Doug Young
Chinese car makers are fueling a new global buying binge of clean-energy assets, with the latest word that Geely Automobile (HKEx: 175) is buying a British electric car startup. This is in addition to Geely announced a new joint venture to produce electric cars with Kandi Technologies (Nasdaq: KNDI). Geely’s deal comes just weeks after China’s Wanxiang Group completed its second major acquisition of a clean energy firm in the US, hinting at a growing wave of global M&A by tech-hungry Chinese car makers. This flurry of deals also comes as China’s leading electric vehicle (EV) maker, BYD (HKEx: 1211; Shenzhen: 002594; OTC:BYDDF), spotlights new government data that showcases its own technology development prowess.
Perhaps I’m being a bit cynical, but all of these latest developments seem at least partly aimed at drawing attention to the development and acquisition of intellectual property by the Chinese car makers. Companies in most western markets wouldn’t typically seek attention for this kind of acquisition and development, and would instead focus on promoting and publicizing their actual products, which in this case would be their latest electric and hybrid vehicles.
But this is China, a place where companies all feel at least a certain obligation to show they are complying with the latest goals and policy directives from government leaders in Beijing. In this case, central leaders are under growing pressure to breathe new life into an aggressive but sputtering government program to add millions of clean-energy vehicles to China’s congested roads. The imperative has gained more urgency in the last week, following a prolonged period of heavy smog in Beijing that has attracted global headlines and is once again shining a spotlight on China’s polluted air.
All that said, let’s look at the latest headlines from Geely, one of China’s most acquisitive automakers, which has confirmed its recent purchase of a British new-energy auto startup called Emerald Automotive. (English article) No actual price was given, but the reports say Geely has pledged to invest at least $200 million into Emerald’s operations over the next 5 years. Emerald is currently working on 2 prototype electric delivery vans, though Geely says the same technology could be used in electric powered taxis.
The reports indicate that Geely may use Emerald’s technology to help produce just such taxis for Manganese Bronze, the storied cab maker that fell on hard times and became insolvent before Geely bought it last year for just $18.5 million. (previous post) I suppose I should applaud Geely for at least trying to find some innovative ways to resuscitate Manganese Bronze, though I have serious doubts about whether electrifying its taxis is the right solution.
Geely’s latest new energy plan comes just weeks after Wanxiang won the bidding to buy US-based Fisker Automotive, another former high-flyer that also fell onto hard times. Last year Wanxiang also purchased another former new energy superstar when won the bidding for battery maker A123 Systems in a US bankruptcy court. Perhaps not too coincidentally, BYD has just put out a completely separate announcement trumpeting its position as China’s fifth most prolific recipient of new patents last year, behind only telecoms stalwarts Huawei and ZTE (HKEx: 763; Shenzhen: 000063), state-owned energy giant Sinopec (HKEx: 386; Shanghai: 600028; NYSE: SNP), and leading microchip maker SMIC (HKEx: 981). (company announcement)
Obviously it’s an oversimplification to tie all of these developments to one week of smog in Beijing, or to the opening of the National People’s Congress, an annual event starting this week where company executives like to showcase their efforts to assist central government initiatives. But that said, this sudden flurry of activity to develop and acquire new clean energy technology certainly has some political overtones, and probably presages more similar deals and announcements in the year ahead.
Bottom line: Geely’s new energy purchase in the UK could presage a new round of similar overseas acquisitions by Chinese firms eager to show their support for Beijing’s clean auto initiatives.
Doug Young has lived and worked in China for 16 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.
