By 2022, investments in mobility-based climate tech startups had reached an all-time high. Green vehicle startup funding was the steepest in the Americas, partly spurred by Tesla’s success in the United States. However, while this region recorded the largest funding for green vehicles, Chinese electric vehicle startups were consistently among the startups receiving the most investments, as well as part of the climate tech unicorns with the highest valuation.
National and international challenges to profitability
As the world’s biggest electric vehicle market, China also provided domestic startups with favorable economic conditions for their expansion through policies and projects such as government investment funds and below-market credits. As of 2023, Chinese electric vehicle manufacturer WM Motor was the climate tech startup with the second-highest valuation, tied with fellow Chinese startup Meicai at a valuation of seven billion U.S. dollars. Hozon, which tied for fourth in the list of highest-valued climate tech unicorns, was also the eighth best-selling electric vehicle manufacturer on the Chinese market in 2022. However, despite advantageous measures set in place to help Chinese electric vehicle startups, the national market is slowly becoming more concentrated. The price volatility of raw materials, impacted by Russia’s invasion of Ukraine, and EV market pricing, becoming more competitive as Tesla lowered prices for some of its models in 2023, are symptoms of a more challenging post-pandemic operational reality for Chinese electric vehicle startups. In 2021, WM Motor reported nearly 44,200 electric vehicle deliveries, a volume which dropped by a third in 2022. In October 2023, the startup filed for a pre-restructuring process after struggling with its financial performance.China is, however, not the only country where electric vehicle startups face various economic hurdles. Faraday Future and Lucid Motors were the U.S. companies that had received the largest funding as of August 2023. Lucid Motors also manufactured the electric vehicle model with the longest driving range as of 2022. However, both startups reported net losses for their 2022 fiscal year, amounting to 1.3 billion U.S. dollars for Lucid Motors and 552.07 million U.S. dollars for Faraday Future.
Investors prefer investing in batteries and electric vehicle infrastructure
Electric vehicle startups faced various challenges to reach profitability. Due to the dynamism of the market, automakers are focusing on their research and development, leading to innovations and the filing of new patent applications. Between 2011 and 2022, WM Motor filed some 548 patent applications, most of them filed between 2016 and 2018.Investments play an important part in this innovation. In 2021, there were 100 mega-rounds of funding for global mobility startups, which involved investments of over 100 million U.S. dollars. Global green vehicle startups received around 65.5 billion U.S. dollars in funding between 2009 and 2021, making it the third most popular mobility startup category, behind mobility services and connected and self-driving vehicles. However, while electric cars were a popular sector for growth-stage venture capital investments, they were not as popular for early-stage venture capital investments, partly due to the growth necessary for electric vehicle manufacturers to reach profitability. Electric vehicle charging startups, in contrast, reported the highest early-stage and growth-stage venture capital investments in 2022. Battery makers were another popular company type for venture capital investors. Northvolt, the climate tech startup with the highest valuation in 2023, is a Swedish battery developer and manufacturer.
