Chinese Companies Charging to Take on Tesla

Chinese Companies Charging to Take on Tesla
Image credit: Reuters | Aly Song
Freeman Shen, founder and CEO of WM Motor Technology Co., Ltd.

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This story originally appeared on Reuters

It remains more promise than product, but the electric vehicle (EV) sector is drawing more talent from mainstream automakers that are reluctant to go full tilt at the new technology.

Making the jump can mean better pay and pioneering opportunities. One Chinese-backed startup with around 900 employees, for example, has a $15 million monthly payroll, according to a person close to the company.

One such "defector" is Freeman Shen, who quit Chinese carmaker Geely two years ago to launch WM Motor, an EV startup that aims to compete with Tesla Motors in China, the world's biggest autos market and one that encourages the new technology through policy and subsidies.

While other Chinese EV startups including LeSee, NextEV, Future Mobility and Qiantu Motor are mostly backed by big internet groups such as Alibaba and Tencent, Shanghai-based WM Motor's funding, in the "billions of yuan," is from Chinese investors, but not technology tycoons or venture capital funds, says Shen. He declined to say who the money has come from.

Shen, 46, has two decades of experience in the United States and China, with BorgWarner, Fiat and Geely, which in 2010 bought Swedish car brand Volvo. He aims to make smart, connected electric battery cars, betting on ordinary drivers in China's big cities wanting more affordable EVs.

He plans to go straight for this mass market rather than follow Tesla in first building a high profile super all-electric battery sports car.

"Building a fancy car to impress people is actually fairly easy as long as you're willing to spend the money," Shen says. "The most challenging part is mass production -- coming up with a car everybody can buy, with high quality but at a significantly lower cost."


Shen reckons he has around a 5-year window of opportunity to establish WM Motor in China, while Beijing offers incentives and policy support for EVs.

"I don't think traditional car companies are doing well selling cars, especially with their customer experience. With smart, connected cars, I believe I can change that," says Shen, who has an engineering Masters from University of California at Los Angeles.

"We're not a traditional car company. We see ourselves as a service company," he says, while acknowledging that friends, family and former colleagues "all think I'm nuts" for starting a new auto brand from scratch.

Advocates, including Shen, see smart, connected EVs revolutionizing the car industry, with today's often-idle cars replaced by smart cars that can be leased out when not needed or shared as part of a city fleet, and which tell the owner when the oil needs changing or a service is due.

"What's important for these emerging EV companies... is the potential change in customer experience, if they can transform the way the car fits into our lives," says James Chao, Asia-Pacific managing director at consultant IHS.

"Creation of an entire ecosystem enabled by fast mobile internet connectivity, location-based intelligence... will be critical."

Online sales

The emergence of China's EV startups does not yet signal any major related technology breakthroughs. Shen is actually turning to a German firm's tech team he acquired for battery, motor control and other technologies.

The innovation of WM Motor and others is more in creating new business models for personal transportation.

Shen was tight-lipped, but three individuals close to WM Motor said he wants to sell cars primarily online, with a limited number of showrooms. Customer test drives would likely be contracted out to a third party, and various car dealers with excess service capacity would carry out maintenance and repairs.

There's already competition.

While Coda, an electric car startup run by ex-GM China chief Phil Murtaugh, failed three years ago, a Beijing startup called Zhiche Auto aims to launch smart, connected electric cars by as early as the end of next year.

Shen Haiyin, the company's 42-year-old founder and CEO, says he, too, is targeting big-city drivers with more affordable EVs, with third-party engineering and a Japanese electric propulsion system, to be sold under the Jidian brand name.

Also, Tesla could start manufacturing sooner than expected in China, making its cars more competitive as they wouldn't face the import duties now levied on foreign-produced vehicles. Spokeswoman Khobi Brooklyn said Tesla doesn't comment on speculation.

China first

WM Motor plans to build an assembly plant, most likely in Zhejiang province, and launch three models, starting in 2018. It plans to nearly double its workforce to around 600 this year in China and Germany, where it is working on around two dozen prototype cars.

The first of those models is aimed at competing with the $35,000 Tesla Model 3, billed as a mass market EV. Shen says WM Motor aims to sell more than 100,000 cars a year within 3-4 years of the planned 2018 launch, at around that price, or cheaper. China is the priority market for now, but Shen says he is also looking to enter the U.S. market further down the line.

He reckons WM Motor has an edge over rivals by mating high-spec German technology with what he calls low-cost, high-quality parts from Chinese suppliers.

"We're not making a luxury car," he says. "We're bringing luxury-like quality to a mainstream car."

(Reporting by Norihiko Shirouzu; Editing by Ian Geoghegan)

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