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SF Motors is exactly the kind of EV startup Elon Musk complained to Trump about

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A US-based, China-backed company that plans to build in both markets

Across the country from the New York Auto Show, which started this week, a small electric vehicle startup called SF Motors has emerged from the shadows. The China-backed company pulled the wraps off its first two high-powered electric vehicles at an event in Northern California last night, where the company roughly sketched out how it plans to take on the EV market and the auto industry at large.

Those plans revolve around two all-electric SUVs: the SF5 and the SF7. The SF5 will come to market first, the company says, with preorders starting later this year and production taking place in 2019. Both cars are built on the same platform, which includes electric motors and battery technology that has all been developed in-house.

SF Motors says it will sell different versions of each car with two, three, or even four electric motors, offering up to 1,000 horsepower and a range of more than 300 miles. The SUVs are packed with smart features inside, and SF Motors is promising semi-autonomous capabilities as well. Pricing hasn’t yet been announced.

The SF Motors SF5.


The drivetrain and battery technology apparently comes, in large part, from a company that SF Motors acquired late last year called Inevit. Inevit was started by Martin Eberhard, a co-founder and former CEO of Tesla who clashed with Elon Musk during some of that company’s tougher, early years. Eberhard now serves as “chief innovation officer” for SF Motors.

SF Motors has an R&D shop in Silicon Valley (and others around the world), but it will make its SUVs in Indiana. The company bought an old manufacturing plant that used to pump out Hummer SUVs that it is currently retooling for production of its EVs, which it estimates will kick off at around 50,000 per year. However, SF Motors is an American subsidiary of Chinese commercial vehicle company Sokon, so it will also be able to make around 150,000 SF Motors vehicles in China, a market that loves SUVs and is widely considered to be the next frontier for EVs.

Manufacturing cars at significant scale is a monumental task, but if SF Motors can get through production and put out a car that’s as impressive as it teased this week, it sets up the potential for terrific drama in this corner of the car industry, even without Eberhard’s involvement.

That’s because SF Motors is precisely the kind of company that Musk recently complained about to President Donald Trump on Twitter. It’s ostensibly a Chinese company that plans to make vehicles here in the US as well as in China, meaning it won’t be subjected to import taxes in either market.

Musk called this unfair because non-Chinese companies only have one way to get around a 25 percent tax that China applies to imported vehicles, which is to enter a joint venture with a Chinese auto company. “The current rules make things very difficult,” he wrote. “It’s like competing in an Olympic race wearing lead shoes.”

The SF Motors SF7.


China imposed the joint venture rule as a way of boosting the capabilities of its own automakers, which have long lagged behind those of the biggest brands in the industry. But the joint ventures effectively reduce the amount of total profit available to non-Chinese carmakers, and there have also been concerns about sharing intellectual property with local companies. Efforts to push China into allowing foreign manufacturers operate alone in “free trade zones” have stalled.

The result is that selling cars in China can be a tricky prospect. Tesla’s cars, which are already expensive in the US, wind up costing even more in China because of the import tax. Some carmakers, like Ford, have long acquiesced to the joint venture rule, but have struggled to keep up with the pace and particular demands of the Chinese market.

Other companies have made big gains in China despite these hurdles. GM sold 4 million cars in China in 2017 through its joint venture with Chinese carmaker SAIC. Honda passed Ford in sales there in 2017, and the biggest Japanese automakers have found success in joint ventures.

Many things have to go right for SF Motors before Sokon can exploit its dual-market advantage, but it appears to be better set up to try than almost any other startup. The only other Chinese EV startup heading down a similar path is NIO, which has a manufacturing facility in China but is planning an IPO in the United States.

A wildcard in all this is that the Trump administration might try to pressure China into easing off the joint venture rule, as Musk asked. But in the meantime, Trump is only likely to assign new tariffs to goods coming to the US from China.

There’s no guarantee that SF Motors’ SUVs will be good or that they’ll sell well. Aside from the light-up mustache grille, the two vehicles are rather indistinguishable from the ones being made by NIO or Byton or any other number of EV startups. And with more-established companies like Jaguar and Hyundai embracing all-electric SUVs, there will be more competition than just Tesla by the time the SF5 comes to market.

But the modern car industry is being shaped by China more and more every day. SF Motors is arguably the most emblematic example of that phenomenon.

Update March 30th, 2:30PM ET: This post previously cited a Forbes article that originally included a quote attributed to SF Motors CEO John Zhang, which stated that the company’s cars could start “below $50,000.” That quote has been removed from the Forbes post because it was a “pricing detail that was not confirmed” and was taken out of context, according to a representative for SF Motors. This article has been updated to reflect that pricing information is currently not available.