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Head of China Green-Car Company Sees Field Shrinking

By Jake Spring and Norihiko Shirouzu

SHANGHAI, April 20 (Reuters) - Of dozens of startup electric car makers in China, only two or three will be around in five years' time, the chief of Nio told Reuters on Thursday, after the automaker unveiled its first production car aimed at taking on Tesla Inc's Model X.

China's government has been promoting electric vehicles in its battle with urban smog, with startups flooding the market after it opened up the sector to investment from technology firms and non-automotive backers.

"A car business is the world's toughest business to start," Chairman William Li said in Chinese on the sidelines of the Shanghai auto show. "If you look in five years, there won't be more than two or three companies reaching the minimum level of sales needed."

Nio, formerly NextEV, has lined its coffers with big-name investors, recently closing a second round of funding led by tech firms Tencent Holdings Ltd and Baidu Inc , Li said. He declined to state the size of investment or the automaker's valuation.

The company now has nearly 40 investors, expanding its backers from five or six early founding investors, he said.

Nio unveiled its first mass production car on Wednesday at the Shanghai show - the ES8 pure-electric, seven-seat sport-utility vehicle. The model is set to go on sale next year with more features than the Tesla Model X at a lower price, Li said.

He said there is an opportunity for Nio to succeed by focusing only on electric cars and offering better service and digital functionality, areas where traditional car makers have difficulty.

"Traditional car companies aren't seriously doing this," Li said. "Their focus is still on hybrids and traditional cars."

(Reporting by Jake Spring and Norihiko Shirouzu; Editing by Christopher Cushing)