Hong Kong will provide a subsidy of up to HK$ 200 million ($25.6 million) to China’s Hozon Auto, which could alleviate the financial pressure on the electric vehicle startup and facilitate its expansion in overseas markets. 

Why it matters: Hozon Auto is the latest mainland-headquartered company to establish a base in Hong Kong as China hopes to create a high-tech megalopolis in its southern Greater Bay Area to rival California’s Silicon Valley.

• The news comes just months after CATL, the world’s biggest EV battery maker and a backer of Hozon, announced plans to set up a research and development facility in Hong Kong as part of a $128 million investment plan to make the city its international headquarters. 
• Chinese auto tech unicorn Horizon Robotics has recently partnered with Hong Kong Science and Technology Parks Corporation (HKSTP) with plans to expand its local research team and invest a total of HK$ 3 billion in the territory by 2028, according to an announcement published in December. 

Details: In addition to providing a $25.6 million subsidy, the Hong Kong government will also “provide assistance” (our translation) for a $200 million cornerstone investment for Shanghai-based Hozon, the company said on Wednesday in a statement, without giving further details. 

• “Hong Kong serves as a super-connector and super value-adder […] for mainland Chinese companies willing to expand their global presence,” Hong Kong Chief Executive John Lee said on Wednesday at a signing ceremony attended by Hozon chairman Fang Yunzhou, the South China Morning Post reported. 
• Hozon had announced plans in August to locate its global headquarters in the Asian financial hub in a partnership with HKSTP while promising to invest RMB 3.2 billion ($444 million) and hire 600 research staff locally over the next few years. It is also looking into the possibility of operating a production plant in Hong Kong. 

Context: In December, Hozon forged a partnership with local dealership DCH Motors to begin selling Neta-branded EVs in Hong Kong in 2024 and began trial production at its first overseas car plant in Thailand, which has an output of up to 20,000 EVs annually. 

• The company has reportedly hired several major investment banks including Morgan Stanley for an initial public offering in Hong Kong that could raise to $1 billion, a development that took place soon after the firm secured RMB 7 billion in a funding round last summer.
• Hozon delivered roughly 127,500 EVs last year, representing a 16% decline compared with 2022 and around half of its sales target of at least 250,000 units, and has been offering a price cut of between RMB 8,000 and RMB 22,000 on its vehicle lineups since mid-February as competition heats up in the Chinese EV market.