(Bloomberg) -- Nissan Motor Co. is looking to invest in a Chinese electric-car startup, according to people familiar with the matter, to provide it with a greater footprint in the world’s biggest market for new-energy vehicles.
The Japanese company wants to buy a stake of as much as 25% in a Chinese electric-vehicle maker, and it has narrowed the potential targets to startups including WM Motor Technology Co., Zhejiang Hozon New Energy Automobile Co. and CHJ Automotive Co., said the people, asking not to be named as the plan isn’t public.
The plans signal Nissan is looking to push ahead with ambitions in the EV space started when Carlos Ghosn was still chairman of the carmaker’s board. While Ghosn was arrested in November on charges of financial misconduct, throwing Nissan’s alliance with Renault SA into turmoil, the Japanese carmaker can’t afford to take its eye off the Chinese market, with rivals including Volkswagen AG and Tesla Inc. doubling down there.
Nissan is expected to report its weakest annual operating profit in a decade Tuesday, amid a slowdown in U.S. sales and an aging model lineup.
A spokesman for Nissan declined to comment, as did representatives for the three Chinese EV companies.
Before his ouster, Ghosn was pushing for greater integration between Nissan and Renault, which he brought together two decades ago when the Japanese company was foundering. Nissan Chief Executive Officer Hiroto Saikawa at one point raised the possibility of bringing another manufacturer into the pact, possibly by acquiring Chinese electric-vehicle or connected-services companies, according to email correspondence between the CEO and Ghosn seen by Bloomberg.
While Nissan is a global force in electric vehicles -- its Leaf is the No. 1 electric car by cumulative sales -- the Chinese market is dominated by local manufacturers such as Beijing Electric Vehicle Co. and BYD Co. A relationship with an innovative local contender could help Nissan better appeal to Chinese buyers.
Nissan is seeking to act before potential acquisition targets become too big and expensive, according to one of the people. The company is shying away from players whose cars may clash with Nissan’s own offerings in the EV space. The carmaker considers Chinese startups to be more agile than established manufacturers, making them better suited to potentially disrupt the industry, they said.
Nissan’s technology experts are currently assessing the potential targets as part of a due diligence process, said the people. Nissan’s code name for the China EV project is “Hermes,” they said.
Zhejiang Hozon, which plans to start delivering its second mass-produced car by end of this year, won a manufacturing permit from China’s economic planing body, the National Development and Reform Commission, in 2017. The Shanghai-based carmaker said last month it raised 3 billion yuan ($436 million) in a B round of financing, bringing the total it has gathered to 7 billion yuan, according to its website.
CHJ, set up by entrepreneur Li Xiang in Beijing, started taking orders last month for Leading Ideal ONE, its first electric SUV model with range-extending system that uses gasoline to power long-distance drives. Li previously founded companies including China’s premier car-buying portal Autohome Inc.
WM, founded by Volvo Cars veteran Freeman Shen, makes the Weltmeister EX5 electric sport utility vehicle. The Shanghai-based company is aiming to become the first electric-car startup to post a full-year profit, counting on its know-how from the supply chain to manufacturing and sales, Shen said last month, without providing a timeframe.
While China’s electric-car sales keep rising, many industry observers are predicting that just some of the country’s EV startups will survive as the boom has led to overcapacity in manufacturers. The number of registered EV makers in China has more than tripled over the past two years to more than 480.
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