Chinese Tesla Rival Xpeng Motors Bags US$1.5B In U.S. IPO

Xpeng Motors is the third Chinese EV maker to list in the U.S. after Li Auto earlier this month and Nio in 2018

Relations between U.S. and China have been souring due to rising political tension, and threats from the U.S. government to delist Chinese companies that do not meet U.S. accounting standards, fuelled by scandals and fraud by Chinese companies like Luckin Coffee and Kingold Jewellery, who were delisted from Nasdaq this year.

However, Chinese companies have been undeterred in their ambition of U.S. IPOs, with Tesla’s Chinese counterpart Xpeng Motors, being the latest Chinese company to debut on the New York Stock Exchange on Thursday under the ticker XPEV.

Supported by surging investor demand, Xpeng amassed a total of $1.5 billion from its IPO, higher than the initial target of $1.11 billion, while its stock prices soared almost 40%, closing at $21 per share yesterday, according to a report by CNN.

Xpeng also left behind Chinese hybrid EV maker Li Auto, which raised $1.1 billion in its Nasdaq IPO earlier this month.

The startup’s Initial Public Offering (IPO) received heavy interest from investors, causing Xpeng to sell 99.73 million American Depository Shares (ADS) at an offer price of $15, much more than the previously planned sale of 85 million ADS with initial price between $11 and $13, according to a press statement released yesterday.

Credit Suisse Securities (USA) LLC, J.P. Morgan Securities LLC, and BofA Securities, Inc. acted as joint underwriters for the offering, the statement said.

According to the press statement, the public offering includes a greenshoe option, whereby the underwriters are eligible to purchase an additional 14.95 million ADS in the next 30 days, which could raise another $224.4 million for Xpeng.

The Alibaba and Foxconn-backed startup had raised $400 million in its Series C funding round in November last year, and completed its remaining Series C tranches earlier this month with $900 million from renowned investors including Alibaba, Aspex, Coatue, Hillhouse, Sequoia China, QIA and Mubadala.

The startup was valued at $3.6 billion in 2018, and is currently valued at over $11 billion, according to a report by Reuters.

Founded in 2015, the Tesla rival designs, develops, manufactures, and markets Smart Electric Vehicles (EVs) to the large and growing base of technology-savvy middle-class consumers in China.

Xpeng claims that its technology is at par with Tesla’s, but the Chinese startup’s latest model, the P7, is sold at almost $50,000 less than Tesla models in China, making it more affordable for the huge middle class population in the country.

Xpeng will use the fresh funds for research and development, and sales expansion, and continue developing affordable smart EVs, priced between $21,000 and $45,000 approximately, Xpeng CEO He Xiaopeng told Reuters.

The startup launched its first vehicle, the G3 compact SUV, in December 2018, and launched its second EV model, the P7 sports sedan in April 2020 amid the pandemic, after testing it on U.S. roads in March.

The startup has also secured a production license for its self-built fully-owned factory in Zhaoqing, Guangdong Province in May 2020, the company had previously said.

Xpeng, which was inspired by Tesla, aims to become the leading smart EV player in China, and is working on its own advanced autonomous driving system called “XPilot” that will offer hands-free driving.

As consumers become environmentally conscious and look for cleaner alternatives, there is a need for EVs that are affordable for mid-income consumers. EV makers have been enjoying increasing interest after strong stock prices of Tesla surged, and Nio’s share prices increased by almost 50% in the last month.

Li Auto’s stock has climbed 61% since its IPO in 2018, more than tripling its valuation prior to the listing, according to a report by Bloomberg Quint.

China’s EV market was projected to grow at 28% CAGR from around $74 billion in 2018, to $330 billion by 2024. However, the global pandemic has hit the sector hard with sales of new energy vehicles declining by 33.1% year-on-year, according to the China Association of Automobile Manufacturers.

However, sales have been creeping up every month as the Chinese economy is slowly showing signs of recovering from the pandemic.

Moreover, the Chinese government, in hopes of stimulating the EV market, introduced new policies and extended its new energy vehicle subsidies and tax break policies that were set to expire this year, to 2022, further encouraging new energy vehicles.

Header image courtesy of Xpeng Motors

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