Last time it partnered with Volkswagen; this time it’s taking over Didi.

Xpeng, a new player in the auto industry, always seems to quietly make big moves.

In the past, funding for new carmakers was directly proportional to the hype surrounding investment and business partnerships. Now, however, the new carmaking sector is moving from chaos toward order.

Over the past nine years, some have found their footing, while others have quietly exited the scene… In the fierce competition of the EV industry, no one can afford to go on a reckless “spree” alone.

Compared to previous years, competition among local governments to attract investment is no longer as fierce as the price wars in the new energy vehicle sector.

Clearly, local governments have consistently prioritized “risk control” and have become increasingly cautious in “screening” automakers—a strategy that ultimately determines their influence within the new energy vehicle supply chain.

Which New EV Startups Are Still Heading Down a Dead-End Road?

This year, Xpeng Motors has been making frequent moves: last month it secured a $700 million investment from Volkswagen, and its monthly delivery volume has once again surpassed 10,000 units.

Yesterday, Xpeng officially announced a strategic partnership with Didi, acquiring assets and R&D capabilities related to Didi’s smart electric vehicle project.

Codenamed “MONA,” this project—as the first product under its new brand—is expected to begin mass production in 2024.

This seamless integration of the automotive sector with mobility services will undoubtedly introduce new variables to the market.

For Xpeng, this significantly reduces initial startup costs and the cost of trial and error. More importantly, leveraging Didi’s ride-hailing ecosystem will expand sales channels and boost sales volume.

Moreover, sales volume is not the sole objective. The partnership between Xpeng and Didi is based on the concept of “Internet + autonomous driving,” where new energy vehicles are no longer merely a means of transportation but a lifestyle.

Many automakers launching autonomous vehicle services typically develop their own standalone apps. However, in terms of user base, no ride-hailing platform can rival Didi.

For example, there are platforms like T3 Travel (developed by FAW, Dongfeng, and Changan), Xangdao Travel (developed by SAIC), and Ruiqi Travel (developed by GAC).

From another perspective, this is also one of the best ways to drive the industry ecosystem toward the future of mobility.

There is no doubt that the automotive industry is ultimately moving toward economies of scale. Whoever achieves scale and makes the largest investments will control R&D capabilities and hold the dominant voice in the market.

In the past, local governments hoped to “spend a little to gain a lot,” using the automotive sector to stage a “regional turnaround.”

Now, however, behind the wave of automotive investment by local governments to rescue their economies, there is no longer a rush to launch new energy vehicle projects en masse; instead, project qualifications are subject to strict scrutiny, and the speculative nature of capital should not be underestimated.

A common phenomenon is that while local governments are attracted by the production capacity and industrial spillover effects of new automotive startups, the capital behind them has ulterior motives—they are primarily eyeing the low-cost land that local governments can provide.

It is worth noting that, compared to other industries, the automotive sector is characterized by an inverse relationship between scale and cost.

The pricing structure for an automaker producing 100,000 vehicles is one system, while that for a manufacturer producing one million vehicles is another. The parts supply chain for a million-unit automaker not only offers lower prices but also holds greater bargaining power compared to that of a 100,000-unit manufacturer.

At the same time, the larger the automaker, the greater its economic contribution to the region. Consequently, automakers can secure comprehensive government support, thereby strengthening their resilience against risks.

Once a certain scale is reached, the company tends to act as a magnet, attracting more upstream and downstream industries for the local government and thereby creating an automotive industrial cluster effect.

Strengthening New Risk Control: The Market Is the Best Solution

As for Didi, after going through a long and winding journey, it ultimately chose to abandon the venture. Ultimately, it must have tasted the bitterness of the automotive market.

In earlier years, the company either partnered with Ideal to build cars or flirted with BYD, or even sought out qualified manufacturers to produce vehicles on its behalf. But later, the path of contract manufacturing was blocked; new policies required both parties to possess vehicle manufacturing qualifications.

Why has Didi stopped building cars?

Beyond the licensing hurdles, the entire process is extremely capital-intensive, and profit margins are shrinking. In particular, this year’s relentless price wars have made the venture too daunting to pursue.

After nine years of explosive growth, China’s new energy vehicle market is red-hot. The industry generates buzz, breaks records, and continues to poach customers from traditional fuel-powered car manufacturers.

Driven by policy promotion, capital investment, and the involvement of industry heavyweights, local governments have also deeply engaged in the new energy vehicle boom—some have struck gold, while others have suffered massive losses.

