Denton Peng, the onetime “solar king” of China who was briefly the country’s youngest billionaire, emigrated to California in 2018 with plans to defibrillate a moribund industry: electric buses.
Now several years into the effort, shares of his company Phoenix Motor trade for mere pennies and it has received two delisting warnings from Nasdaq. Despite generous US subsidies to help cities adopt zero-emission mass transit, Phoenix was able to deliver only about 40 buses in 2024, and it has lost money in every year of operation under Peng’s leadership.
The story of Phoenix illustrates the inherent challenge of manufacturing electric vehicles in the US and the seemingly quixotic goal of government-backed incentives to get the industry off the ground, much less become competitive with its Chinese counterparts. Though both China and the US have provided seed funding to the fledgling industry, inefficiency and cost structures — especially for labour — make western production a long-shot challenge.
Out of the top 10 electric-bus makers in the world, only two are based in the US — one of which was bought by Peng after it went bankrupt.
“Peng is just running into the same issues that many US electric-car makers are facing — that they can’t build a profitable vehicle without a huge part of their supply chain being from China,” said Tu Le, founder of Sino Auto Insights, a Detroit-based consultancy. “Regardless of how much is reshored, the United States will have a hard time getting to the cost level with China.”
China’s EV industry features a large pool of cheap and productive labour, as well as a highly efficient supply chain few countries can rival.
“If it takes one month to complete a project in China,” said Peng in an interview with the Financial Times, “it takes four to five in the US.”
Government support played a crucial role in driving Peng’s earlier success. When he faced a funding gap to make the profitable yet capital-intensive solar wafer, a key component of solar cells, in 2005, local authorities in China lent him Rmb200mn and encouraged banks to provide more than Rmb25bn lines of credit for his venture, called LDK. Chinese press nicknamed him the “solar king”.
Business prospered as the company profited from the solar power boom in European countries. The bonanza ended after western nations began imposing sanctions on Chinese solar products in 2012, a blow to LDK that relied on developed markets for growth.
Peng lost control of LDK in 2012 after the local government took over the company. Chinese authorities accused him of fraud related to a subsequent group he launched. Peng denied wrongdoing.
Peng bought Phoenix Motorcars, a California-based electric-bus maker, for $12.5mn as he sought to return to manufacturing.
“There is a chance I can succeed in making EVs in the US,” he said.
Three years later, Peng paid $10mn to acquire the transit bus operation of Proterra, a leading electric-bus maker that filed for bankruptcy a few months earlier, as he looked to increase capacity to meet orders.
Phoenix merged with Proterra, creating one of the biggest electric-bus makers in the country. There was no shortage of demand for the vehicles as both the federal and state governments made a push to build more environmentally friendly public transit systems.
The Federal Transit Administration has over the past three years provided $4.9bn in subsidies for local authorities to purchase more than 4,600 zero or low emission buses, mostly electric ones.
While the programme is a boon for Phoenix, it comes with a caveat — the company must locally source more than 70 per cent of its parts, measured by value, to qualify for the subsidy.
That has slowed down production and created a backlog of orders as the EV supply chains in the US remain under-developed.
“The US EV industry is facing challenges in building a more efficient and affordable supply chain,” said Peng. “We have trouble meeting orders partly because our suppliers are slow in making deliveries.”
Pavel Molchanov, an analyst at Raymond James & Associates, said the US electric bus industry, while growing fast, was “too small to produce on a scale” that allows a well-established supply chain to emerge.
Molchanov added that it would take at least five years for the US electric bus market to become “meaningful”.
Yet Peng could barely afford to wait for that long. Shares of Phoenix have traded at less than $1 — a threshold that could trigger delisting by Nasdaq — most of the time since he bought Proterra in 2023.
The best solution is to work with Chinese suppliers that enjoy cost and quality advantages over their US counterparts.
Peng said Phoenix two years ago launched, without government subsidy, an electric shuttle bus aimed at commercial clients that cost 65 per cent less than its previous model by outsourcing parts to China.
Yet the Buy America requirement for government-subsidised electric transit buses, a major source of revenue for Phoenix, has made it difficult for Peng to replicate his cost-cutting magic.
He said he did not use Chinese-made batteries, known for their low price and high efficiency, for products with federal subsidy as they accounted for at least 30 per cent of the costs of components needed to make a bus.
Despite the challenge, Peng is still keen to tap Chinese suppliers when possible. He said he was considering building electric bus or parts factories in China where production costs were less than half of the level in the US.
The new factories, according to Peng, would serve markets outside the US under an American brand and technology, which customers were willing to pay a premium for.
Peng added that his future car parts factories in China would “certainly consider” serving the US market if policy allowed.
Molchanov of Raymond James said outsourcing to China “makes a lot of sense from an economic perspective”, but could be “politically controversial”.
He went on to warn that Trump’s pledge to revoke electric vehicle support might create “additional headwind” for electric buses that could become out of reach for buyers without government subsidy.
Peng has pinned his hopes on environmentally conscious states such as California that will ban sales of gas-powered cars by 2035.
“As long as we can survive until then,” he said, “our company will definitely grow into a big one.”
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