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The efforts of Big Tech companies in China to launch electric vehicles are being hindered by red tape. Search giant Baidu, smartphone maker Xiaomi, and ride-hailing group Didi are all experiencing delays in rolling out their cars. These tech companies are struggling to obtain regulatory approvals to start producing and selling their first cars. This issue has left hundreds of engineers idle, with no clear timeline for when they can begin their work.
Stringent licensing regulations are impacting these companies, as they entered the Chinese electric vehicle market later than others. The Chinese regulators have tightened approvals to address overcapacity issues and the failures of some electric vehicle companies, which resulted in customers owning cars that couldn’t be repaired or serviced. Public records show that only two new electric car production approvals have been granted this year.
Eunice Lee, an auto analyst at Bernstein, estimates that China currently has the capacity to produce nearly 40 million vehicles per year, but there is only domestic demand for 20 to 25 million. Despite the challenges, there is hope among the tech companies that regulators will ease restrictions, especially considering recent efforts by Chinese officials to rebuild private sector confidence.
However, the carmaking rules enforced by China’s state planner and Ministry of Industry and Information Technology (MIIT) have already caused significant obstacles for start-ups like Niutron. Niutron, backed by US investment group Coatue, was forced to lay off most of its workforce and nearly went bankrupt after failing to obtain an EV production license.
Baidu’s electric vehicle arm, Jidu, has also faced delays in launching its Robo-01 model, despite previous announcements that deliveries would begin in the third quarter. Baidu and its partner, carmaker Geely, have invested $1 billion in the project and are seeking an additional $400 million. The delay is due to new MIIT rules that require both the car brand and its contract manufacturer to hold new energy vehicle production licenses.
Other leading electric vehicle makers, such as Nio and Xpeng, are also waiting for licenses to operate their factories. The approval process has proven to be challenging even for these established players in the industry.
Didi, China’s ride-hailing leader, has been working on a car project named Da Vinci, which involves taking a stake in a heavily indebted state-backed automaker and producing cars at its plant in Ganzhou. However, Didi has not yet received approval from MIIT for this venture.
Xiaomi, on the other hand, has started test production at its newly built factory complex in Beijing. Despite this progress, the company has not received permission from MIIT to begin mass production. Xiaomi’s CEO, Lei Jun, has been lobbying city officials to ensure that the company obtains a production license.
Throughout the industry, there is frustration and anticipation for regulatory approvals to be granted, allowing these tech giants to fully enter the electric vehicle market in China.
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