Technically impressive Byton M-Byte never saw the light of dayThe ex-CEO of one of the biggest EV start-up failures shares his painful learnings as Fisker joins the list
The vivid and ongoing demonstration of how brutally unforgiving the car industry can be continued this month with the bankruptcy of Fisker, the latest of the Tesla-inspired new-energy start-ups to collapse following the failure of Lordstown, Byton, Nikola and Arrival UK.
In the struggling zone remain Faraday Future, Canoo, Lucid and China’s HiPhi, while questions hang over outwardly impressive but persistently unprofitable start-ups such Rivian, Xpeng and Nio.
The catalyst for their creation was mostly down to one company: Tesla. “It’s all very simple. In 2014 Tesla shares increased tenfold and suddenly a company that sold 50,000 cars had the same market cap as BMW,” Daniel Kirchert, former CEO and co-founder of Byton told Autocar. “That was the trigger”.
Tesla unlocked investment for EVs, both privately and later on the stock market, in amounts not seen before in the automotive start-up space. However, bar the lucky few who cashed out at peak enthusiasm, hardly any will have seen a return on that investment.
Kirchert was an BMW and Infiniti China specialised automotive executive who went on to witness first-hand the EV start-up whirlwind after helping form Byton, an electric focused, Chinese-backed car maker with global aspirations.
Byton, whose M-Byte crossover memorably touted a 48in dashscreen when 10in was considered generous, was one of the first to collapse in 2020. “The timing was really bad. We hit the most capital intensive phase right at the start of Covid. So that killed us originally,” Kirchert said at the sidelines of the Move 2024 urban mobility event.
Kirchert, now CEO of Swiss-focused, Chinese car distributor Noyo, has taken a professional interest in the trajectory of those start-ups that did survive and knows what he’d do differently with Byton. “I’d do it for much less money. We believed in a truly global set up in Silicon Valley, China and Germany,” he said. “However it was too complex. If I would do it again I’d concentrate everything in China and then get it done for half.”
He cites the difference between Nio – another brand with global engineering and design centres, including in the UK – and Li Auto, which has remained China focused. “Nio burned through $2 billion before they launched. Li Auto did a similarly good car for $200 million,” Kirchert said.
Nio is still loss-making while Li Auto posted its first annual operating profit in 2023 of just over $1 billion, making it one of the few EV start-ups aside from Tesla to generate income. “Li Auto definitely it looks like the winner from the start ups,” Kirchert said.
Another classic mistake displayed by the likes of Fisker was assuming that everything would sort itself out once you had cars on the road.
“They thought it’s just about getting to the SOP [start of production] and they underestimated the critical importance of the working capital to run the business,” Kirchert said
Fisker sensibly left manufacturing of the Ocean electric SUV to the experienced hands of Magna in Austria, but found that once production started last year, problems still reared their head.
In an expose examining the reasons behind Fisker’s failure, Tech Crunch revealed that the company didn’t ringfence money to create a proper supplier quality team to check the parts were good enough. That in turn led to a raft of issues that were not properly handled because management also decided to save money by automating the complaints hotline.
The cash burn for new car companies is staggering. “Even if you want to sell just 10,000 cars, you need billions of working capital to keep it turning to buy the parts and sell the car,” Kirchert said.
And even then you’re still living on a knife edge until you reach a certain level. “I think in order to survive sustainably you need really to scale up to at least a million vehicles,” Kirchert said.
Many startups like Nio, Li Auto, Lucid, Rivian and Faraday Future are aiming for a more premium market than Fisker but they’re still a long way off reaching scale.
Nio for example lost $2.9 billion on 160,038 vehicles last year, Li Auto was profitable with sales of 376,030, while Rivian lost an eye-popping $107,000 per vehicle in 2023 on sales of 50,122. BMW by contrast sold 2.25 million vehicles last year.
Many start-ups over-reached themselves by piling on future projects, partly through the need to generate new investor excitement. If you don’t, the danger is your stock price falls, meaning the next time you got to the markets to raise cash, you get less money in return for more of your business.
Rivian, for example, also makes a van on top of its SUV and pick-up, and has announced two new SUVs. Faraday Future reckons it too will one day build a van despite little overlap with its top-end FF91 costing $309,000.
Van maker Arrival touted a potential future ride-share car aimed at Uber drivers, while Fisker promised a pickup, the Pear small car, an autonomous pod and the $385,000 Ronin four-door convertible electric sports car.
Arguably they were all following Tesla’s successful model of juicing investor interest with phantasmagorial future projects ranging from roadsters to a fleet robotaxis, but they all cost money.
Some just had the wrong focus. Arrival spent too long working on its digital factory, as well as the software for its vehicles, delaying the production start at its Bicester facility.
Arrival investor Hyundai/Kia at least got some wisdom for its money as it prepares to launch its own electric van, dubbed the PBV (Purpose Built Vehicle). “I think [Arrival] helped us understand what it means to launch PBV and to present a project,” Pierre-Martin Bos, director of PBV in Europe, told Autocar at the Move event.
Kia’s project combines the start-up mentality in its reinventing the van for the electric era, but at the same time realising what it means to design, engineer and build a product that needs to work flawlessly straight from the dealer. “As an OEM we have strong manufacturing processes, whereas it's quite difficult to set up a new business if you’re a start-up”
There’s another group-up of start-ups with perhaps a more secure future, despite presenting the same cashflow problems. They include Polestar, which has yet to turn a profit, and has seen its stock price plummet after the Covid-era start-up euphoria wore off in 2022.
But Polestar, along with Zeekr and Lotus, benefits from being in the same orbit as Geely and its billionaire owner Li Shufu, tapping the former for manufacturing and engineering expertise and the latter for cash.
For the independents, tie-ups with the same established car makers they were supposed to disrupt is presenting a new lifeline, for example Xpeng’s partnership with VW and Nio’s potentially fruitful link-ups with a range of Chinese carmakers to use its battery-swap platform. Otherwise you find someone with bottomless pockets like Lucid has done with the Saudi Arabian Public Investment Fund (PIF).
But even deep-pocketed benefactors are going to lose patience if the red ink isn’t staunched eventually. “If they're not making any money, how are they going to live?” asks Kirchert.
