New energy vehicle companies in China plan IPOs despite tough market conditions.

In recent years, the market for new energy vehicles in China has been unstoppable, with annual sales reaching 3.521 million units in 2021, a 1.6-fold increase year-on-year. According to the China Association of Automobile Manufacturers, the sales of new energy vehicles this year will further increase to 5 million units. By 2030, new energy vehicles will account for about 40% of the total new car sales, and the competition on the new energy track will only become more intense.

With this trend, many new energy vehicle companies are eager to launch their IPOs. Recently, it has been reported that Hezhong New Energy may go public as early as the second half of this year and is currently working with financing consultants. Before that, LingPao, Weimar, Huaren Yuntong, Changan New Energy, and other companies are also planning IPOs, and most of them are targeting the Hong Kong Stock Exchange. However, apart from Xiaopeng and Ideal, no new car company has listed successfully on the Hong Kong Stock Exchange. Under these difficult conditions, why are companies still gathering outside the Hong Kong Stock Exchange?

New Energy Vehicle Companies in China Eye IPOs as Sales Continue to soar

New energy vehicle companies are eager to IPO. Making cars is a long-term, money-burning business. It requires a lot of capital and a long return cycle. Even the top new forces at present cannot make enough money to make a profit by themselves, so external financing is still an inevitable choice for the continuous survival of enterprises. Therefore, this year’s new forces in carmaking are actively applying for IPOs. NETA, with a strong delivery volume this year, is reportedly planning to list in Hong Kong this year.

According to the media, citing sources, Hezhong New Energy, the parent company of NETA, has chosen China Securities, China International Capital Corporation, and other institutions to assist it in its IPO in Hong Kong. The company is also working with Morgan Stanley and UBS on the first stock offering, which may be the earliest this year. Compared with the top enterprises such as Xiaopeng and Ideal, the second-tier enterprises of the New Force still have a big gap in terms of delivery scale, product technology, etc., and their market performance has really come out since the second half of last year. Wangxianbin believes that if the market size of the New Force is not large enough, the enterprise valuation will also be affected accordingly.

Based on the US listing of ‘NETA’, there were reports in May 2021 claiming that NIO’s, IDEAL's, and Xiaopeng’s market capitalizations in US stocks are respectively US$55.447 billion, US$17.053 billion, and US$20.960 billion. However, as of Eastern Time on February 22nd, NIO’s US stock market capitalization had decreased by more than US$2 billion. While IDEAL and Xiaopeng’s US stock market capitalizations have increased, their Hong Kong stock market capitalizations have both declined since they first went public.

New energy vehicle companies in China plan IPOs as market performance comes to the forefront.

This has already been the performance of the head companies of the new forces under comprehensive development. For other new forces, entering the capital market is not only difficult, but even if they go public, they may be unlikely to exceed the performance of the head companies in the capital market.

Source: Securities Times