China is home to the largest market for electric cars and plug-in hybrids. Naturally, numerous local startups have cropped up as companies aim to cash in on the market.
Alas, a new report claims only 1 percent of electric-car startups will survive. Chinese investor and managing partner of NIO Capital, told Bloomberg in a Tuesday report that the survival rate for the numerous electric-car startups will be “very low.”
“It’s a very complicated system that needs abundant investments and a large group of people to be able to build a car from scratch,” Zhu said.
Yet, the market sees the potential and companies have poured billions of dollars in investments to see a potential return. Zhu noted most companies have yet to begin building cars at mass production, but companies often value themselves at sums greater than established automakers. Said startups also see Tesla’s relatively small market share as an opportunity in the segment.
Tesla plans to build a production facility in China and build cars locally in the next few years.
And competition will only grow as China will soon remove ownership limits on foreign automakers. Currently, automakers must partner with a local Chinese company to form a joint-venture to build vehicles locally and avoid steep tariffs on imported cars. This year, the country will lift the cap on any foreign-invested shares in electric and hybrid cars. By 2022, any foreign automaker will be able to outright own their operations.
That leaves a lot of small fish swimming in a massive body of water.
A version of this story originally appeared on Hybrid Cars.