We've seen some impressive moves of late from the Chinese electric vehicle market, as exemplified by companies like Li Auto (NASDAQ:LI), Nio (NYSE:NIO) and Xpeng (NYSE:XPEV). While these three are coming under some stiff competition from a range of other electric vehicle makers, there are new signs of life coming out of the trio, and a big move is ahead for them that may represent some significant new capital to work with.
One Big Fundraising Move
The move-in question is to the Hong Kong stock index. All three companies—Li Auto, Nio and Xpeng—are planning to list themselves on the Hong Kong exchanges, in a move that may happen as early as “later this year.”
At stake, reports note, is a combined total of around $5 billion in new investment for the three companies, as they put at least 5% of their enlarged share capital in Hong Kong's hands for resale. While each of the companies is currently available for trade on US exchanges, this would mark the first move into the Asian investment market, which has been steadily growing for some time, reports note. So far, the three firms have raised a combined total of $14.7 billion with US investors over the last three years, and the plans to also be listed with the Hong Kong markets have generated fresh interest as well.
Such a move would allow the three Chinese electric vehicle makers to take advantage of growing capital availability at a pivotal time for electric vehicles; new reports suggest that the Chinese market for such vehicles is poised to increase around 40% from this time last year, reaching 1.8 million total vehicles sold.
Three Companies With a Lot in Common
Looking at all three companies, meanwhile, reveals one important thread, based on our latest research: all three are currently considered a “buy” by the broader analyst pool.
Nio is showing itself to be a clear buy with increasingly bullish sentiment from the analyst pool. The company was actually rated as a “hold” as recently as a month ago, until just weeks ago when it officially crossed the Rubicon to “buy”. That's thanks to a consensus rating made up of seven “hold” and nine “buy”, which it held last month, but an additional “sell” rating—no longer present as of today—made the company just a “hold.”
Xpeng, meanwhile, has been ranked a “buy” for the last three months, and though a slip in sentiment showed up a month ago, recovery has been on hand ever since. Three months ago, the company had one “hold” and four “buy” ratings. A month ago, things slipped substantially toward bearish as the company had one “sell” rating for the first time, along with two “hold” and six “buy” ratings. Today, it currently has two “hold” and seven “buy”, which makes it nearly as strong a buy as it was three months ago.
Finally, Li Auto has been a “buy” for the last six months, even if sentiment has slipped a bit toward bearish. Six months ago, the company had one “hold” rating, along with two “buy” and one “strong buy”. Three months later, it doubled its “buy” rating to four and left everything else stable. A month ago was the company's low point, with three “hold”, seven “buy” and one “strong buy”. Today, however, the company stands at two “hold”, eight “buy” and one “strong buy.”
More Money in the Face of More Problems
It's hard not to regard the move to the Hong Kong stock exchange as anything but a good plan. Sure, it has a few downsides to it, like the potential issue of share dilution by selling more of it, but that's kind of subsumed by the fact that these shares will be rapidly bought up. Those looking to take profit will likely be able to do so in rapid fashion with a whole new exchange buying in, and undoubtedly, the Hong Kong markets will buy in with haste.
Raising new capital is going to be vital for all three firms going forward; the ongoing challenges represented by firms like Tesla (NASDAQ:TSLA) and the legacy automakers looking to get in on this growing market will require a strong response in order to remain competitive. An extra few billion dollars behind the three of them should go a long way toward making sure they're part of the still-growing electric vehicle market for some time to come.
It's not enough that they merely raise more capital, of course; they're going to have to put that capital to work to design better products and bring them to market. Without some real “killer app” products on the market, the three will likely be overmastered by Tesla's technological edge and the legacy automakers' name recognition and economies of scale. However, $5 billion can buy a lot of advancement, and if these three can generate some positive results with all this new capital, then we may have a serious horse race on our hands in the electric vehicle market.
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