SHANGHAI — Hundreds of new companies have popped up across China to develop electric vehicles with the dream of becoming the next Tesla.
Yet signs were evident at the Shanghai auto show that most of the EV startups will vanish in the near future.
Some 20 fledging EV makers showcased products at the show but only a small number of them have started production and just three — Nio, WM Motor and Xpeng Motors — have launched deliveries.
And only Nio and WM have achieved meaningful sales volume.
Nio's first product, the ES8 electric crossover, debuted in showrooms in June. Cumulative deliveries of the ES8 topped 15,000 by the end of March, according to company filings on the Nasdaq.
WM started shipping its first product, the EX5 electric crossover, to customers in September. The company said it delivered 4,083 EX5s in the first quarter.
Some of the EV startups such as Nanjing-based Byton and Hong Kong-incorporated Hybrid Kinetic, which have exhibited products at China auto shows, were no-shows in Shanghai.
Byton, in particular, faces an uncertain future: Co-founder Carsten Breitfeld left and made his first appearance as CEO of another Chinese EV startup, Iconiq, at the Shanghai auto show.
Breitfeld's departure is tantamount to a vote of no-confidence in the company he started.
Nio, WM and Xpeng have demonstrated that an EV startup must raise more than 15 billion yuan ($2.2 billion) to launch production. But most of their domestic peers haven't raised a third of that much, according to figures disclosed by the companies.
While more EV startups are likely to start production this year and in 2019, global automakers are also on track to ramp up EV output.
Volkswagen Group, the largest carmaker in China, plans to build nearly 12 million EVs accumulatively by 2028, VW Chairman Herbert Diess said last week in Shanghai.
To achieve the target, the German auto giant is set to launch output at EV plants in Shanghai and Foshan next year. The two factories combined can produce 600,000 vehicles a year, with products based on the MEB global platform VW has developed specifically for its next-generation EVs.
If they actually launch EVs and survive the early phase, the startups will have to compete head-to-head with global giants in the domestic EV market.
Freeman Shen, VM's founder, says the shakeout among China's automakers over the last decade offers a preview of how the newest EV startups will fare.
"Ten years ago, China had more than 100 carmakers, but now only Geely, BYD and Great Wall have gained a foothold," Shen said. "The others were either closed or are half dead."
Shen predicts the EV startups will face similar results in five years: "Two or three will stand out, four to five will be half dead and the rest will be closed."