Author: Zheng Senhong
After nearly two years since its establishment, the valuation of Xpeng Motors has been soaring high, surpassing even the latest market value of Li Auto in the US stock market.
On February 13th, Xpeng Motors announced the completion of its Series A financing round of $750 million. Investors include Amnon Shashua, founder and CEO of Mobileye, CATL, Xpeng’s longtime strategic partner, YF Capital, Guangzhou Venture Capital, and Hillhouse Capital. The post-investment valuation reached $13 billion (approximately RMB 88.8 billion).
Compared to the post-investment valuation of Xpeng Motors’ Pre-A round of financing of approximately $9 billion in 2021, its valuation has increased by 44% in just two years.
As a comparison, the market values of four listed new energy vehicle companies, namely, Li Auto, NIO, Xpeng Motors, and Leap Motor, are approximately RMB 177.3 billion, RMB 119.3 billion, RMB 55.9 billion, and RMB 25.9 billion respectively. The valuation of Xpeng Motors is only 1.6 times that of Li Auto and 3.5 times that of Leap Motor, second only to Li Auto and NIO.
Amidst the cold winter of subsidies withdrawal and market concentration improvement, capital markets are extremely cautious about the “burn money for volume” strategies of new energy vehicle companies.
Under this background, the participation of various investment parties with real money and silver in Xpeng Motors’ investment is a kind of recognition of its business model. In the short term, Xpeng Motors’ cash flow will be greatly supplemented.
Boost from Industry Capital and Leading Suppliers
In this round of financing of Xpeng Motors, the biggest highlight lies in its investment parties.
Among them, CATL is Xpeng’s long-term strategic partner. As early as January 2021, it participated in Xpeng’s Pre-A round of financing and chose to continue to follow up in the Series A round.
In addition to providing real money and silver support, CATL has also provided industrial resources to Xpeng Motors. For example, the world’s first mass-produced Kirin power battery is installed on Xpeng’s P7.
Apart from the support of the Power Battery Giant, Amnon Shashua, founder and CEO of Mobileye, also attracted much attention for his personal investment.
The relationship between Mobileye and Xpeng Motors can be traced back to the Pre-A round of financing – Intel was one of the important investors at the time.
At that time, Mobileye was still an Intel’s wholly-owned subsidiary but had not yet gone public.
From shareholders, customers to individual investors, these three different roles have made the binding of Jidu Auto, Intel, and Mobileye even closer.
From the perspective of Mobileye:
- China is one of the most active and largest markets for intelligent driving;
- Jidu Auto is one of the most potential new forces in the domestic automotive industry.
Especially at the time when many domestic automakers are turning to Nvidia, Qualcomm, Horizon, and Black Sesame, seizing high-quality customers is equivalent to firmly occupying a place in this largest market.
Currently, Jidu Auto’s product line mainly includes segmented categories such as cars, SUVs, and MPVs:
- Z product line: Jidu 001, Jidu 009
- C product line: Jidu X, CS1E (sedan, to be released in the second half of 2023)
- M product line: M-Vision, CM2E (double-row compact SUV)
Jidu 001, Jidu 009, and Jidu X all use Mobileye’s solutions.
At the beginning of 2022, Jidu Auto also announced that it plans to launch a consumer-grade intelligent driving electric vehicle with L4 level autonomous driving capability in 2024 with Mobileye. This model will be built on the SEA Haohan architecture and equipped with 6 EyeQ5 chips.
From the cooperation of these models, Jidu Auto has given sufficient support to Mobileye.
In January 2023, Jidu Auto released an 8-minute Jidu NZP high-speed autonomous navigation assistance system demonstration video.
The video showed Jidu 001 equipped with Mobileye EyeQ5 solutions driving 27 kilometers in Shanghai in the unmonitored state throughout the test process.
From the video, Zeekr NZP has excellent performance in the smoothness of large curvature bends and merging on the ramp.
In January 2023, Zeekr High-Speed NZP has launched a pioneer test and opened in Shanghai and Guangzhou areas.
As an important supplier in the field of intelligent driving, from ADAS to high-level autonomous driving, Mobileye's cooperation with Zeekr will continue.
