Enovate, a Chinese new energy vehicle manufacturer that has struggled in its home market recently, announced the establishment of a joint venture with Saudi Arabia’s Sumou Holding on December 12. Both parties will invest about $500 million in Saudi Arabia to set up a manufacturing and R&D base with a planned annual output of about 100,000 EVs.
Enovate is also discussing investment strategies with Saudi investors, including the country’s Public Investment Fund and Saudi Aramco. Time Finance‘s report shows that Saudi Arabia chose Enovate mainly because of its higher capital utilization rate and solid technical strength among car companies in China.
The predecessor of Enovate was Dianka Auto, established in Zhejiang in 2015. As a high-end automobile brand of Dianka Auto, Enovate was unveiled at Guangzhou Auto Show in 2018, and the company officially changed its name to Enovate in 2019.
Since its establishment, Enovate has secured financing of about 10 billion yuan ($1.43 billion), with the largest round occurring in October 2020 from a local government fund and large Chinese state-owned banks.
But 10 billion yuan is far from enough to make Enovate a leading player. At the end of 2021, William Li, CEO of NIO, said, “Building a car needs to reserve a capital threshold. A few years ago, it was 20 billion yuan, but now it is 40 billion yuan.” Li explained that 40 billion yuan is enough to build a competitive and sustainable enterprise.
Enovate currently sells two models, namely the ME5, an extended-range compact SUV starting from 138,800 yuan ($19,886), and the ME7, a pure electric medium-sized SUV starting from 238,800 yuan ($34,212). Enovate has not voluntarily released its delivery data. From January to October this year, the number of Enovate vehicles with insurance was 4,837 units, which was less than the monthly delivery volume of its rivals.
Despite its low sales volume, Enovate has built two factories in China. The first is located in Shaoxing, Zhejiang Province, covering an area of 66 hectares, with an investment of 5.5 billion yuan and a designed annual production capacity of 180,000 vehicles. The second one was completed and put into operation in Changsha, Hunan Province in June 2021, with a production scale of 60,000 vehicles per year.
As for the future factory in Saudi Arabia, Enovate said that it can use this as a starting point for exploring the Middle Eastern, European and American markets by virtue of a Saudi tariff trade agreement.
Saudi Arabia is one of the important markets for Chinese auto firms. In the first half of this year, China exported 91,000 cars to Saudi Arabia. Changan Automobile ranked among the top three in Saudi Arabia this year, and SAIC MG and Geely also ranked among the top 10.
Following the development of a thriving oil industry, Saudi Arabia is now attempting to diversify its business sector. The country has put forward the goal of “Vision 2030,” which aims to increase the share of non-oil exports to 50% of GDP. In 2018, Saudi Arabia’s Public Investment Fund invested more than $1 billion in Lucid, an American automaker, holding 62.72% of the latter’s shares. In November this year, the fund cooperated with Foxconn and BMW to launch Ceer, the first local electric vehicle brand, which will design, produce and sell a series of vehicles for consumers in Saudi Arabia and the Middle East and North Africa. The joint venture has already obtained some technical licenses from BMW, and Foxconn will participate in developing the electronic architecture of vehicles.