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China’s EV upstarts are building their own investment powerhouses

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China’s EV upstarts are building their own investment powerhouses

The investment game going after automotive startups is getting more competitive in China with not only established venture capital firms joining the fray but also industry veterans. Two mobility-focused funds that recently closed new rounds have the backing of the country’s leading electric car-making upstarts.

Rockets Capital, a brand new venture- and growth-stage investment vehicle, announced earlier this month the close of its $200 million maiden fund, with EV maker Xpeng as the anchor investor. Other investors are big institutional names in China, including IDG Capital, Sequoia China, GGV Capital, 5Y Capital and eGarden. The fund looks for opportunities in the auto industry value chain, clean energy and other “frontier technology” areas.

The other major close from this week is Nio Capital’s oversubscribed $400 million sophomore USD fund, the Eve ONE Fund II. Investors range from sovereign wealth funds, insurance companies, multilateral financial institutions, funds of funds, family offices, pension funds to foundations from across the world.

Nio Capital was started by William Li, founder of Xpeng’s archrival Nio — hence the name of the fund — although the investment body is not directly related to the carmaker itself. The firm manages an RMB fund along with its USD one, focusing on auto, technology and energy sectors.

Rockets Capital makes its connection to its EV investor more public. While it operates as an independent investment firm, it will also leverage Xpeng’s “industry expertise and resources” and “incubate technological innovation.” Given the stated mission, it won’t be surprising if some of Rockets’ future portfolio companies also do business or partner with Xpeng.

Founded in 2016, Nio Capital has a head start in the investment space. Some of its more notable deals in China include two leading robotaxi companies — Bosch-backed Momenta and Toyota-backed Pony.ai, Temasek-backed lidar maker Innovusion — which is also one of Nio’s suppliers, BP-backed battery swapping Aulton and auto chipmaker Black Sesame.

Over the past several years Nio Capital has built a fortress around itself with up-and-coming players in China’s auto industry. Now it’s time to see how Rockets Capital and its patron Xpeng play catch-up and what alliance it can forge to reshape the market.

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