HONG KONG -- Byton, one of China's most high-profile electric vehicle startups, will suspend operations and production in the country for at least six months and lay off its non-core U.S. workers after a failed attempt to secure new funds in the face of an industry shakeout and economic slowdown.
Multiple employees at the four-year-old company confirmed the news to the Nikkei Asian Review. The move could affect some 1,000 local workers in Shanghai, Beijing and at its headquarters in Nanjing as well as hundreds of overseas employees. Some say they have not been paid since March.
In an internal email seen by Nikkei, Byton said all China employees were being furloughed from July 1. "Due to the global outbreak of COVID-19 and other factors, the company has encountered great challenges in both financing and operations," the email says.
Separately, a company spokesperson told Nikkei that a decision was made to facilitate a restructuring and which has gained support from major shareholders. Only core employees will remain at work during the suspension period, she said.
Founded in 2016 by two former BMW executives, including current CEO Daniel Kirchert, Byton was seen as one of the most promising electric vehicle startups in China, a group known as the "four dragons." So far, though, the company has not sold a single car.
Byton drew a total of $1.2 billion from prominent investors including Tencent Holdings, Foxconn Technology and FAW Group, one of China's oldest state-owned carmakers. It built a factory encompassing 800,000 sq. meters in Nanjing and expanded to Hong Kong, Munich, and the U.S. state of California.
The cost-saving measures will also affect its overseas staff. The spokesperson said the company would reduce its U.S. headcount due to the delay in fundraising plans from June 30. Further, she said it will only retain core members of its research and development team and supporting staff. And in Munich, where it has a design center, employee working hours will be reduced, she added.
Some workers were not surprised.
"I have prepared for today," a Shanghai-based employee told Nikkei after he received the internal email. "We all know the situation [in the auto industry] is very bad."
The employee had worked at Byton for two years and not been paid since March. "Most people have left by now if they can find a job," he said. He plans to search for a new job, but said that right now "it's very difficult."
Indeed, the auto industry, especially the electric vehicles segment, faces multiple headwinds. Since last year, Beijing has cut subsidies to "new energy vehicle" buyers and manufacturers after years of heavy support. Sales of electric vehicles fell in 2019 for the first time in a decade. This year the downturn has accelerated, with sales in the first five months down 40% year-on-year due to the economic slowdown triggered by the pandemic.
Meanwhile, the market for electric vehicles has become more crowded. U.S. EV maker Tesla lowered the price of its China-made Model 3 vehicles this year, a move analysts expect to greatly threaten sales of local players.
Byton is the only company among the "four dragons'' -- including Nio, Xpeng and WM Motor -- with models that haven't entered mass production. Now, with manufacturing suspended, Byton is not likely to meet its goal of mass producing its first electric SUV, the M-Byte, this year.
"Byton is not a doer," said Feng Linyan, an analyst at Beijing-based research company EqualOcean. "Fancy designs are not enough."
Feng said CEO Kirchert owned only a small stake in the company and lacked the entrepreneurial spirit to drive its growth. "The biggest problem of Byton lies in its founder," she said. "He is more of a professional manager." Kirchert could not be reached for comment.