BEIJING – Chinese automakers Nio, Xpeng Motors and Li Auto together raised around $ 12.5 billion in the US market in 2020, benefiting from growing investor interest in electric cars sparked by the recent surge in shares of You’re here.
The Chinese electric vehicle market is approaching a major crossroads as a key government grant expires after 2022 and new players rush for a piece of the pie. All three companies are eager to take funds raised in the United States to expand their sales channels and earn profits to survive this change.
Nio, which was founded in 2014 and counts internet services company Tencent Holdings among its investors, raised $ 3 billion this month through new share offerings. Overall, the automaker has secured $ 6 billion in new funds this year, including government investments.
Nio is known to produce the ES6 electric sport utility vehicle, which starts at 358,000 yuan ($ 54,700). Despite being priced higher than the popular Tesla Model 3, the ES6 won new fans through word of mouth.
“A lot of families are looking for a second vehicle, or young customers who like high-tech products,” said a Guangzhou dealer who sold his SUV.
Nio sold around 37,000 vehicles in total in the first 11 months of 2020, up 110% from the same period in 2019. Although the company remains far behind Tesla, it ranks seventh in the Chinese car market. electric vehicles for passengers.
“Our cars are better than similarly priced gasoline vehicles,” CEO Li Bin said at an event in Beijing this month.
But the company still hasn’t made a profit. Nio faces high fixed costs, in part because it maintains an annual capacity of 200,000 vehicles. The Chinese Guosen Securities estimates that the automaker must increase its sales to 180,000 units per year to reach the breakeven point.
The automaker’s stock offering in December will fund “research and development of new products and next generations of autonomous driving technologies” as well as “expansion of the sales and service network,” the company said. .
Nio is also aiming to expand its battery swap service, in which customers swap used batteries for new ones instead of waiting for them to recharge, to 1,000 out of around 140 locations currently. It would cost around $ 480,000 to build each site.
Expanding Nio’s range beyond its three current models is another priority.
“He will lose customers unless he can keep offering something new,” said Tang Jin of Mizuho Bank.
The Chinese electric vehicle market can be broadly divided into a luxury sector targeting retail customers and a budget sector aimed at ridesharing operators and other businesses. Nio focuses on the former, as do compatriots like Xpeng and Li.
Although Li currently only produces one plug-in hybrid model, it develops electric cars and is treated as an electric vehicle manufacturer in the industry. The company went public in the United States in July, followed by Xpeng in August. Both have since raised billions in the stock market, although they only offer a handful of models and make no profit.
Their fundraising boon is part of a larger surge in EV actions. Tesla shares jumped more than 600% in 2020, and the company joined the S&P 500 index on Monday. Nio has also climbed exponentially this year.
About 1.12 million new electric vehicles, fuel cell vehicles and plug-in hybrids were sold in China from January to November. The figure was roughly stable for the year despite the coronavirus pandemic, and November sales doubled from a year earlier. The country hopes to increase purchases of electric cars by promoting rural sales and prioritizing license plates for electric vehicles.
The competition is growing. Foreign players like Volkswagen and Toyota Motor are planning to gain a foothold in China, while non-auto companies like real estate developer Evergrande Group are also seeking market share.
China also intends to eliminate subsidies for purchases of electric vehicles at the end of 2022. Subsidies already do not apply to Nio vehicles, because their price is over 300,000 yuan, but the electric vehicles as a whole could run out of steam in the end.
“Competition between EV startups and established automakers will intensify,” said one analyst. “Startups face a test of how quickly they can strengthen their sales framework.”
Firms like Nio could also be affected by growing Sino-U.S. Tensions, as Washington prepares to tighten requirements for Chinese companies listed in the U.S.