According to statistics, if we include all the new EV projects backed by local governments that are in the pipeline, there are at least a hundred of them.

Automobile manufacturing is the jewel in the crown of modern industry, featuring a long supply chain and high output value, making it a “prized asset” in the eyes of some local governments—which is only natural.

Furthermore, since new energy vehicles represent a growing trend, many regions are pulling out all the stops to get on the track—a clear demonstration of proactive development strategies.

However, while the automotive industry boasts high output value, it also presents significant barriers in terms of technology, talent, and industrial infrastructure. These inherent barriers objectively increase the risks associated with competing in this sector.

Local governments, being directly involved, recognize that for a highly market-driven industry, whether it comes to attracting investment or providing targeted support, they must carefully calibrate the extent of their involvement and place greater emphasis on risk management.

Numerous failed cases demonstrate that some localities, in an effort to attract vehicle manufacturing projects, often “spare no expense.” This “all-or-nothing” heavy investment model, however, tends to sow the seeds of project abandonment. Some new automotive startups have relied purely on subsidies for financial support while neglecting their own technological advancement.

Today, when the government introduces automotive projects, it prioritizes market-oriented thinking and a clear sense of boundaries; the best form of support remains a robust business environment. Even with financial backing, the government operates in accordance with market principles and incorporates necessary risk control mechanisms.

A double-edged sword: whose hands hold the fate?

Some argue that without government and state-owned capital, no new energy vehicle company could have taken its first step.

Indeed, for new automotive startups, every step—from early-stage investment, land acquisition, and vehicle manufacturing licenses, to product design, manufacturing, and delivery, and on to post-launch operations and customer support—requires financial backing.

Moreover, after these new automotive players invest in and build factories locally, government officials now visit the production lines directly to inquire about development progress and production challenges. The establishment of component supply chains and service networks—which are crucial for vehicle manufacturers—must be planned well in advance; otherwise, operational efficiency will be compromised, leading to obstacles in mass production.

Previously, during a discussion with the vice mayor in charge of industry in a city on the eastern coast, I learned that they had successfully attracted a mainstream new energy vehicle company with substantial capabilities. After multiple rounds of negotiations and evaluations, and repeated deliberations at high-level meetings, the company was brought in, has already begun production locally, and is performing well.

Once the local automotive industry infrastructure had matured, the government sought to attract another new energy vehicle manufacturer. However, after meeting with the founders of several new entrants in the sector, the local government abandoned this plan. Why?

The government would have to invest substantial funds in these new entrants, requiring them to pledge certain assets as collateral. Since this particular company lacked significant assets to pledge, the local government decided against attracting it to mitigate risks and ensure fiscal security.

In fact, many local governments have enthusiastically welcomed some of these new EV startups, but local governments are not “parents”; they cannot simply invest without expecting returns.

For new EV startups, achieving mass production is akin to the birth of a child—a critical milestone. Reaching mass production signifies the beginning of a new phase of development. Some companies, however, have suffered from poor management in the later stages, leading to continuous losses and eventually bankruptcy.

Compared to those new players that have achieved mass production, there are even more that have failed before they could even get off the ground, falling by the wayside before reaching mass production—Qidian, Byton, and Bojun are representative examples.

Amid the new energy wave, some have resorted to underhanded tactics: ostensibly flying the banner of new-energy vehicle manufacturing, but secretly engaging in schemes to defraud investors and claim subsidies—such cases are all too common.

Government bailouts for automakers are a means to an end, but the key to such assistance lies in whether the automaker possesses market competitiveness. The survival rate of automakers largely depends on market competition, and the fundamental factor is whether they are inherently competitive.

At this stage, if automakers rely solely on government “infusions” rather than generating their own “revenue,” government “bailouts” can only provide temporary relief. This is akin to a double-edged sword, potentially causing automakers to develop a dependency syndrome.

From an industry-wide perspective, market competition is a process of eliminating outdated production capacity and optimizing structural and resource allocation. The elimination of some automakers through competition has positive implications, as it helps enhance the industry’s overall competitiveness.

However, if these companies are concentrated in a specific region and have a significant impact on the local economy, it is reasonable for the government to step in to provide assistance.

Over the years, local governments have accumulated considerable experience in knowing when to extend and when to withdraw the government’s hand of macroeconomic regulation. By prioritizing both guidance and support for new automotive players while not neglecting supervision and management, ensuring their healthy growth will no longer be a challenge.

As new automotive startups enter their “countdown to exit,” whose hands hold the reins of their fate?