There’s a sleek, new sports utility vehicle cruising the streets of Frankfurt and Munich. It’s all electric, and it has backing from Siemens and Bosch. But there’s one thing that makes the car — the Aiways U5 — different from the Audis, BMWs and Mercedes-Benzs that rule the Autobahn: this vehicle was designed and built by a Chinese company.

While much of the world is just beginning to embrace electric vehicles (EVs), China has raced ahead, doling out government subsidies, setting up special charging stations and rolling out scores of EV startups with names like NIO, XPeng and Aiways — the first Chinese-made electric vehicle to be marketed in Europe.

The three-year-old startup was co-founded by a pair of Chinese entrepreneurs, and named Aiways (it stands for “AI,” or artificial intelligence, is on the way). It didn’t take long to gain traction. The Shanghai-based company raised more than $1 billion from a consortium of investors, including Chinese venture capital firms, government asset management firms, and leading Chinese technology companies like DiDi Chuxing. And now, it’s looking to overseas markets.

“The electric vehicle market is a new market for everybody, even for established brands like Audi and BMW,” says Anika Wild, a Munich-based spokesperson for Aiways, adding that the company intends to build electric vehicles that can take on Germany’s premier brands, even on their own turf.

Like some of its EV rivals in China, Aiways has fashioned itself a global company. Flush with cash, it has opened research and development centers in Denmark, Germany and Shanghai, manufacturing operations in both Europe and China, and a battery pack factory near the historic Chinese city of Suzhou. 

The founders are two longtime auto executives, Fu Qiang, the former CEO of Volvo China, and Gu Feng, who served as the chief financial officer of SAIC Motor, China’s biggest state-owned manufacturer. In an interview in 2017, not long after the company was established, Fu said, “We’re not disruptors, we’re evolvers.” 

Their timing could not have been much better. In 2015, China’s central government began promoting the development of electric vehicles as part of Made in China 2025, a government backed push for the nation to pursue and lead in key technologies like artificial intelligence and EV over the following decade. To help make that possible in the car market, the authorities mandated that car makers shift more to EV production and began offering subsidies and tax breaks to consumers who purchase EVs.

Almost immediately, a group of tech entrepreneurs, many of them with little or no auto industry experience, began building startup EVs, hoping to create the next Tesla.

The country’s most successful EV startup is called NIO.¹See our profile of NIO last spring here Founded in 2014 by a serial entrepreneur, the company went public on the New York Stock Exchange in September 2018 at about $6 a share. It now trades for $56 per share. With its market value hovering near $90 billion, it is already more valuable than Daimler, General Motors, Ford, BMW and Hyundai.

In fact, Tesla, Volkswagen and Toyota are the only pure automakers worth more than NIO. Meanwhile, XPeng and Li Auto — two other Chinese startups — now rank among the world’s twenty most valuable automakers. And BYD, which makes everything from batteries and facemasks to electric vehicles, has a market capitalization of more than $100 billion.

Chinese companies, of course, are not alone in the shift to EVs. Volkswagen and other global brands are racing to build their own electric cars, and GM is promising to transition entirely to zero-emissions vehicles by 2035.

“It’s going to become a trillion dollar market in the next seven years. It’s a big enough ocean for more than one boat,” says Daniel Ives, an analyst who tracks electric vehicles at Wedbush Securities. “Aiways has a massive opportunity. They are one of the names that’s significantly going to be on the map in the next two to three years.”

Aiways has moved swiftly. The company has built a manufacturing facility in the city of Shangrao, in Jiangxi Province, in partnership with the local government, which now holds a stake in the company. And like many electric vehicle companies, it uses batteries from CATL, the huge Chinese manufacturer that also supplies Tesla.

Its fundraising rounds came fast too. According to Pitchbook.com, which tracks venture investments, Aiways got funding from DeepBlue Technology, a Chinese venture capital firm. Siemens and Bosch partnered with Aiways to build its Shangrao factory. And last month, the ride-hailing powerhouse Didi bought a small stake in Aiways.

The Chinese government is also invested in the company. The Shangrao government, in Jiangxi Province, and the central government’s State-Owned Assets Supervision and Administration Commission, own about 10 percent of Aiways, according to WireScreen, this magazine’s data platform.²The Shangrao government brought in Chen Zhixin, the former president of SAIC Motor, to work with Aiways. In addition, an investment fund controlled by the Shanxi provincial government, bought a stake last month alongside Didi.

