Chery Aims for Hong Kong IPO by 2025
Recently, according to a report by Bloomberg, Chery Holding Group is considering an initial public offering (IPO) for its automotive division, Chery Automobile, in Hong Kong, with a business valuation of about 50 billion yuan (approximately $7.1 billion).
In response to this, a journalist sought confirmation from Chery Holding Group, and the relevant staff member stated that they were not clear about the details regarding Chery Automobile's IPO.
Over the past two decades, there have been multiple reports of Chery Automobile promoting an IPO, but for various reasons, it has not been successful. Previously, Yin Tongyao, the Party Committee Secretary and Chairman of Chery Holding Group, had publicly expressed his hope that Chery Automobile would complete its IPO plan before 2025. "Accessing the capital market is beneficial for Chery to establish a long-term capital replenishment channel and to activate Chery's equity incentive mechanism. Therefore, Chery will strive to go public at the fastest speed when conditions allow."
The reason why Chery Automobile has not been able to successfully go public for a long time, according to Zhang Xiang, Secretary-General of the International Intelligent Transportation Technology Association, is firstly, because in the past few years, the sales volume of Chery Automobile has mainly been contributed by fuel vehicles, while the market is now more willing to invest in the promising new energy vehicles; secondly, Chery Automobile does not yet have an independent new energy brand that has been tested by the market, and such brands are relatively easier to go public independently; finally, the equity structure of Chery Automobile is relatively complex, which is also an important factor affecting its listing.
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Because of this, this year, Chery Holding Group has further shifted its focus and financial resources to its previous shortcomings in new energy. In the first three quarters, the sales volume of Chery's new energy vehicles was 331,788 units, a year-on-year increase of 186.4%, and its major brands have launched new energy models such as Jetour Shanhai T2, Xingjiyuan ET, 2025 Xingjiyuan ES, and Zhiji R7 in a concentrated manner.
The valuation scale is about 50 billion yuan.
According to the official website, Chery Holding Group was established in 1997, starting from the automotive manufacturing industry, and its business now covers automobiles, finance, real estate, services, intelligentization segments, and spare parts, with operations in about 80 countries; the largest shareholder is Wuhu City Construction Investment.
According to Bloomberg, informed sources said that Chery Holding Group is currently looking for banks to handle the potential IPO of Chery Automobile, with a valuation scale of about 50 billion yuan. The relevant deliberations are still ongoing, and the scale of the IPO may still change.
As one of the few domestic car companies that have not yet gone public, Chery Automobile has frequently been reported to be interested in promoting an IPO. At the end of 2023, there was news that IDG Capital was in contact with Chery Holding Group to acquire equity, and Chery Holding Group planned to submit an IPO application as soon as 2024, with Chery Automobile's corresponding market valuation being about 150 billion yuan. At that time, Chery Holding Group did not comment on this news.
Some people believe that Chery Automobile's valuation has shrunk by two-thirds. In response, Zhang Xiang said that now there are many listed car companies, and this track is becoming increasingly crowded. Chery Automobile's new energy vehicles "started early but arrived late," and there is a certain gap compared to car companies such as SAIC, GAC, and Geely. New energy is an important indicator to measure the growth potential of car companies, and now Chery Automobile's sales volume is still dominated by fuel vehicles, which may affect the valuation.Journalists have combed through the information and found that Chery Automobile has been striving for its "listing dream" for 20 years. As early as 2004, Chery Automobile first disclosed plans to go public, but these were immediately denied by Chery officials. Subsequently, in 2006, 2009, and 2012, Chery Automobile was reported to have plans for the company or related investors to go public, but none of these plans came to fruition.
Fast forward to 2016, Chery began to attempt a "circuitous salvation" strategy, planning to have its subsidiary Chery New Energy go public through a reverse merger with Hailuo Profiles. However, because Chery New Energy lacked independent vehicle manufacturing qualifications, the principle of company independence could not be met, and ultimately this plan had to be terminated.
By 2019, Chery initiated a mixed-ownership reform. In December of that year, the capital increase and expansion project of Chery Holding Group and Chery Automobile was completed, with the investor Qingdao Wudaokou New Energy Automobile Industry Fund Enterprise (Limited Partnership) contributing a total of 14.45 billion yuan. Through the capital increase and expansion, Chery not only obtained development funds but also accelerated the listing process to an important agenda.
"Chery hopes to introduce new capital this time and leverage their capabilities in capital, talent, and mechanism reform to achieve profound changes," said Yin Tongyao in September 2022 during the "Comprehensive Financial Services for the Integration of the Yangtze River Delta and the Yangtze River Economic Belt Construction" research activity, when communicating with the media. He indicated that in the past, Chery has been focused on technological innovation and has limited practical experience in capital market operations. After the mixed-ownership reform, many of the new directors sent by the new shareholders are experts in banking and securities industries, which will be very helpful in promoting Chery's next steps in going public.
