July 24, 2024

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China EV startup Byton misses payroll as bankruptcy looms

Byton, a formerly highflying Chinese electric-vehicle startup, missed payments to workers and idled production lines as a local court started bankruptcy hearings.

A court in Nanjing, Jiangsu province, held a hearing Monday on the request of Shanghai Huaxun Network System Co., a Byton creditor. Shanghai Huaxun demanded a bankruptcy proceeding for Nanjing Zhixing New Energy Vehicle Technology Development Co., Byton’s main business unit.

Byton suspended worker payrolls while its factories halted operations, according to a person close to the company. Byton, which unveiled its first M-Byte concept car in 2018, has yet to start commercial production, originally scheduled for 2019. Even if the company could launch products soon, Byton cars would not be competitive with rivals under current market conditions, the person said.

Byton didn’t immediately respond to a request for comment on the bankruptcy case and its latest business problems.

Founded in 2016 by former BMW and Nissan Motor executives, Byton is among a group of Chinese startups that rushed into the burgeoning new-energy vehicle sector as central and local governments offered generous subsidies. The closely held carmaker, initially named Future Mobility Corp., had early investors including Foxconn Technology Group and tech giant Tencent Holdings Ltd. The investment vehicle of the Nanjing city government held 19.4% of Zhixing New Energy.

In 2017, Future Mobility formally adopted the brand name Byton shortly after securing $240 million in funding from retail giant Suning and Fullshare Holdings.

In 2018, state-owned China FAW Group led Byton’s $500 million B round and signed a cooperation framework to collaborate in areas such as component purchasing, platform technology and investment. In September 2018, Byton acquired an FAW unit for 850 million yuan ($133 million) to obtain an automobile manufacturing license.

Byton’s capital stress started emerging in September 2019 when it failed to complete a funding round to be led by FAW. A management overhaul and the COVID-19 pandemic further exacerbated Byton’s troubles. The company suspended all domestic operations and furloughed staff in July 2020. Former CEO Daniel Kirchert left the company and joined Evergrande’s EV unit shortly afterward.

“It will probably be very difficult for Byton to revive,” said a person close to the company. Byton’s main research and development unit was abroad with high costs, which required a large amount of new investment to rekindle production.

The company applied to register a new tech company named Shengteng in September 2020. It planned to raise 2 billion yuan ($289 million) from FAW and the investment vehicle of the Nanjing city government to accelerate mass production of the M-Byte electric SUV.

A new lifeline appeared last January after Byton struck a strategic cooperation deal with Apple Inc. supplier Foxconn. Mass production of the M-Byte was planned for 2022.

While the survival of Byton hinges on funding from FAW, the Nanjing government or Foxconn, the three parties might have lost interest, according to people familiar with the matter. FAW is fully devoted to converting its flagship brand Red Flag to electric vehicles by 2030. Foxconn pulled out of its investment after a few months of due diligence. The Nanjing government, which once helped Byton make payroll, has stopped providing aid two months ago.

As of June 2020, Byton had about 1,000 employees in China and about 500 elsewhere, including in the U.S.

Byton also faces new rivals in the electric vehicle market as competition has intensified compared with a few years ago. Homegrown startups Nio, Li Auto and Xpeng debuted on the U.S. stock market, while tech giants from Baidu to Xiaomi plowed billions of dollars into their own electric vehicle ventures.

Read also the original story.

Caixinglobal.com is the English-language online news portal of Chinese financial and business news media group Caixin. Nikkei has an agreement with the company to exchange articles in English.

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