Nio's China rival offers family-friendlier ride

[HONG KONG] Nio's local rial wants to sell shareholders a family-friendly ride. The Chinese maker of electric-sports utility vehicles (SUV) has filed for an US initial public offering, aiming to raise up to US$1 billion, according to Refinitiv publication IFR. The company is losing money, but fundamentals make it a safer, less sporty, play than Nio.

Founder Li Xiang is moving quickly to capitalise on investors' craving for electric vehicles (EV) shares, which has come a bit unhinged of late. Shares of Nio and its rival Tesla, both focused on the luxury segment, have rocketed up over 200 per cent year to date. The question is whether Li Auto, which has concentrated on sport utility vehicles instead of sports cars and sedans, will be able to inspire similar enthusiasm.

The share rally has occurred even though Chinese EV demand remains weak. Sales of new energy vehicles in China slid over 37 per cent in the first half from the same period last year, and little government help is on the way. Beijing in April pledged to cut EV subsidies by 10 per cent this year and on a staggered basis henceforth.

The five year-old company, backed by delivery giant Meituan Dianping, has been rapidly burning cash. Fortunately it finally got its Li ONE hybrid on the road in December, and delivered some 10,400 units by June. That's approximately half the pace of Nio's sales, but far better than rivals like Byton. Net losses, at nearly US$11 million in the first quarter, are much smaller compared to Nio's loss of US$239 million over the same period, while its gross margin is 8 per cent, compared to Nio's minus 7.4 per cent.

The company claims the production cost of its models, which use a small internal engine for recharging only, is closer to that of conventional cars, and much lower than pure electric vehicles which require expensive high-capacity batteries. The hybrid design, also used by manufacturers like Nissan, allows cars to recharge without plugging in, so drivers are not constrained by the limited distribution of charging stations. Finally, SUVs are extremely popular in China. The cars might not be as sexy as Nio and Tesla's designs, but they might be better buys nevertheless.

Chinese electric-vehicle maker Li Auto filed on July 10 for a US initial public offering (IPO). Goldman Sachs, Morgan Stanley, UBS and CICC are the underwriters for the IPO.

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The company could raise up to US$1 billion, Refinitiv publication IFR reported on July 13, citing sources close to the deal.

Li Auto reported a net loss of 2.4 billion yuan (S$473.9 million) in 2019, compared with a net loss of 1.5 billion yuan in 2018. Revenue totalled 284 million yuan in 2019.

The company delivered 10,473 of its model Li ONE vehicle as at June 30, including 6,604 in the three months to June.

REUTERS