Chinese Electric-Car Startup Planning U.S. Entry Halts Operations for 6 Months – Financial Post

Chinese Electric-Car Startup Planning U.S. Entry Halts Operations for 6 Months – Financial Post

(Bloomberg) — Byton Ltd., the Chinese electric-vehicle startup that plotted a U.S. entry for years but never sold a car, is suspending all domestic operations and furloughing staff after the coronavirus pandemic made it tougher to get its business off the ground.

The suspension starts July 1 and is set to last six months, closely held Byton told staff in an email seen by Bloomberg News. The company invited employees to resign in writing by June 30 and said it is making efforts to obtain funding to pay salaries owed to workers. Those who resign would have priority in being paid.

Byton is one of the highest-profile Chinese EV startups to see its troubles exacerbated by the pandemic, which has hit demand for cars and other consumer goods. Even before the virus broke out, Byton struggled to meet announced deadlines to start producing and delivering its first model. The company’s website still accepts reservations for cars.

Home to the world’s biggest EV market, China encouraged companies to get into the business with subsidies and other support, spurring fears of a bubble. New carmakers have come under pressure since the government started scaling back aid in 2017 and as Tesla Inc.’s locally built sedans grabbed more market share.

In the letter to staff, Byton cited great challenges in financing and production caused by the virus outbreak and other factors. Reducing staff costs are part of a strategic restructuring, during which Byton will retain some workers to maintain its basic operation, a company representative told Bloomberg.

Founded by former BMW AG managers, Byton has about 1,000 employees in China and about 500 elsewhere, including the U.S. Its investors include state-owned China FAW Group Corp. and battery giant Contemporary Amperex Technology Co. Ltd., which has a deal to supply batteries to Tesla.

Initially named Future Mobility Corp., Byton was set up in 2016 with backing from investors such as Tencent Holdings Ltd. and Foxconn Technology Group. The technology giants later dropped out, with Tencent becoming a major investor in rival NIO Inc. and Foxconn backing Xpeng Motors. Byton co-founder Carsten Breitfeld, a former manager at BMW AG, left in 2019 to join another startup before moving again to Faraday Future.

Byton was planning to enter North America and Europe around mid-2020, Daniel Kirchert, a co-founder who is now chief executive officer, said early last year. The company would consider an initial public offering after new financing and production begins, Kirchert said at the time.

Following years of rapid growth, China’s EV market has been slumping since mid-2019 on reduced government incentives and overall economic slowdown. Total sales of new-energy vehicles, including electric cars, fell 26% last month to 70,200 units, following a drop of 30% in April and 49% in March, according to the China Passenger Car Association.

The government still considers electric cars a priority growth area and has added a slew of fresh stimulus measures to help the industry recover. While dozens of upstarts are still struggling, those gaining users include Tesla and local manufacturer NIO, which obtained fresh funding this year from a local municipality to help it avoid a cash crunch.

©2020 Bloomberg L.P.

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