It is hard to say how fast China-made electric cars run, but it is clear their makers are hitting top gear when it comes to powering up with fresh capital — and talent.
Well-known Chinese electric car startup XPeng Motors said on Thursday it has closed its Rmb4 billion ($587 million) series B+ round funding, bringing the four-year-old firm’s value to Rmb25 billion.
The group said the funding round represented the largest single fundraising by a Chinese electric vehicle startup in the year so far. This round was co-led by Primavera Capital Group, Morningside Venture Capital and the carmaker’s chairman and CEO He Xiaopeng, the firm said on its official site.
With the fresh capital, XPeng has raised more than Rmb10 billion from the above-mentioned investors and several others, including Hillhouse Capital Group, K11, and Eastern Bell Venture Capital.
Going forward, the company may seek to accelerate its fundraising pace after raiding the financial sector for a new fundraising chief.
One day before the funding announcement, XPeng said in a separate statement that Bobby Bao, a veteran portfolio manager with 21 years' experience at Fidelity, had joined to take charge of global strategy, investor relations and fundraising.
“I am confident I will make a substantial contribution to XPeng by leveraging the experience and resources I have, and it is an exciting opportunity to step into a trillion-Rmb-size market,” Bao said.
Bao follows in the footsteps of former JP Morgan banker Brian Gu, who became XPeng's vice-chairman and president earlier this year.
NO PROFIT, FINE
Growth in the industry continues to hit a fast and furious pace despite a move by the country's top planning body, the National Development and Reform Commission, to issue stricter regulations in mid-June. The move was intended to cool the disorderly development of this red-hot sector and direct the market towards healthier competition.
While the industry is flourishing, investors are a long way from finding a return on their money as a wide range of companies pour billions into research, development and manufacturing. Multiple cases prove that the poor cash flow performance of Chinese electric car startups is not scaring investors off.
Last week, another mainland electric vehicle player Dearcc, which has so far sold just 1,000 cars at about Rmb140,000 per unit, announced its Rmb2 billion pre-A round, taking its total fundraising to Rmb2.5 billion.
Such is the heat that startups can raise big money without even having built a car, never mind selling any.
XPeng’s CEO He said in the statement that delivery of the brand’s first model – the XPeng G3 – will start at the end of this year.
True, Tesla also attracted a considerable amount of capital between its establishment in 2003 and June 2009 when it achieved 500-volume delivery of its first model, the Roadster. According to Crunchbase, Elon Musk had sold his electric car story very successfully, raising more than $740 million during that period.
So how much has XPeng managed to raise? At Rmb10 billion, it is approximately $1.5 billion.
Nevertheless, players seem certain of the industry's future.
“Given the market force and government push together, I see the industry about to take off this year,” XPeng's Gu said at the Hong Kong Venture Capital Association’s China Private Equity Summit in early June.
TECH TALENT OBSESSION
A fast-growing market with too many pure yield-chasing venture capitalists wandering around could be a dangerously frothy one. But one point in XPeng's favour is that it has brought in some of the gurus of China's tech scene as investors.
Its CEO, He, is himself a former high-profile executive who worked for companies such as Alibaba and famous Chinese video-sharing website Tudou.com.
Other backers include Yao Jinbo, founder of New York-listed 58.com, Zhang Tao, founder of e-commerce giant Meituan-Dianping, and Rick Dai, CEO of job site Liepin, which recently listed in Hong Kong.
“We believe in XPeng’s capability to combine its strong internet credentials with innovative auto-making ideas,” said Richard Liu, co-founder of Morningside.
Fred Hu, a partner at Primavera, considers XPeng to be “the most promising rising star” in China’s electric vehicle field.
“More broadly, disruptive technical innovations in the internet area and other sectors like artificial intelligence are reshaping the automotive ecosystem,” Hu said.
