Why China is buying U.S. startups

Thieves or saviours?

Its flagship model is called the Karma, but luxury hybrid carmaker Fisker Automotive has only experienced the bad kind. Reeling from poor sales and the loss of 338 of its plug-in electric vehicles to Hurricane Sandy last fall (each one worth US$107,000), Fisker has been looking for new investment. According to reports from late February, the company has joined the growing ranks of failing U.S. clean-tech startups being courted by deep-pocketed firms from China.

Fisker has reportedly received between US$200 million and US$300 million in bids from Chinese firms Geely and Dongfeng Motor Group. It is only the latest example in a new trend that’s seeing Chinese companies scooping up western startups in an alternative-energy space plagued by insolvency. Fisker’s own lithium-ion battery supplier, A123 Systems, was bought by Chinese auto-parts maker Wanxiang Group in December after going bankrupt. Silicon Valley darling Miasole, a thin-film solar startup, was sold to Chinese renewable power company Hanergy last October. China is now being described as a global clean-tech “scavenger” in alternative energy circles.

A sticking point in the Fisker case is its outstanding $192 million in U.S. government loan guarantees. The spectre of cutting-edge technology developed with western tax money ending up in Chinese hands at bargain prices has sparked hand-wringing that China is poised to own the future of alternative energy.

If so, Americans can partly blame their politically charged energy policy, say analysts. “Claiming you can have one million electric cars on the road by 2015 and having that fail spectacularly is going to backfire,” says Lux Research analyst Cosmin Laslau, referring to the pledge U.S. President Barack Obama made in his February 2011 State of the Union address.

The rhetorical climate may be putting undue deadline pressure on green technology that requires time to find its feet, say observers. Expensive lithium-ion batteries have proven problematic, Laslau says, and electric vehicles may need next-gen, solid-state batteries to become viable.

Meanwhile, the global market for clean-tech of all stripes continues to grow, even as traditional western funding sources grow impatient. “For technology venture capitalists, social media and Web 2.0 investments feel like a faster time to money,” says clean-tech industry consultant Dallas Kachan. In contrast, green energy was pegged as a top priority in the Communist Party’s most recent five-year plan.

“The Chinese are able to put up money for five, 10, 15 years of development,” says Laslau. “They take the long view. They have the resources for it.”