## Creating the delivery speed record for China's high-end pure electric vehicle brands, Zeekr plans for IPO this year.
In November 2022, Geely announced that the Hong Kong Stock Exchange agreed to spin off Zeekr and list it independently. Later, it was reported that Zeekr had submitted a draft registration statement to the U.S. Securities and Exchange Commission for a possible IPO based on confidentiality standards.
It is said that Zeekr's IPO plans to raise more than **USD 1 billion** and will be listed in New York as early as the second quarter of 2023.
The news of Zeekr's IPO has raised many doubts in the industry. After all, with less than two years of establishment, Zeekr has not achieved the level of killing everything in terms of fist products, self-research ability, and brand profitability. The IPO of the top new forces, such as Weixiaoli, will not happen for at least three or four years.
The reason behind this cannot be separated from Zeekr's acceleration.
Since the first model started delivery, Zeekr 001 has repeatedly refreshed the delivery record:
It took 110 days to deliver more than ten thousand vehicles, 107 days for more than 20,000 vehicles, 64 days for more than 30,000 vehicles, and 45 days for more than 40,000 vehicles.
With the increase in the product volume, Zeekr 001 has become the first domestically produced pure electric car with a price above **RMB 300,000** and a monthly delivery of more than ten thousand units. It has also become an option that cannot be bypassed in the domestic RMB 300,000 pure electric vehicle market.
Separating and listing during the brand's upward period is a common capital operation method used by Geely in the new energy field. Both Volvo, Polestar, and Ecarx are no exception.
Through Geely's strategic intentions in the new energy layout, Zeekr, who is eager to go public in the United States, may not be able to escape the word "loss."
According to financial data disclosed by Geely:
- The revenue of Geometry in 2021 was RMB 2.868 billion, with a net loss of RMB 1.01 billion during the same period.
- In the first half of 2022, Geometry’s revenue was RMB 8.828 billion, with a net loss of RMB 759 million. This means that Geometry’s net loss has nearly reached RMB 1.8 billion in just over a year.
In addition, it is evident from Geely’s financial report that it provides more than just financial support to Geometry.
According to Geely’s first half of 2022 financial report, Geely invested in 66 Geometry brand direct stores, leading to the increase in sales expenses by 29% YoY, and the increase in commodity R&D costs in the R&D expenses by a whopping 173%. Geely primarily focuses on the technological development of new energy vehicles. With the increase in R&D investment, Geely’s administrative expenses for paying R&D personnel increased by 44% YoY.
At the same time, Geely stated that the group is increasing its borrowing to support Geometry’s rapid growth. This means that in every aspect, including technology, personnel, sales channels, and funds, Geely is “nurturing” Geometry.
Despite the impressive delivery data, if we calculate based on Geometry’s total delivery of 18,613 vehicles in the first half of 2022, Geometry is losing about RMB 40,000 for each car sold.
It’s worth noting that Geometry’s gross profit margin is lower than the industry average.
An Conghui revealed during the earnings conference that in the first half of 2022, the gross profit margin of a complete vehicle of Geometry was about 5%.
In contrast, Tesla’s gross profit margin has exceeded 27%, while the gross profit margins for top new forces such as NIO, Xpeng and Li Auto are respectively 13.8%, 11.5%, and 22%. Despite Geometry’s average order amount exceeding RMB 336,000, Geometry’s gross profit margins in the single digits seem to be hard to stop the bleeding in the short term.
To achieve Geely’s ambitions, Geometry needs more financial support. Geometry’s series A financing round is particularly valuable in this regard.
Obtaining financing through an IPO not only strengthens Geometry’s R&D and product capabilities, but also benefits future charging and energy supplement systems, as well as the construction of sales and service channels.
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Until January 31, 2023, Jidu Auto has delivered 81064 vehicles. The domestic sales target this year is 140,000 vehicles, while by 2025, Jidu plans to sell 650,000 vehicles and become one of the top three high-end electric vehicle brands in the world.
Despite the ambitious goals, Jidu still has the opportunity to continue the momentum of 2022 in the face of enormous uncertainty, from product, technology to system capability.
