Bad timing? Yet Another EV IPO: Chinese Carmaker Lixiang Aims for USD 500 Million
Lixiang will be the second Chinese EV start-up to list in New York if the IPO proceeds.
According to Reuters, Chinese electric vehicle (EV) maker Lixiang Automotive (formerly known as CHJ Automotive) has reportedly filed for a US Initial Public Offering (IPO), aiming to raise at least USD 500 million.
The listing news comes several hours after Tesla announced that it is going to cut the starting price for its China-made Model 3 by 16% to CNY 299,050 (USD 42,919), which adds a severe pressure to China’s EV market. The brand that will feel this will be NIO, which is the only startup that produces cars priced in the same range as Tesla in China, as explained in a previous article.
It is rather apparent that Tesla is going to cut into the largest EV market in the world quickly, ramping up its Shanghai Gigafactory production capacity to take advantage of the orders flooding in, boosted by compelling price cuts.
“Tesla can cut its Model 3 price to a low of around CNY 250,000 (USD 35,000) based on our breakdown of the car production and delivery cost. In that case, Tesla will make a major incursion against traditional Internal Combustion Engine (ICE) carmakers, not even mention young EV startups,” an analyst from Changjiang Securities commented.
In China, these young EV companies include NIO, Xpeng Motors, WM Motor and Lixiang, referred to sometimes as 'new forces (造车新势力).'
Among them, NIO has adopted the model of contract manufacturing with Jianghuai Auto while Lixiang has obtained its EV manufacturing license by the acquisition of a traditional car marker Chongqing Lifan Auto. On the other hand, compared with NIO’s focus on purely battery-adriven cars, Lixiang has launched its range-extended electric Ideal One model, the first car model of the company.
Lixiang started mass production of Ideal One in November 2018. The sport utility vehicle (SUV) is priced from CNY 328,000 (USD 45,900) apiece after subsidies, slightly lower than NIO ES6’s starting price but higher than Xpeng and WM Motor's models (all prices are after subsidies).
Lixiang needs to think about how to deal with Tesla’s market campaign and how to compete with NIO, which is gaining experience and reining in losses in this cash-burning game of manufacturing cars as a startup.
Finding fresh capital in the secondary market is not an easy bet. 40% of NIO’s valuation has evaporated since its debut, and its top priority is finding a convincing answer about future profitability to avoid a stock sell-off in the next quarters.