Enovate, a Chinese electric vehicle manufacturer facing financial difficulties, is set to receive a much-needed infusion of funds through a new round of financing. According to a report by media outlet 36Kr, the company will secure 750 million yuan ($108 million) in the near future. A source familiar with the matter disclosed that the funds are expected to arrive by March 24 at the latest, providing a potential lifeline for Enovate.
Since its establishment in 2015, Enovate has completed a total of eight financing rounds, with the cumulative amount exceeding 11.5 billion yuan ($1.67 billion). The latest financing round took place on October 13, 2020 and raised over 5 billion yuan ($725 million).
For Enovate, which is currently facing employee wage arrears and factory shutdown, this new financing round is undoubtedly crucial. One employee revealed that Enovate has failed to pay two months’ salary to its employees since the beginning of this year, stating that “the wages for January and February have not yet been paid, and the social security and accumulation funds for February have also not yet been paid.” Additionally, Enovate’s factory in Changsha, Hunan Province has not started production since the beginning of this year.
Enovate has established factories in Hunan, Zhejiang, and Guangxi, with a planned total production capacity of 220,000 vehicles. According to its employees, the new financing round will be used to issue unpaid salaries and to support the resumption of production at Enovate’s factories.
While the new round of financing may provide some relief for Enovate’s immediate financial struggles, the company still faces significant challenges in revitalizing its operations.
Enovate’s predecessor Dearcc launched its first model named the EV10 in 2017, which sold for only about 60,000 yuan ($8,709) after subsidies. Since the company’s rebranding to Enovate, it currently offers a pure electric vehicle, the ME7, and an extended-range vehicle, the ME5. The total sales volumes in 2021 and 2022 were relatively low, with only 1,778 units and 5,321 units sold, respectively.
Enovate appears to have fallen behind other leading electric vehicle makers in terms of product development and sales channels. While NIO, XPeng, and Li Auto successively released their first products from 2017 to 2019, Enovate’s first product, the ME7, was delayed from December 2019 and not launched until September 2020. Additionally, Enovate’s sales outlets began establishing in August 2020, while NIO and XPeng had already expanded to a hundred stores by that time.
According to an Enovate employee, the company faced significant setbacks in its efforts to capture market share in 2020. During this crucial period, Enovate’s co-founder and CMO, Xiang Dongping, as well as two of its vice presidents, Zhao Huan and Yang Yanru, who were responsible for public relations and digital marketing, and sales, respectively, all left their positions at the company.
The competition in the Chinese electric vehicle market is set to intensify once again in 2023, according to Zhang Xiuyang, the secretary-general of China Passenger Car Industry Alliance. Zhang predicts that over a hundred new electric vehicles will be launched in China in 2023, further increasing competition in the already crowded market.
In this regard, Enovate appears to be focusing on global markets to help bolster its business. At the end of 2022, the company signed a contract with Sumou Holding, a world-class institutional investor, to jointly invest about $500 million in Saudi Arabia for the construction of a manufacturing and research and development (R&D) base. This move suggests that Enovate may be seeking to expand its operations beyond the Chinese market and into new international markets.