Regarding the reasons for Chery Automobile's plan to go public, Yin Tongyao also stated that Chery had less initial capital investment, and coupled with not being listed, it has not issued bonds in the capital market in recent years. The capital needs during the rapid development process have mainly been met through bank financing. Entering the capital market is not only beneficial for Chery to establish a long-term capital replenishment channel but also conducive to activating Chery's equity incentive mechanism. Therefore, Chery will strive to achieve listing at the fastest speed possible when conditions permit.
It is worth mentioning that in the same month, at the "Yaoguang 2025 Chery Technology DAY" held by Chery Holding Group, Yin Tongyao clarified the listing timeline for Chery Automobile: he hopes to complete the IPO plan before 2025.
In addition, reporters learned from Chery Holding Group that although Chery Automobile has not yet successfully gone public, the group has already incubated three listed companies:伯特利 (603596.SH), 瑞鹄模具 (002997.SZ), and 埃夫特 (688165.SH). By 2025, Chery Group will have at least ten such companies that can go public.
"Dual Growth" in New Energy and Fuel Vehicle Tracks
"Monthly sales exceeding 240,000 units, monthly exports exceeding 100,000 units, and monthly new energy sales exceeding 50,000 units, setting three historical records in the 27 years since Chery's establishment." On October 1, Chery Holding Group announced this good news.
Relevant data shows that in September 2024, Chery Holding Group sold 244,534 vehicles, a year-on-year increase of 28.6%. Among them, exports were 109,048 units, a year-on-year increase of 20.6%; new energy vehicle sales were 58,941 units, a year-on-year increase of 183.4%.Looking at the first three quarters of 2024, Chery Holding Group accumulated sales of 1,752,793 units, with a year-on-year growth rate of 39.9%, reaching 93% of the annual sales volume for 2023. Among them, new energy vehicle sales reached 331,788 units, a year-on-year increase of 186.4%; fuel vehicle sales reached 1,421,005 units, a year-on-year increase of 24.9%; exports reached 829,353 units, a year-on-year increase of 24.5%; domestic sales reached 923,440 units, a year-on-year increase of 57.2%.
Chery Holding Group stated that in the first three quarters of this year, the group has been the only automotive company in the entire industry to achieve "double growth" in both new energy and fuel vehicle tracks, as well as domestic and overseas tracks. Moreover, all "four tracks" of sales have set new records, entering a fast track of development that is "both quantitative and qualitative."
Specifically, among the four main passenger car brands of Chery Holding Group, Chery brand sold 151,051 units in September; the cumulative sales from January to September reached 1,113,541 units, a year-on-year increase of 33.1%. The Starway brand sold 15,717 units in September; the cumulative sales from January to September reached 95,946 units, a year-on-year increase of 18.1%. The Jetour brand sold 60,226 units in September; the cumulative sales from January to September reached 376,672 units, a year-on-year increase of 94.1%. The iCAR brand's first product has been on the market for 7 months, with sales of 5,180 units in September; the cumulative sales for the year have reached 42,798 units.
Electrification and intelligence are the main development directions for Chery at present. Reporters learned that in 2022, Chery fully deployed the "Yaoguang 2025" forward-looking technology strategy. Within 5 years, Chery plans to invest more than 100 billion yuan in core technology research and development, with more than 25,000 R&D personnel, achieving upgrades in nineteen major core technologies such as platform architecture, chips, efficient hybrid engines, hydrogen energy, electric drives, batteries, intelligent interaction, unmanned driving, and smart cloud platforms.
It is reported that since the beginning of this year, relying on the "Technological Chery" foundation, Chery Automobile has launched a series of new products, including Jetour Shanhai T2, Xingjiyuan ET, 2025 Xingjiyuan ES, Zhiji R7, and other models, providing users with a rich and diverse range of choices.
At the Global Intelligent Automobile Industry Summit high-level forum held on September 29, Yin Tongyue frankly stated that Chery Automobile ranks relatively behind in the development of new energy vehicles. "Our (new energy vehicles) base is very small, but with the help of excellent partners such as iFLYTEK and Guoxun Gaokong, the transformation towards electrification and intelligence is moving towards a fast track."
"We have always wanted to catch up with BYD, but the more we chase, the farther away we get, but Chery's new energy vehicle business is also catching up month by month," Yin Tongyue lamented.
Zhang Xiang stated that most of the new car manufacturers have successfully gone public through an IPO, so as a traditional car manufacturer, Chery Automobile's focus on new energy is correct. By launching high-end new energy brands and rolling out new models like snowballs, they strive to catch up with the "last train" of the car company's IPO.