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China’s Tesla wannabes will drive closer to home

Hong Kong’s bourse is revving up to join the electric-vehicle race. China’s Tesla wannabes have so far favoured New York to charge up on capital. Now three of them – Nio, Li Auto, and Xpeng- may drive closer to home to raise some $6.1 billion between them, Reuters reports. That could prompt others to follow.

Nio is now worth $70 billion, 10 times its market value at the time of its 2018 initial public offering on the New York Stock Exchange. The company run by William Li, along with Li Auto and Xpeng, which listed in 2020, have rustled up close to a total of $15 billion in U.S. markets over the past three years.

Hong Kong is uncharted territory for electric-vehicle upstarts. Its investors are more familiar with legacy automakers such as Brilliance China Automotive and Great Wall Motor than the brave new world of batteries and chargers. The closest thing to Nio and its peers is electric-car and battery maker BYD, a more mature marque which entered the auto business in 2003, or property conglomerate Evergrande’s experimental investments in the sector.

That could change. Last year, nine U.S.-listed Chinese companies used the city’s bourse to raise close to $17 billion, according to KPMG. More are coming: Baidu raised over $3 billion in a secondary listing on Wednesday, the same day video-sharing site Bilibili launched an issue for a similar amount. This suggests the market could easily supply Nio, Li Auto and Xpeng’s needs. And there’s plenty of demand for cash. Battery-power entrepreneurs have been speeding into global markets via initial public offerings and blank-cheque companies, and may soon be joined by traditional automakers spinning off their own electric-vehicle units.

Geely Automobile could be one of them. The Chinese carmaker and owner of Volvo will soon separate its battery-powered brands from its legacy business, sources told Reuters this month. The move could set the scene for a new listing, according to analysts. Electric vehicles currently account for some 5% of the overall company’s car sales, which would value the unit at around $20 billion on an historical price-to-revenue multiple similar to Nio’s.

If a triple whammy of electric-car startups can power up successfully in Hong Kong, plenty more companies will queue up to plug in. Read More

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