LeEco raises $1.08b in funding for electric car hoping to compete with Tesla
Chief executive Jia Yueting claims funding is largest ever in automotive industry
LeEco’s automobile unit has raised over US$1 billion worth of funding as the company seeks to put its electric cars on the road within three years.
LeEco chief executive Jia Yueting claimed the financing round of US$1.08 billion for its LeSee “super car” was the largest in the automobile industry.
Investors include Legend Holdings, Shenzhen Capital Group, State Grid Yingda Group, China Minsheng Trust and Macrolink Group, but individual amounts were not disclosed.
“We are bullish on the autonomous driving and electric vehicle industry – it will be the next big thing in China,” said Liu Gang, Shenzhen Capital Group’s general manager for northern China.
“LeEco’s LeSee car will see innovation within an ecosystem, with a revolutionary business model, technology, branding and capital operation. The company is leading the way down this path,” he added.
Liu said that he is optimistic about LeSee as LeEco’s television and smartphone business is proof that the company is able to quickly find success in new ventures.
The funding follows an announcement in August that LeEco plans to invest 12 billion yuan in an electric car factory in Zhejiang province’s Deqing county, which is slated to be producing 400,000 electric cars annually by 2018.
Previously known as LeTV, LeEco was first known for its on-demand video streaming platform. The company has since diversified into producing smart TVs and smartphones.
LeEco first unveiled its LeSee concept car in April, with Jia throwing down the gauntlet to Tesla by declaring the vehicle will be a high-end, connected, autonomous electric vehicle.
But some analysts view LeEco’s ambitious plan for the LeSee to rival Tesla as a long shot.
“LeEco is very good at raising funds. While US$1 billion is not a small sum, it is still not enough to get LeSee off the ground. At the moment it’s still a concept car,” said Zhang Yu, managing director of Automotive Foresight.
Zhang said that the positioning of LeSee as a high-end vehicle poses a problem for the company, since Chinese consumers are very brand-sensitive when it comes to buying a luxury vehicle.
“Luxury buyers in China are extremely picky, because cars are an indicator of social status. LeSee has no reputation in the luxury car market,” Zhang said.
“On the other hand, Tesla is still able to sell vehicles in China because it is associated with Elon Musk, a celebrated figure in the technology world.”
“LeEco smartphones are sold for only one or two thousand yuan. Its branding is completely different. Unless the LeSee is positioned as a mainstream vehicle with a price tag of about 100,000 yuan, it would be very difficult for the company to break into the luxury automobile market,” he added.
However, Neil Wang, partner managing director of Frost and Sullivan in China, said that LeEco’s dream of building its LeSee super car is attractive to investors because of the steps it had taken to build its ecosystem. “LeEco’s partnership with Faraday Future and … establishment of a production base makes its ambition more convincing,” said Wang. “Though LeEco is silent on more details such as pricing, its positioning as an autonomous electric vehicle leader has been clear and yielded impressive results.”
Jia announced LeSee’s latest financing round during the company’s own September 19 shopping festival gala. LeEco said it booked about 4.48 billion yuan in sales during the day, around 10 per cent higher than the target previously set by the management.
Dubbed EPIC 919, the sale was held simultaneously in China, India and the US, offering discounts and offers in partnership with companies like Uber and MakeMyTrip.
“The upbeat sales still fall within a reasonable range,” said KGI Securities analyst Richard Ko, who has an “outperform” rating on the stock.
“What makes its shopping event different is that the products put on sale are mostly its own high-tech gadgets such as its Super TV and Superphones, while LeEco can make use of the sales campaign to boost the brand name of its own products.”
Ko added LeEco’s decision to extend the shopping extravaganza by another 12 hours was on back of the stellar sales results it had managed on September 19.
“They are ‘making hay while the sun shines’,” he said.