Sitech Dev Is Going Through "EV's Winter"
Since the Chinese government reduced subsidies to the electric vehicle industry, most EV startups in China like Sitech Dev are finding their way to survive.
Sitech Dev (新特汽车) is a Chinese EV (electric vehicle) manufacturer and mobility service provider headquartered in Gui'an New Area where Chinese government poured USD 1.02 billion into the construction of new energy vehicle industry chain. Taking advantage of resources of the National Big Data Center, Sitech Dev, therefore, owns the strong capacity of research and development of EV making and is positioned as a global intelligent EV manufacturer and ecosystem service provider.
Founded in September 2017, Sitech Dev is devoted to not only making EV but also providing v2x service, developing autonomous driving system and offering shared travel solutions. Four months after its founding, Sitech Dev reached strategic cooperation with China FAW (一汽轿车), a Chinese domestic auto manufacturer, to form a global research center, aiming to jointly develop mass produced EV. On April 19 in 2018, Sitech Dev unveiled its first EV model, DEV 1, in Beijing, and publicly launched DEV 1 to the market in four months. From the start of the company to landing mass produced EV, it took only one year for Sitech Dev to get it done.
However, the rapid development speed of Sitech Dev has nothing to do with the complexity of making a car. The entry barrier for the auto industry is still tremendous for potential entrants because car making entails injection of substantial capital. Sources from TianYanCha (天眼查) indicate that several primary shareholders from Sitech Dev are state-owned companies, so it is reasonable to infer that Sitech Dev received a huge amount of funds from the government to start its business.
So far, the EV maker has just raised two rounds of financing. It signed an A-round financing framework agreement with top Chinese investment institutions, CDH Fund (鼎晖投资) and Shanghai Hongjia Asset Management Co. Ltd (宏嘉资产) on May 25 in 2018, raising around “hundreds of millions” US dollars used for R&D purpose. On May 16 this year, Sitech Dev completed Series B round of fundraising, boosting its market value to USD 1.6 billion. Chongqing government investment fund took the lead in this round and some anonymous investors followed.
Since it launched DEV 1 on August 30 in 2018, Sitech Dev has not pushed out any other EV model but a lite version of DEV 1. The primary reason is the reduction in subsidies from the government. Notwithstanding cost cutting, sales of DEV 1 did not rise in the first half of 2019, and in contrast, it even drastically dropped down.
Statistics says until January in 2019 Sitech Dev kept zero sales of DEV 1, which means the EV maker sold no car in the first four months after it launched the new product. However, sales of January soared to 505 units, taking 0.67% of market share, in an abrupt way and then fell back to zero in February. Then sales in the next three months consecutively decreased from 177 to 15. The number of sales of DEV 1 recorded from its launch day up to May this year totals up to 721, which is extremely far below industry benchmark.
According to the latest data, DEV 1 model’s sales of 15 in May are rather negligible compared with the top 10 sales in the Chinese EV market. The highest number of car sold belongs to Baic EU model reaching 7,079 in this month. Even the last one in the list, BYD Qin pro, sold 2,936 units of electric vehicles which are around 200 times sales of DEV 1.
Is it because of the high sale price leading to tremendous sales gap? The answer is negative.
Sale prices of DEV 1 and top 5 EV are listed above. Price ranges from the lowest CNY 60 thousand (JAC IEV6E) to the highest CNY 162 thousand (Baic EU). Notably, top 3 sale EV models are sold at high prices while the other two models of top 5 are priced lower than DEV 1. Comparison between sale prices illustrates price has nothing to do with sales in this case as other EV models with either higher price or lower prices have better performance than DEV 1 in terms of sale volume.
Hence, it is reasonable to infer that the sales failure of DEV 1 comes from its inaccurate position targeted in the market. DEV 1 seems underperforming compared with higher priced EV and less cost-effective compared with lower-priced EV, and the customer might prefer not to choose a mediocre EV, leading to a sharp decreasing in DEV 1's sales.
Another possible reason to explain the failure of Sitech Dev sales might be given to branding effect as China's top 10 sales electric vehicles all come from traditional car manufacturers, and this effect might be dominant in determining EV sales. Consumers might prefer to purchase EV from a traditional manufacturer rather than a startup company because of accumulated technology and manufacturing techniques which make traditional makers look more reliable.
The branding effect, however, does not work for EV makers like Tesla and NIO. The two giant EV manufacturers are not shown in the top 10 list just because they set the high sale price for their high-end products, resulting in reasonable low sale volume in China.
Despite bad sales of DEV 1, Sitech Dev is believed by industry insiders to achieve better targets in the future. One possible reason is the background of having state-owned companies as its main shareholders, and for this reason, Sitech Dev could form a tie-up with the big traditional manufacturer FAW, state-owned car maker, with ease and is expected to own more capital from the government to solve the marketing issue.