As Jidu’s global market gradually takes shape, Li Shufu may soon have his ninth listed company.
Li Shufu’s global dream is hidden in Jidu
“To make China’s cars go global, instead of letting the world’s cars run all over China.”
Li Shufu, a car enthusiast, once described his ambition to make cars.
Different from the weak car-making force of Zhejiang’s private enterprises ten years ago, Li Shufu used the past ten years to realize Geely’s internationalization strategy through acquisitions and cooperation. The sales and influence of its brands have also continued to increase.
Polestar, which actively expands its global map, exported a total of 35,588 cars in 2022, with new energy models accounting for 97\%. It ranked first among Chinese brands with vehicle prices over RMB 250,000.
Although the results are impressive, this 97\% new energy ratio is mainly attributed to the hybrid system, while the overseas pure electric market mainly depends on Geometry C to make efforts in Israel and other regions.
For the global pure electric market game, CEO of Jidu Auto, Andy An Conghui, has the same determination as Li Shufu.
In the internal letter on the first day of work after the Spring Festival, An Conghui regarded “globalization” as one of Jidu’s five key tasks in 2023, and regarded the European market as Jidu’s first stop to prove its ability to build a global intelligent pure electric luxury brand in the heart of the world’s car industry.
In the 300,000 yuan high-end luxury market, high-end intelligent pure electric vehicles represented by JiKe are continuously diluting the traditional fuel vehicle market through strong product power, for example, JiKe 001 increase purchase users, of which users from Mercedes-Benz, BMW, and Audi brands account for **32\%**.
JiKe hopes to replicate the replacement effect from fuel to intelligent electric in mature markets such as Europe by taking advantage of this window.
Exports have always been a bright spot in China's new energy vehicle industry. Currently, Europe's new energy vehicle sales account for 34\% of the global total sales, the second-largest market globally after China and also the largest market for China's exports. According to the data from the China Association of Automobile Manufacturers, **1 in 10** new energy vehicles sold in Europe comes from China.
An Conghui once stated at CES 2023 that JiKe saw the growth opportunity in Europe and planned to sell electric vehicles equipped with Mobileye's auxiliary driving system in the European market by the end of 2023.
China's brand going global is not something that can be achieved overnight, and one must be prepared for long-term global competition.
Currently, it seems that JiKe 001 and JiKe X are likely to be JiKe's pioneers for exporting to the European market.
In addition, JiKe has a CEVT Innovation Center in Gothenburg, Europe, with an automotive engineering team of over 2000 people. SEA Haohan Architecture is the representative masterpiece of this team.
After completing the acquisition of Volvo, Geely and Volvo established the CEVT center in 2016, mainly for joint development based on the Volvo EUCD platform at that time. After creating the CMA platform for mid-size car models, the R&D of SEA Haohan Architecture became the second task of CEVT.
After 5 years and an investment of **18 billion yuan**, SEA Haohan Architecture has become Geely's killer in the new energy field.
Volkswagen’s MQB platform covers A0-B class cars, while SEA can achieve coverage from A to E class cars, including sedans, SUVs, MPVs, pickups, and sports cars.
As of now, Jinkuang’s off-road vehicle Model 001, MPV model 009, compact SUV Jinkuang X, as well as Smart’s pure electric small SUV Haofeng Jingling, and pure electric pickup truck Leida RD6, all originate from the SEA architecture.
In addition, since 2020, Geely intends to sell the SEA architecture to more third parties.
For example, it established “Jidu” with Baidu, established a joint venture company with Foxconn, and the M-Vision unmanned taxi, which cooperated with Waymo, and the compact SUV that cooperated with the Polish electric car brand EMP.
From the current progress, the visibility and influence of the SEA architecture are not limited to the domestic market. With the mature and flexible modular advantage, the SEA architecture has gained more and more recognition in the international market, which is also Jinkuang’s confidence in entering the European market.
For Jinkuang, brand development is an indispensable process for global reach, as well as an important step in demonstrating China’s advanced and forward-looking capabilities in the luxury smart pure electric race.
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This article is a translation by ChatGPT of a Chinese report from 42HOW. If you have any questions about it, please email bd@42how.com.