Explainer | As Tesla, NIO, Xpeng and BYD battle for dominance in China, which electric car maker has the slickest fundraising machine?
- Xpeng and NIO have been the most active Chinese electric car companies in equity and debt capital markets since the stock rally started
- The top 5 most prolific EV fundraisers have amassed about US$21 billion of fresh capital since January 2020
Electric car companies’ dash for cash will continue through the Year of the Ox as the capital-intensive industry ploughs billions of dollars into new models and builds infrastructure across the world’s largest car market, China.
All of them need well-oiled fundraising machines to source capital for developing cars with longer driving ranges per charge while maintaining spotless safety records. Companies will also have to spend heavily on rolling out charging stations and marketing their models to China’s 1.4 billion consumers.
2020 was a golden opportunity for EV companies to fill their coffers as their share prices surged. We calculate which company was most nimble in reacting to the sector’s changing fortunes since January 2020 by capitalising most on investors’ desire to participate in the industry’s growth.
To be sure, companies can tap into a wide variety of the sources of capital, including internal resources, government funds as well as external investors. Start-ups are competing against state-owned behemoths that do not need to tap capital markets.
Governments are lending their support to the EV industry in the form of subsidies in a bid to cut pollution from exhaust pipes. Beijing wants one in every five new cars hitting the country’s roads to be either purely electric, hybrid or fuel-cell powered by 2025, which could amount to 4 million units. EV makers such as WM Motor and Xpeng have won backing from government and state-owned enterprises to expand production.
Funding the switch to EVs has only just begun, cautioned analysts. Complete electrification of the industry would cost over US$2.5 trillion of investment, said Bank of America stock analysts in a research report. The next gear up, fully autonomous vehicles, would entail further investment.
The window of opportunity since January 2020 has given the more established players in the sector the chance to put more road between themselves and new entrants who have not yet listed such as Leapmotor and Aiways. It helps them retain talent, build factories and install manufacturing equipment.
Public markets investors leapt on the bandwagon as they looked to upgrade their portfolios in terms of environmental, social, and corporate governance (ESG) factors. Tesla’s stock is nearly nine times higher than where it was trading at the start of 2020.
Given the current market exuberance, leading players could arguably raise more capital than they could productively use given the exuberance in markets. With that in mind, we also examine the major EV players’ long-term capital-raising records based on data from Refinitiv, Bloomberg and company sources as well as their key use of proceeds.
NO 5: LI AUTO
2020 to date: US$2.46 billion
Total funds raised: US$3.16 billion
Li Auto, founded by serial entrepreneur Xiang Li, is the first company in China to commercialise what is known as extended-range technology for EVs, which helps solve the problem of a lack of charging infrastructure in China and limited battery power. If the car’s battery runs down then a combustion engine kicks in.
Li Auto has no debt outstanding, according to Refinitiv and Bloomberg databases.
NO 4: TESLA
2020 to date: US$3.1 billion
Total funds raised: US$20 billion
Founded in 2003, Tesla is a fundraising machine, having tapped external investors for roughly US$20 billion, according to publicly available records.
The Palo Alto-based company made its Nasdaq debut on June 29, 2010, raising US$260 million. Now the world’s most valuable carmaker, Tesla was trading at US$816 a share as of mid February, 48 times its IPO price of $17 a share. Propelled by the surge in Tesla’s share price, CEO and early investor Elon Musk, is now one of the world’s richest men.
Tesla began construction of its Gigafactory in Shanghai, its first factory outside the US, in January 2019 and its swish models have become a smash hit in the Middle Kingdom. Its Model 3 was the bestselling EV in China last year, beating state-owned SIAC Motor’s Wuling HongGuang Mini EV into second place. In 2020, Tesla generated 21 per cent of its sales from China, its second-largest market after the US.
On January 1, Tesla launched its second Shanghai-made EV – Model Y, which is likely to boost sales this year.
NO 3: BYD
2020 to date: US$4 billion
Total funds raised: US$11.3 billion
Unlike Tesla, and the Chinese NEVs, BYD was an established fossil-fuel vehicle company before switching to electric power.
Founded in 1995, BYD said it sold the stocks to accelerate its replacement of vehicles powered by petrol or diesel with new energy vehicles and smart cars.
BYD is the world’s third-largest carmaker by market value, behind only Tesla and Toyota and makes EV models under the bands of Qin, Song, Han and Tang. It is also the world’s biggest manufacturer of electric buses.
The company started as a manufacturer of rechargeable batteries. In total it has raised US$7.9 billion from equities investors and US$3.4 billion from debt markets, according to Refinitiv data.
NO 2: XPENG
2020 to date: US$5.1 billion
Total funds raised: US$7.7 billion
Xpeng has overtaken BYD to slide into second place in our rankings of EV makers’ ability to capitalise on investors’ fascination with the budding industry. The Guangzhou company has raised a grand total of US$5.1 billion since the start of 2020 and its American depositary shares have jumped to US$43.41 as of mid February, nearly triple its IPO price of US$15 each.
The company is ploughing the funds into research and development, with its third model slated for official launch and delivery this year. It delivered 27,041 vehicles last year.
Xpeng completed its Series C+ round of fundraising in August, collecting a total of US$900 million from investors including Alibaba Group Holding, the owner of the Post, Qatar Investment Authority and Xiaomi. From Series A through C fundraising rounds between 2016 and 2019 it accumulated roughly US$2.64 billion, according to Crunchbase. Xpeng has no bonds outstanding according to Refinitiv and Bloomberg databases.
NO 1: NIO
2020 to date: US$6.11 billion
Total funds raised: US$9.6 billion
Since listing, NIO has raised a mixture of equity, bonds and loans, creating one of the more diversified capital structures among Chinese-headquartered EVs. NIO named Jade Wei as its capital markets point person in 2018, according to LinkedIn.
Before its IPO, NIO collected US$1.409 billion from Series A through D fundraising rounds, according to Crunchbase. Pre-IPO investors included internet behemoth Tencent Holdings and Edinburgh-based investment manager Baillie Gifford.
Additional reporting by Daniel Ren
