Chinese Hybrid EV Startup Li Auto Raises US$1.1B In Nasdaq IPO

Li Auto is the second Chinese EV startup to list in the U.S. after Nio’s 2018 IPO

While trade tensions between the U.S. and China have been intensifying, and various instances of fraud by Chinese companies listed in the U.S. have come to light, Chinese startups have not been deterred in their ambitions to list publicly on U.S. exchanges.

On Thursday, Chinese hybrid Electric Vehicle (EV) maker Li Auto debuted on Nasdaq under the ticker ‘LI’, and raised US$1.1 billion through its IPO. Goldman Sachs, Morgan Stanley and UBS were among the underwriters for the IPO.

While Li Auto applied for an IPO early this year, the company received approval from regulators recently and priced its IPO at $11.5 per share, a little over their targeted range of $8 to $10. This indicates that Li Auto’s market value when fully diluted would stand at $10 billion.

Li’s listing was greeted with considerable enthusiasm, as shares quickly soared to $17.50, and is trading north of $16 at the time of writing.

The startup also raised an additional $380 million through a concurrent private placement of shares to existing investors, according to TechCrunch.

This is the second Chinese EV startup to list on Nasdaq after Nio’s 2018 IPO, and Xpeng, which recently raised $500 million, will be next, according to reports by TechCrunch and The Verge.

Electric vehicles have been gaining traction over the last few years as awareness of sustainable and eco-friendly options grows. With Tesla becoming the most valuable automaker in the world, with a valuation of $208 billion, investors are newly interested in funding EV startups.

Li Auto’s first angel investor Mingmin Huang, Founding Partner at Future Capital Discovery Fund, said that Li Auto differentiates itself from other EV makers by focusing on developing extended-range electric vehicles (EREVs) rather than pure electric models, and manufacturing its own cars, unlike its rival Nio.

Li Auto’s models are equipped with two electric motors, one of the front axle and another on the rear, which are in turn powered by a 40.5kWh battery pack, a 1.2 litre turbocharged engine paired to a 45-litre fuel tank (about 12 gallons) and a 100kW electric generator, which can provide power to the battery pack in real time.

This allows the vehicles to be driven for about 180 km on battery power, but offers a total range of 800 km using the combustion engine.

Li Auto’s first model, called Li One, a six-seat hybrid EV SUV, which began shipping last year, was sold for approximately $46,800. The 5-year old Beijing-based startup is targeting the growing environmentally-conscious and tech-savvy Chinese middle class.

According to Li Auto’s prospectus, the startup has delivered over 10,000 of its first model as of June 30, 2020. Li Auto is looking to sell hybrid SUVs ranging between $21,000 and $70,000 in the future.

“Pure battery electric vehicles face structural challenges currently with limited battery capacity such as charging infrastructure, consumer habits etc. Li Auto dared to blaze a different trail and became the first in China to successfully commercialize EREVs, solving for these challenges,” Huang wrote in a press release celebrating Li Auto’s IPO.

“I would like to thank product managers who, like Li Auto’s team, are bold enough to be different. It is through their unwavering dedication to their products that our lives are made better,” he added.

Huang believes that Li Auto’s range extension solution will accelerate the adoption of electric vehicles in the world’s most populous country, paving the way for a greener world, a reinvention of how we think about mobility, and an altogether different future cityscape.

Li Auto’s top priority is to lead in autonomous driving technologies and to contribute to building an ecosystem for EVs that would propel the future of e-mobility, said Huang.

“Advancements in smart EV will alter the course of human mobility. Some of the most innovative, trillion-dollar-companies of the future will be technology companies in this field – which is why I made my bet early with Li Auto,” he added.

Header image courtesy of First Capital