Electric vehicle demand may be slowing, but investors seem excited about the U.S. debut of a Chinese luxury EV brand.
Geely-owned Zeekar hit the New York Stock Exchange on Friday, making it the first major US listing by a Chinese company since 2021. China’s effective ban on foreign IPOs, The company’s share price soared 38% in the first few minutes of trading, giving Zeeker a potential $7 billion valuation.
Zeekar’s market hype is notable and may indicate that investors see value in high-quality, low-cost offerings from Chinese automakers. But if the public EV market has taught us anything so far, it’s that the higher the shares jump in the early days, the higher they are. next they have to fall, And Zeekar’s debut not only comes as customers shy away from the high prices of EVs, but also amid price wars and geopolitical tensions that threaten the automaker’s market position.
Still, Zeeker managed to sell 21 million shares at $21 per share to raise $441 million, which is more than a previous plan to sell 17.5 million shares between $18 and $21, pointing to strong investor sentiment. Those funds will help Zikr as it plans to expand outside China in 2024.
Zeekar hasn’t shared its plans to launch any EVs in the US, but stiff competition in the homeland among other automakers has eaten into every company’s profits, leading many to turn to outside markets.
Europe is a big target for Zeeker as it offers EVs that compete with models from older European automakers. The company began shipments of its flagship Zeeker 001 shooting brake SUV to the Netherlands in late 2023, and it plans to expand deliveries of that model and the Zeeker X urban SUV to six European countries in 2024. Zikar has said it expects its international presence to reach eight countries by 2025.
Other Chinese companies disrupting the European EV market include BYD, SAIC and Great Wall Motor.
While Zeeker has not announced the launch of any passenger vehicles in the US, the automaker plans to put its vehicles on US roads under a partnership with Waymo, Alphabet’s self-driving technology unit. In December 2021, Geely and Waymo It was agreed to create an all-electric, self-driving ride-hailing vehicle by integrating Waymo’s AV technology into the Zeeker vehicle. Neither Waymo nor Zeeker have shared any updates on the launch timing of this vehicle, though Zeeker’s filing shows that both are still moving forward on the project.
Previous renderings of the purpose-built vehicle depicted something resembling a minivan. Zeekar hasn’t confirmed, but it’s likely the Waymo vehicle will be modeled on Zeekar’s fifth model, the Mix, which debuted at the Beijing Auto Show in April with the automaker’s SEA-M architecture. In a regulatory filing, Zeeker said its Waymo vehicles will be based on SEA-M, an enhanced version of the original Sustainable Experience Architecture (SEA) that can support a range of mobility products from robotaxis to logistics vehicles.
Zikar is one youth company, but Geely’s support means the automaker has had a healthy start to vehicle deliveries this year. In the first four months ended April 30, Zeekar delivered 49,148 vehicles. By comparison, competitors like Xpeng and NIO delivered 31,214 units and 45,673 units, respectively, during the same period, according to regulatory filings and press releases.
Despite its promise, Zikar is still incurring losses.
In regulatory filings, Zeekar reported bringing in $7.3 billion (51.7 RMB) in revenue in 2023. This is up from about 32 billion RMB at the end of 2022, which would have been about $4.6 billion at the exchange rate at that time. Keep in mind, operating expenses also increased significantly, so the $1.7 billion net loss at the end of 2023 was 8% larger than at the end of 2022. Zikar’s recorded gross margin in 2023 was 15%.
Zeeker said in the filing that it is still preparing financial statements for the first quarter of 2024 and that it expects vehicle sales revenue to be higher than Q1 2023, but lower than Q4 2023 because “seasonality has impacted our delivery volumes.” impacted, as well as lower” average selling prices primarily due to changes in our product mix.” Zikar also estimates that gross profit in the first quarter will be lower than the previous quarter.
And in Europe, the Commission is Exploring the possibility of imposing import duties On EVs made in China to protect European manufacturers.
Where there’s hype, there’s risk
Zeekar isn’t the first EV upstart to get a warm welcome from the public markets. That doesn’t mean it will stay that way, especially if Zeekar is loss-making.
Perhaps more important is the fact that Zikr’s US IPO comes amid rising geopolitical tensions between the world’s two largest economies. Although Zucker has a lot of promise after raising so much money from its IPO, it is not without challenges – especially on the regulatory side from both Beijing and Washington.
As a Chinese company, Zeekar has said that one of its risk factors is the influence that the Chinese government is able to exert on business operations. In its prospectus, Zicher said the government “may interfere with or influence our operations as the government deems appropriate to pursue regulatory, political and social goals.”
In the US, Zicher says continued regulatory and legislative hurdles could adversely impact its market value. Obstacles like enactment of Holding Foreign Companies Accountable Act (HFCAA), resulting in increased scrutiny of Chinese companies and additional oversight that could put a company at risk of delisting or losing investor confidence.
If Zeekar plans to launch any of its vehicles in the US, it will face heavy scrutiny. recent discussion in congress Concerns have been raised about connected and autonomous Chinese vehicles – which cost significantly less than those from American or European manufacturers – collecting data and potentially sending it back to the Chinese Communist Party.
And in Europe, the Commission is Exploring the possibility of imposing import duties On EVs made in China to protect European manufacturers.
the-buzziest-ev-ipo-of-the-year-is-a-chinese-automaker-techcrunch
