Cash-strapped electric car maker Byton, once seen as a Tesla challenger, will suspend its operations in China starting Wednesday as it files for bankruptcy protection for its US and German business units.
Why it matters: After a fruitless search over the past year and a half for new backers to raise its Series C, Byton is the latest Chinese EV startup to face a cash crisis in a slumping market.
- State broadcaster China Central Television (CCTV) on Sunday reported the company has raised more than RMB 8.4 billion ($1.2 billion), without delivering a car to a real customer.
Details: Management and shareholders have decided to suspend business in mainland China on July 1, 2020, Byton CEO Daniel Kirchert announced late Monday, according to Chinese media reports. It currently has around 1,000 employees on the payroll in China.
- The business suspension is expected to last six months, and just a few of Byton’s employees in China will be exempt from furlough, a company spokeswoman confirmed with TechNode on Tuesday.
- Furloughed employees will not be entitled to a performance bonus, but Byton will continue payments to employees’ social security funds, according to an internal letter circulated on social media.
- The company has promised to pay full unpaid wages to employees who resign voluntarily before June 30 and check out of the office before July 3.
- Byton has also filed for bankruptcy protection for its US and German operations as part of a restructuring plan. More than half of the 450 employees at its US office will be downsized, the Detroit Bureau reported citing a company spokesman.
- The company “has encountered great challenges in both financing and production operations” due to the Covid-19 outbreak, Kirchert said in the letter, primarily blaming the pandemic for its money woes.
- The company has reportedly been strapped for cash for months. It has been withholding salaries since March and recently closed offices in Shanghai and Beijing, as well as its factory in the eastern Chinese city of Nanjing.
- Prominent backers in earlier funding rounds include state-owned automaker FAW Group, China’s biggest EV battery supplier CATL, and Tencent.
Context: Financially troubled Chinese EV makers face intensified pressure this year as the global pandemic weighs on the country’s economy, resulting in a shrinking market already impacted by Beijing’s reduction in purchase incentives a year ago.
- Enovate, backed by SoftBank China Venture Capital, has owed money to suppliers for two years and began massive layoffs at its R&D center and a local plant in late April, according to a Chinese media report.
- The road ahead also looks grim for Bordrin as its manufacturing partner FAW-Xiali in late May confirmed in a regulatory filing that the Nanjing-based EV startup failed to meet payment obligations to form a joint plant.
Correction: This article has been updated to correct two errors: The company promised to pay all unpaid wages to employees who resign voluntarily by July 3, not to pay July wages to employees who resign voluntarily. Layoffs at Chinese EV startup Enovate happened in late April, not July.