Nothing yet seems to be able to stop Chinese investor enthusiasm for electric vehicle makers, not even subsidy cuts and not even for new players.
On Sunday, one such startup, Enovate, said it had secured more than Rmb2 billion ($298 million) in Series A funding led by Hong Kong-listed Shanghai Electric.
It is a comparatively large sum of money for a relatively little-known electric vehicle (EV) brand, and all the more remarkable given Enovate has yet to start full production.
Indeed, the proceeds of the fundraising are to be used to build the company almost from scratch –from production facilities through to branding and research.
But then, technically, Enovate is a revamped brand. A month ago it was a company called Dearcc that produced mini EVs with a range of only around 255km per charge and had franchises in third- and fourth-tier Chinese cities, targeting price-sensitive buyers.
The decision to change names and switch to the production of high-end SUVs with 500km driving ranges came in July.
To this end, Enovate has raised a total of Rmb6.5 billion ($969 million). Its new manufacturing base in the eastern Chinese city Shaoxing is scheduled to begin operations in the second half of 2019 and a new distribution network is in the process of being built out.
Crucial, perhaps, for investors is the involvement of several Chinese state-owned companies and banks. State-backed Industrial Securities, for example, is a long-time investor, along with power generator Shanghai Electric and some industry funds.
CHANGING CONSUMER TASTE
Also, it makes sense for Enovate to start producing better vehicles since customers are bound to get pickier as the EV technology improves and disposable income grows. Delivering more mileage and a higher-quality finish are essential if electric car makers are to survive.
The competition between EV makers in China is increasingly less about the price and more about the technology. And government subsidy cuts in March are unlikely to disrupt the industry's growth, argue Fitch Ratings in a recent report.
Commercial demand for EVs is also seen supporting total sales, which helps explain why EV fundraisings haven't slowed so far in 2019, given also the $448 million Series C fundraising in March for WM-Motor and the $650 million convertible bond issue for startup NIO in January.
Enovate has priced its first vehicle ME7 in a mid-to-high-end range, at around $59,600. This is almost double the price of WM-Motor’s flagship vehicle and almost 80% higher than XPeng’s, which are better-known brands among consumers.
But Enovate is aiming big and its investors appear ready to back it in its ambitions. The company is already said to be starting the next round of fundraising and aims to launch eight products in the next five years.
It is also developing fuel-cell EVs that will not need batteries.
Nonetheless, it remains to be seen how this new EV brand on the block will be accepted by the end-consumer.