Mohit Oberoi
The valuation of Chinese EV (electric vehicle) company Zeekr has surpassed that of peer Xpeng Motors (NYSE: XPEV) after the recent funding round. XPEV was among the worst-performing EV stocks last year after disappointing production and deliveries, especially in the fourth quarter.
Zeekr has raised $750 million from investors including CATL, Mobileye co-founder Amnon Shashua, and China’s state-owned Yuexiu Industrial Fund. The funding round values the company at $13 billion which is ahead of Xpeng Motors’ market cap of just around $8 billion.
Also, XPEV had cash and cash equivalents of $5.64 billion at the end of Q3 2022. If we compare on the basis of enterprise value, Xpeng Motors would look even cheaper as compared to Zeekr.
Looking at 2022 deliveries, Xpeng Motors delivered 120,757 EVs which was less than half of its original guidance of 250,000. Zeekr on the other hand delivered 72,000 vehicles last year and expects to almost double its deliveries to 140,000 in 2023.
Xpeng Motors would likely provide its 2023 delivery guidance during its Q4 2022 earnings call which is scheduled for later this month.
That said, last year, Xpeng Motors faced both demand and supply issues. The company’s cumulative deliveries reached 263,298 at the end of January. At the same time, Li Auto and NIO reported cumulative deliveries hit 272,475 and 298,062 respectively.
Last year, Li Auto outperformed both NIO and Xpeng Motors. It is now the second most valued Chinese EV company after market leader BYD. NIO comes third while Zeekr is at number fourth followed by Xpeng Motors.
Zeekr’s Valuation Surpasses Xpeng Motors
Notably, just about a couple of months ago, Zeekr confidentially filed for a US IPO where it was reportedly targeting a valuation of $10 billion. Vietnam’s Vinfast is also looking to list in the US but the company hasn’t provided the timeline yet.
Vinfast meanwhile reaffirmed the timeline for its US plant and said that it would begin production in 2024. There is a list of some of the upcoming US IPOs.
As for Zeekr, its valuation should be seen in light of the recent rise in EV stocks including Tesla. The Elon Musk company is among the top S&P 500 gainers this year. Last year, Tesla stock slumped 65% and had its worst-ever year.
Cathie Wood of ARK Invest bought the dip in Tesla stock. She expects the stock to rise multi-fold from these levels. Ron Baron also recently said that Tesla stock could reach $1,500 by 2030 which would mean a market cap of around $4.5 trillion.
Xpeng Motors Has Entered Europe, Zeekr to Follow Suit
EV competition is meanwhile heating up globally. Xpeng also recently announced an entry into Europe following NIO’s footsteps. Zeekr is also looking to enter Europe later this year. Europe’s EV penetration levels are ahead of the US but lag that of China.
Meanwhile, as EV companies ramp up production, there are also visible signs of a price war. After Tesla lowered car prices in China, Xpeng Motors also followed suit.
In the US also, Ford lowered Mach-E prices while Lucid Motors is offering a $7,500 “credit” to buyers of select Air sedan models.
Tesla and Ford Say Chinese EV Companies are Tough Competitors
Automakers see Chinese EV companies are worthy competitors and Tesla and Ford have publicly acknowledged the same. During Ford’s Q4 2022 earnings call, following which the stock slumped, the company’s CEO Jim Farley said that Chinese EV companies would eventually enter Europe as well as the US.
He said, “I don’t think you can be globally successful in the EV business if you don’t compete with the Chinese.”
NIO incidentally has been quite open about its plans to enter the US, which is the world’s most profitable automotive market.
Musk also echoed similar views during Tesla’s Q4 2022 earnings call and said that the Chinese market is “most competitive.” He also said, “if I would have guessed, there are probably some company out of China as the most likely to be second to Tesla.”
Meanwhile, after reports of Zeekr’s fundraising at premium valuations, other Chinese EV stocks like NIO and Xpeng Motors are also trading higher in early US price action today.
We’ll next hear from Xpeng Motors during the Q4 2022 earnings call where the company might provide more color on its 2023 plans after a disappointing 2022.
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This article was written for Business 2 Community by Mohit Oberoi.
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