SOME of China’s wealthiest tycoons steered billions of dollars into electric car companies in order to fuel the country’s dreams of becoming a leader in the field. Now a reckoning may be looming as car sales slow and the government reduces subsidies for the nascent industry.

That leaves the flagship companies of Jack Ma, Pony Ma, Hui Ka-yan and Robin Li facing an increasingly steep path to profitability on their bets that electric vehicles (EVs) can be smartphones-on-wheels connecting passengers to other businesses. Their capital, along with dozens of startups raising US$18 billion, helped inflate an electric bubble that now looks to be in danger of popping.

China’s car market is experiencing a prolonged sales slump, prompting EV makers to slash earnings outlooks. With China considering further cuts to the subsidies for consumer purchases in order to force automakers to compete on their own, a shakeout is looming that not even the tycoons’ support may be able to prevent, said Rachel Miu, an analyst with DBS Group Holdings Ltd. in Hong Kong. “For the new kids on the block in the EV space, it’s a steep uphill climb,” she said.

Alibaba, founded by Jack Ma, has participated in several funding rounds for Guangzhou Xiaopeng Motors Technology Co., or Xpeng Motors, including one in 2018 that raised 2.2 billion yuan (US$313 million) for the carmaker co-founded by former Alibaba executive He Xiaopeng.

Xpeng launched its first vehicle, the five-seat G3 SUV, last year and has sold 11,940 vehicles so far this year, according to data compiled by Bloomberg.

The company, founded in 2014, also is teaming up with more-established automakers. A factory built with Haima Automobile Co. can produce 150,000 EVs annually. Another should soon begin assembling the P7 coupe, scheduled to begin deliveries next year.

Xiaomi Corp., the consumer electronics company, participated in another US$400 million fundraising round, the automaker said Nov. 13.

Pony Ma’s Tencent Holdings Ltd., whose WeChat messaging app helped make him China’s second-richest person, led a US$1 billion investment round in NIO Inc. in 2017. With more than 26,000 vehicles sold, NIO’s one of the few Chinese startups making multiple models, and it beat rivals with an initial public offering in New York last year.

But losses piled up with the overall sales slump and as the company, which has been described as “China’s Tesla,” plowed money into marketing and real estate. It sponsored a Bruno Mars concert and opened luxury clubs for NIO owners that feature showrooms, coffee bars and performance spaces. By August the company had opened 19 NIO Houses over 22 months, and combined rental expenses were equivalent to 6.3 percent of revenue during the 12 months ended March, according to Bloomberg Intelligence.

NIO lost US$2.8 billion in the 12 months ended June on revenue of US$1.2 billion, and its shares have plunged this year. The Shanghai-based company cut about 20 percent of its workforce through September.

One of the more startling entrants in the EV industry is property developer China Evergrande Group, which declared it wanted to be the world’s biggest manufacturer within three to five years. That means surpassing Tesla. Between September 2018 and June 2019, Evergrande invested more than US$3.8 billion in EV-related companies, according to Bloomberg Intelligence, and will start producing its Hengchi brand next year.

Evergrande, which wants to open 10 production bases, plans to spend 45 billion yuan on new energy vehicles between 2019 and 2021. (SD-Agencies)