Still, competition is fierce in a market that some experts say now has hundreds of electric vehicle startups. Aiways, for instance, has only sold about 1,500 vehicles in China to date, and it’s competing head to head with Xpeng. While the Aiways U5 starts at $26,000, XPeng (which sold 6,000 vehicles in January) prices its vehicles on its website starting at $23,000. NIO is even pricier, at $57,000 and reports selling more than 7,000 cars last month.

[Electric vehicles are] going to become a trillion dollar market in the next seven years. It’s a big enough ocean for more than one boat.

Daniel Ives, an analyst who covers electric vehicle companies for Wedbush Securities

While the industry is growing rapidly — Paul Gong, the director of UBS’ China Autos & Mobility Research division, told The Wire he expects China’s market to expand by 10 times this decade — analysts expect many of the EV startups to fail.

“There will be this process of creative, innovative destruction in the industry, and when we emerge from that it will be more consolidated,” says Edison Yu, an analyst who covers the electric vehicle industry for Deutsche Bank.

According to Yu, there are two things an electric vehicle company needs to be successful in China: backing from a local government and a partnership with a leading technology company. Aiways has government backing. That’s very common in the industry; even Tesla has a partner in the Shanghai government.

The technology element, however, could prove more tricky. As autonomous driving and connected infrastructure begin to play a bigger role in next generation vehicles, companies without strong technologies may struggle to find customers. Aiways does not currently have a relationship with a tech giant, Emma Hai, an Aiways spokeswoman in Shanghai, told The Wire, but the company would be open to a partnership in the future. 

Nio, for example, has a partnership with Intel to develop autonomous driving technology, and Tencent owns a 16 percent stake in the company, per its most recent securities filings.

Aiways, though, is building international alliances. In 2017, for instance, it incorporated a German subsidiary and began focusing on meeting European Union standards. And its chief product officer is Roland Gumpert, a famed German engineer who worked at Audi. The company is already selling vehicles in Belgium, France, Germany, Israel and The Netherlands.

Aiways was the first Chinese electric vehicle brand to enter the European market, months before XPeng entered the market in Norway. NIO also plans to bring its cars to Europe this year. Analysts see Aiways’ move as ambitious, but perhaps a bit too aggressive for a company that has only sold a handful of vehicles and has less capitalization than typically necessary for a global automaker.

By going into Europe first, “they thought there was going to get a first mover advantage,” says Tu Le, managing director at Sino Auto Insights, a Beijing-based consultancy. Tu worries that Aiways will struggle to make inroads into Germany, which is perhaps the world’s toughest auto market.

Indeed, Aiways has only sold about 2,500 vehicles, and experts worry the company may struggle to finance its next line of cars. Other electric vehicle startups have run into trouble as well. NIO, for instance, was on the brink of bankruptcy, but the company received a huge cash infusion from a local government, in a move some saw as a bailout directed by Beijing. And when Faraday Future, an electric vehicle startup in the U.S. run by the Chinese tech entrepreneur Jia Yueting ran out of money, it got a last-minute cash infusion from the Evergrande Group, the massive Chinese property group.

Some analysts are skeptical Aiways will be as fortunate if it stumbles. “No one cares if Aiways fails,” says Tu, the analyst at Sino Auto Insights. “They never got to the point where the brand is representative of the entire sector for China, whereas for sure, NIO is.”

Still, Aiways operations in Munich have seen signs of progress. The company received 200 orders from consumers who saw videos of the U5 at the Geneva Motor Show, even before the company started a European marketing campaign. The car is priced at $47,000 in Germany (and varies across Europe depending on taxes). Most orders in Germany have been for the more expensive premium edition, according to the company.

Aiways has developed a capital light approach across Europe, with online sales and mobile service garages that come to customers. A centralized warehouse in Amsterdam distributes spare parts. And after it settles into its current markets, Aiways plans to expand to Scandinavia.

The last generation of cars saw Europe export its brands across the world, including to China. Now, to some, Aiways is heralding a new era of growth led by China.

“European brands are really facing a challenge; they can feel that Chinese vehicles are coming,” says Hai, the Aiways spokeswoman in Shanghai. “We’re really proud to be one of the brands recognized by the market and part of that process.”

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