HONG KONG, Nov. 21 (Reuters Breakingviews) – Chinese electric car maker Zeekr is preparing funds for a U.S. initial public offering that will test geopolitical speed limits. The company, which is part of Geely Automobile (0175.HK), is increasing sales in the country. But plans to raise about $500 million through a New York initial public offering and overseas expansion are unlikely to materialize unless tensions between Beijing, Washington and Brussels are resolved, according to IFR.
This business is likely to accelerate in China. Zeekr has not yet made a net profit, but sales more than doubled to 21 billion yuan ($2.9 billion) in the six months to the end of June. It is also becoming more diverse. Only 13 billion yuan of its sales come from luxury cars, which puts it in competition with the likes of Tesla (TSLA.O) and Nio (9866.HK). More than a third comes from the Viridi unit’s battery and other components. Sales from research and development services accounted for the remainder.
Driving abroad is expected to be more difficult. Chinese President Xi Jinping met with US President Joe Biden last week, but a dramatic thaw in the icy relationship between the two countries has yet to materialize. So Zeekr’s hopes of developing a robotaxi business in the state are a tricky business at the perfect time, and one that requires vast amounts of potentially sensitive data, but he’s optimistic. It could become something. Meanwhile, in China, Zeekr is classified as a foreign-backed car manufacturer, meaning it must rely on licensed partners to collect, store and process data from its vehicles. Expansion into Europe could also become difficult as the European Union has launched an investigation into Chinese automakers.
At least Zeekr benefits from a strong parent company, Geely Automobile, which is part of China’s largest privately owned auto group, Zhejiang Geely Automobile. The prospectus states that “related parties of the group” accounted for almost half of last year’s receivables and accruals and will also be a major supplier delivering more than 50% of Zeekr’s purchases in 2022. ing. However, this is a potential risk. The same is true if the bond breaks or becomes strained.
Investors appear to be cautious. His fellow Chinese EV manufacturers Xpeng (9868.HK), Leapmotor (9863.HK), BYD (002594.SZ) and (1211.HK) not only sell cars under their own brand, but also provide services and services. It’s a good comparison since they also offer products. other car manufacturers. On average, their equity is equivalent to about three times last year’s sales. Applying that multiple to Zeekr would make it worth more than $13 billion. However, Geely Automobile, which will retain control of the business after the IPO, has a market capitalization of just $12.3 billion. This suggests that the deal with Zeekr is already testing the envelope.
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On November 9, Chinese electric vehicle manufacturer G-Car Intelligent announced its application to list its shares in New York. The company, which is part of Chinese automaker Geely Automobile, hopes to use the funds to expand its product line.
The company reported a net loss of 3.9 billion yuan ($534 million) for the six months to the end of June 2023, compared with a loss of 3.1 billion yuan in the same period a year earlier. Sales increased by 136% to 21 billion yuan, of which 13.2 billion yuan came from automobile sales. Sales of research services, batteries and other components accounted for the remainder of sales.
IFR reported on November 10 that the deal could raise less than $500 million, citing two people familiar with the matter.
Geely Automobile’s Hong Kong-listed shares fell 2.9% on November 10th.
Editing: Anthony Currie and Thomas Shum
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