High-end new energy vehicle brands from China’s legacy automakers reveal new financing efforts

In the past several years, legacy automakers in China followed one another in building new high-end electric vehicle brand as the segment is seeing substantial growth in the biggest automotive market in the world and new startups are springing up to seize more market share in intelligent electric vehicle era.

And now, the new brands seem to accelerate their progress. Within only one month, four high-end new energy vehicle brands from China’s legacy automakers revealed new financing efforts.

Photo credit: GAC AION

On July 18, GAC AION announced the commencement of new-round capital increase. On the first day of August, IM Motors, backed by SAIC Motor, said it had signed the Series A equity financing agreement, with its valuation surging to RMB 30 billion. One day later, AVATR Technology, supported by Changan Automobile, CATL, and Huawei, announced the completion of its Series A financing round. And also on August 2nd, VOYAH from Dongfeng disclosed its first capital increase project for external investors.

One reason for new financing plans is that even though the new brands are backed by traditional automaker giants, the intelligent electric vehicle business needs long-term and continuous investment, making it hard for just those established automakers, which also have numerous units to fund, to pour money incessantly.

Those four emerging brands themselves are also not generating profit currently even though they all have vehicles on the market. Comparatively speaking, AION from GAC Group has achieved certain production and sales scale. With five models for sale, namely the AION Y, the AION S PLUS, the AION S, the AION V PLUS and the AION LX PLUS, the brand delivered 25,033 vehicles in July 2022, far more than the respective deliveries of local startups, such as XPeng, NIO and Li Auto. In the first seven months of 2022, its deliveries more than doubled year on year to 125,284 units.

In spite of the growing delivery performance, AION hasn’t been able to achieve turnaround. Its annual net loss was RMB621 million in 2019, RMB688 million in 2020 and RMB1.389 billion in 2021. Last month, Zeng Qinghong, chairman of GAC Group, said that all new energy vehicle manufacturers, except Tesla, haven’t broken even.

Photo credit: VOYAH

Apart from GAC AION, IM Motors and VOYAH are slow to expand production and sales scale. Data from SAIC Motor showed that, by the end of July, IM Motors, which has only one model for sale currently, had delivered 1,051 IM L7s since the model’s delivery started. VOYAH delivered 1,793 vehicles in July, including the VOYAH Free and the VOYAH Dreamer.

Photo credit: AVATR

The AVATR 11 just hit the market earlier this month with a price range from RMB349,000 and RMB409,000. Deliveries of the long-range versions of the new model will begin in December while the ultra-long-range version is expected to start delivery from the first quarter of next year. Apparently, the above brands have a long way to go before they become profitable.

What’s more, in the past two years, surging raw material price and automotive chip supply shortage also squeezed automakers’ profit and dented vehicle production, slowing down the development of progress of new automaking brands.

Photo credit: IM Motors 

Apart from alleviating capital pressure of the established automakers behind those brands, introduction of external fund before the initial public offering can also help boost market value. For example, the market valuation of IM Motors was up to RMB 30 billion after its first funding round.

Besides, fund raising means more than new investment. “We can find strategic partners in intelligent electric vehicle segment, the entire industry chain and ecosystem via capital market,” An Conghui, CEO of Geely’s ZEEKR brand said after the brand’s 500-million Pre-A round, which listed Intel Capital Corporation, CATL, Cathay Fortune Corporation, Bilibili, and Boyu Capital as new investors. After the round, ZEEKR obtained a market value of RMB8.928 billion.

Meanwhile, An Conghui also pointed out that the purpose for gaining support from capital market is to be more powerful in the industry, but efforts in capital market don’t mean ZEEKR will rely entirely on capital market to realize development.

Promising new energy vehicle market will drive those brands to go fast. According to the China Passenger Car Association, the retail sales of locally-made new energy passenger vehicles (NEPV) totaled 2.733 million units in the first seven months of this year, surging 121.5% from a year ago. And the strong momentum in June and July suggested that market demand exceeds supply.

The association noted that, if the industry can continue to improve its supply ability, the average monthly sales of NEPVs can be up to 600,000 vehicles in the rest five months of 2022. Thus the association raised the segment’s sales outlook for this year by 500,000 to 6 million units. In such a segment with great potential, all players will certainly step up efforts. We will wait and see who will stand out.