Electric-vehicle startup Byton will purchase a struggling unit of major state-owned automaker China FAW Group Corp. to obtain the unit's production license.
The deal will allow Byton, backed by Chinese investors, to acquire subsidiary Tianjin Huali Automobile Co. for 1 yuan ($0.15), Tianjin FAW Xiali Automobile Co. said.
According to the agreement Tianjin FAW Xiali signed with Byton last week, the latter must pay 54.62 million yuan in overdue salaries for Tianjin Huali's employees in the coming weeks.
In addition, Byton must also retire Tianjin Huali's debt, totaling 800 million yuan, before September 30, 2019.
Tianjin Huali and Tianjin FAW Xiali are based in the north China port city of Tianjin.
Tianjin Huali, established in 1965 by the Tianjin municipal government, builds compact sedans and microvans. It was acquired in 2008 by Tianjin FAW Xiali, a Shenzhen-listed subsidiary of FAW Group.
Tijian Huali, saddled by weak sales, has struggled with losses and has been unable to pay employee salaries on a timely basis in recent years.
By Acquiring Tianjin Huali and its production license, Byton can move forward with plans to produce EVs in China.
The Chinese government has maintained tight control on the release of new licenses for vehicle production to prevent excess manufacturing capacity.
The policy has left EV startups in China with two options to start output: acquire an existing automaker or contract manufacturing to an existing auto manufacturer.
Byton, previously known as Future Mobility, was established by former BMW Group executives last year in the east China city of Nanjing. Its CEO, Carsten Breitfeld, was a leading engineer for BMW's i8 electric car.
With the financial backing of Chinese retailer Suning Holdings Group and auto dealer China Harmony New Energy Auto Holding, Byton plans to sell its first vehicle, an electric sedan, in China in 2019.