China’s electric car start-ups turn to private equity, venture capital for funds as they are turned away from Shanghai’s Star Market

China’s cash-hungry electric vehicle (EV) start-ups, are actively looking to private equity and venture capital for funding, as they seek alternative financing sources in the face of tougher thresholds for initial public offerings (IPOs) on Shanghais Star Market.

Evergrande New Energy Vehicle Group, Geely Automobile and WM Motor Technology were three of the most recent assemblers of electric cars to be turned away in recent months from Star Market, as the Nasdaq-like market – set up in July 2019 at the order of the Chinese President Xi Jinping – tightened its definition of what passes muster as “technology” and “innovation” to qualify for a Star Market listing.

WM Motor, backed by the largest Chinese company Tencent Hodings, the internet search engine Baidu and China’s largest state-owned carmaker SAIC Motor, halted its Star Market listing in April, even after it completed its pre-listing tutorial programme three months earlier.

Geely, the owner of Volvo Cars and 9.7-per cent shareholder of Daimler, withdrew its listing application in June on Star Market, which would have raised 20 billion yuan (US$3.1 billion) to finance its push to have 10 electric cars in its vehicles portfolio by 2025.

These applicants fell victim to Star Market’s tighter approval procedure, requiring substantial investments in research and development (R&D), as well as products that contain “hard technologies.” Electric carmakers failed to convince the review committee that they possessed core technology that could help them lead the future of mobility. A trio of Chinese EV makers with the best prospects of grabbing market share from Tesla – Li Auto, NIO and Xpeng – are listed in New York and Hong Kong.