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Jon LeSage

Jon LeSage

Jon LeSage is a California-based journalist covering clean vehicles, alternative energy, and economic and regulatory trends shaping the automotive, transportation, and mobility sectors.

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Alibaba, UAE-Backed Tesla Competitor Set To IPO In The U.S.

Chinese electric carmakers continue savoring becoming Tesla-competitive in their home market — while keeping the door open to Tesla’s home court and stock market success. Chinese electric car start-up Xpeng Motors has filed for an IPO on the New York Stock Exchange. That comes after raising $400 million from Chinese media giant Alibaba, the Qatar Investment Authority, and Abu Dhabi sovereign wealth fund Mubadala. 

While Covid-19 continues, Xpeng sees the time being right with Tesla's stock still soaring and more competition in China coming from Li Auto (which last month listed in the US), WM Motor, and Nio.

Xpeng Motors, also known as XMotors.ai, said in the Securities and Exchange Commission (SEC) filing that it would sell 429,846,136 class B ordinary shares. The automaker, which has its headquarters in Guangzhou, China, and offices in Mountain View, Calif., said that it plans to raise a placeholder amount of $100 million, a figure that typically increases during a successful IPO.

The XMotors.ai brand name comes from its presence in Silicon Valley at the Mountain View location. The Chinese company wants to surge forward in the EV market and another Tesla-competitive segment — autonomous vehicles. The company gained a test permit from the state of California to conduct trial runs of its AV technology. 

Xpeng becomes the third Chinese EV-maker to go public on the US stock market. Li Auto went public on Nasdaq at the end of July and is backed by China's largest consumer services app, Meituan, as well as by Beijing Bytedance, which owns the wildly popular short-video app TikTok.

NIO raised $1.3 billion when it went public on the New York Stock Exchange in September 2018. Its models, such as the ES8 and ES6, are doing quite well in China, and the company is still waiting to enter overseas markets like the US.

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Being Tesla-competitive also rises to a new level as the US automaker sold 50,313 electric vehicles in China during the first six months of 2020, a 130 percent jump from a year earlier. Tesla started delivering cars made in its Shanghai factory in January, and has seen its Model 3 take off in popularity.

That’s had much impact on Tesla’s previous main global competitor, Berkshire Hathaway-backed BYD. The Chinese EV maker had been Tesla’s biggest global competitor, but BYD saw its global EV share drop when its home market pummeled into a downward spiral starting in 2017. This year, BYD came in fourth place in the first six months of global EV sales with Tesla way ahead of the pack — and Volkswagen and BMW ahead of BYD and another Chinese major automaker, SAIC. 

The US-China trade war continues, but Tesla has found its way around it with its presence in China being taken more seriously by consumers this year. Chinese EV makers are well aware of it, and are thrilled to see their home market coming back even during Covid-19. They’re also being given a very good reason by Tesla share performance to enter the US stock market and Tesla's home market competitive space. 

Xpeng, which was founded in 2015, has been distinguishing itself from competitors by talking up its investment in software — some of which can be used by autonomous vehicles companies. The company has a feature called XPILOT which gives cars some semi-autonomous driving features like automated parking. Xpeng has started selling it as a direct competitor to Tesla’s Autopilot feature. 

Like Tesla, Xpeng is learning the difficult lessons of making it in the car business — and that includes creating attractive P&L sheets. Losses continue, though the company did report that net loss for the first six months of 2020 came down to 795.8 million yuan ($114.4 million) from 1.92 billion yuan ($276.1 million) net loss during the first half of 2019.

Tesla has been cutting prices this year to recover from the pandemic and economic turmoil, with the Model S and Model X both seeing $5,000 price cuts in North America for the entry-level Long Range versions. The company’s more expensive Performance variations have also seen a $5,000 cut and the Model 3 being given a $2,000 price reduction across all its versions. 

The U.S. automaker is also cutting prices for the Model S and Model X vehicles sold in China. The Model 3 is staying at the same level, perhaps tapping into being more cost competitive and now domestically produced for that market. 

Chinese consumers tend to be quite open to buying pricier cars, but that market dynamic started softening during the overall auto market decline long before Covid-19 started showing its first signs in December 2019. Tesla, Xpeng, and competitors, are staying hopeful that the hip, expensive, high performance car-buying trend will come back in the near future.

By Jon LeSage for Oilprice.com

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