China’s Second-Tier EV Makers Rush to List in Blooming Market

After public listings by XPeng, NIO and Li Auto in China and overseas, the second echelon of the country’s electric vehicle industry, including firms such as Leapmotor, WM Motor, and Aiways, is embarking on a new round of IPOs in a bid to secure more funding.

In January of last year, WM Motor completed the listing guidance for Shanghai’s Science and Technology Innovation Board, but no new progress has been disclosed since then. On June 1, the company formally filed a prospectus to the Hong Kong Stock Exchange. But its adjusted net losses in the past three years were 4.044 billion yuan ($562 million), 4.225 billion yuan and 5.363 billion yuan, reaching 13.632 billion yuan in total.

Although Leapmotor completed its Hong Kong IPO today, its losses are broadening. From 2019 to 2021, it lost 901 million yuan, 1.1 billion yuan and 2.8 billion yuan respectively, for a total loss of nearly 5 billion yuan.

US-listed education firm China Liberal previously announced that it has entered into a partnership with Aiways to acquire all of the shares. Upon completion of the acquisition, all of Aiways’ equity will be converted into common stock of the listed company. Aiways is now valued at $5 billion to $6 billion.

Different from the conventional listing path of Leapmotor and WM Motor, Aiways, which bet on the overseas market early, has sought a “backdoor listing.” This can be described as a strategy adopted by unlisted companies in which they merge with firms already listed on public exchange.

One VC partner told Shanghai Securities News, “Competition in China’s electric vehicle market is too fierce. From the perspective of financing, NIO, XPeng and Li Auto have plenty of cash after multiple listings, but they still face huge financial pressure. Traditional car companies’ cash flow is enough to support new business. In contrast, the second-tier EV makers can only survive if they go public as early as possible, before the opportunity disappears.”

In addition, Shanghai Securities News has learned from investment banks that other second-tier companies, such as NETA and HiPhi, are also gearing up for IPOs. In 2021, He Xiaopeng, Founder of XPeng, asserted in an interview that 2024 is the last year for EV’s rapid development, after which competition will intensify.

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Second-tier EV firms’ desire to go public will depend on their sales. Different from NIO, XPeng and Li Auto, which focus on the middle and high-end market, NETA, Leapmotor and others’ core vehicle models typically sell for 150,000 yuan, or even less than 100,000 yuan. Depending on the cost performance ratio, their sales grow rapidly. However, the low price makes it difficult to generate high profitability.

In addition, GAC Aion and another batch of car manufacturing enterprises have also begun to seize more market share. In August, GAC Aion’s sales reached 28,000 units – a remarkable achievement. Meanwhile, AITO, launched by Seres in cooperation with Huawei, and Zeekr, a high-end brand owned by Geely, have also attracted a lot of attention. AITO and Zeekr will adapt the Kirin battery from CATL, raising market expectations.