Its list of investors include another fellow Chinese startup, NIO. The electric vehicle startup participated in the Momenta.ai’s $46 million series B as a lead investor.

But not everything that’s electric in China is based on the standard automobile. Where roads are crowded and traffic is fierce, more nimble transportation options have sprung up.

Ditching The Car

Although bikesharing is experiencing its own investment boom in China as an alternative transportation option, sometimes a bit more speed that takes up a lot less space is required to get around.

Evoke Motorcycles is attempting to fill that need with its own “smart motorcycles,” according to Crunchbase. The company’s all-electric motorcycles have attracted seed investment totaling $800,000. Super SOCO, a competitor to Evoke based in Shanghai, has also taken a crack at the electric motorcycle market. And in a moderately amusing twist, Fastwheel has raised $1.5 million to create a self-balancing electric unicycle.

Whatever China’s transportation preference are, the startups headquartered there are betting that its customers want them to be autonomous and electric. And the investors backing them agree.

  1. When observing the funding environment for China-based startups operating in the autonomous and electric vehicles sectors, startups that also provide software or hardware as third-party vendors were included in the dataset. Investments via private equity did not make the cut. You can view the list of funding rounds here.