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Byton partners with Foxconn, but extends shutdown

A potential $200 million deal to help resurrect the struggling Chinese EV startup

Photo by Sean O’Kane / The Verge

Chinese EV startup Byton has signed a manufacturing deal with iPhone-maker Foxconn, which according to Bloomberg could be worth around $200 million. In exchange, Foxconn — which has been eager to get into electric vehicles — will provide Byton with “advanced manufacturing technology, operation management expertise and supply chain resources.” The two will apparently work together to get Byton’s M-Byte electric SUV across the finish line into production for the Chinese market in 2022.

The deal comes at a time when Byton is truly struggling. The startup suspended operations last year amid a cash crunch that was exacerbated by the pandemic and is now extending that suspension until June 2021, according to Bloomberg and local Chinese media reports. It has also largely abandoned Silicon Valley, laying off hundreds of employees there who had been working on R&D and marketing. Byton is now ostensibly being folded into the larger corporate structure at First Auto Works (FAW), China’s original state-owned automaker and a major backer of the startup — something co-founder and former CEO Carsten Breitfeld once warned would happen.

Foxconn’s involvement could be part of that restructuring effort, though the Taiwanese electronics supplier has been interested in Byton for a while. Foxconn in fact helped Byton get off the ground in 2016 when it worked with Tencent to create a company called Future Mobility Corporation that was intended to make electric vehicles, and Future Mobility Corporation eventually turned into Byton. But despite reports that the two tech giants invested in the startup, they never actually put money into the venture and instead left it to find its own funding.

That said, Foxconn has been trying to find a way into the budding electric vehicle space. The electronics giant announced its own electric vehicle platform in October. Foxconn also said in January 2020 that it was working with Fiat Chrysler on electric vehicles, though neither company has issued any update on that project in the intervening year. A spokesperson for Fiat Chrysler, which is currently merging with France’s PSA Group, has repeatedly declined to comment on the status of the partnership over the last year, and Foxconn has not responded to multiple requests for comment.

Foxconn could also presumably be interested in working on the tech inside Byton’s vehicles, like supplying components for the massive 48-inch screen that spans the M-Byte’s dashboard.

Byton first revealed a concept of its electric SUV at the 2018 Consumer Electronics Show. It announced the deal with FAW the following year and finished construction of a factory in Nanjing, China — something many of its peers have yet to achieve. But Byton simultaneously burned through the hundreds of millions of dollars it had raised along the way. It returned to CES in 2020 with a production-ready prototype and was still looking for new funding as the COVID-19 pandemic hit.

Byton came out of CES having generated “very strong momentum” with investors, ranging from pension funds to major automakers, according to one former employee with knowledge of the company’s funding. But when the global economy stalled in response to the pandemic, “things started deteriorating pretty quickly.”

The startup had not built up the kind of cash reserves to withstand such an event, this person said, opting instead to plow pretty much all of its roughly $820 million of investments into developing the factory and getting the SUV ready for production while it looked for more funding. (This person said Byton made 200 pre-production prototypes by the time it shut down last June). Byton also took on a lot of debt, including to FAW, that ultimately put it in even greater peril. But lacking the funding to move forward, Byton’s factory — once seen as an asset — ultimately became “an albatross,” Michael Dunne, the head of Chinese automotive consulting group ZoZo Go, told The Verge last month.

Byton’s struggles hit a fever pitch just before a rush of new interest — and more importantly, cash — entered the electric vehicle space, lifting up startups with far less developed products. As as result, Byton’s dire financial situation seems to have inspired it to basically pull up its North American roots, letting hundreds of employees go across 2020. As The Verge first reported last month, Byton has even stopped paying its lawyers in a lawsuit against the company’s former CEO.