TESLA’S RIVAL XPENG FILES FOR IPO IN THE U.S.

Xpeng Motors, a Chinese based EV maker is currently making plans to list its shares on the New York Stock Exchange (NYSE), as it has already filed for an Initial Public Offer (IPO) in the United States. This comes with backing from Alibaba.

With this, it is further expected to strengthen its rivalry with Tesla as it hopes to make more money from the current trend that has seen investors push funds into electric vehicle startups.

Though it wasn’t made known how many class A ordinary shares would be sold, according to the filing, it was revealed that Xpeng Motors would sell 429,846,136 class B ordinary shares. From the filing which was published with the Securities and Exchange Commission, the class A ordinary shares will be entitled to one vote, while the class B ordinary shares will be entitled to 10 votes.

Xpeng going public would make it the third Chinese EV startup that would be going public in the U.S, with the likes of NIO and Li Auto already listed. NIO which happens to be one of Xpeng’s biggest competitors was reported to have made 1 billion dollars in its IPO on September 12, 2018, and this year, its shares have doubled.

With trade relations between China and the U.S being uncertain with the current Trump administration, Xpeng has still made its move to be listed in the NYSE. Despite the current tensions that have posed a huge threat to Chinese companies listing on Wall Street, a good number of Chinese companies are still pushing for an IPO.

The U.S capital market remains the largest and has a huge pool of financial liquidity than China for companies that are just starting up. This would also see Xpeng challenge Tesla in the U.S, the U.S market is widely known to be the largest auto market.

With two cars already in the market from Xpeng, which includes the G3 SUV and the P7 Sedan, this IPO will help to further push funds into the company, because it faces great competition with other reputable EV companies like NIO and Li Auto which has already been listed in the United States.

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Xpeng already has a strong base of investors, which includes, Xiaomi, Alibaba, Morningside Venture Capital, and more. 

Reports from CNBC already revealed that $400 million was raised at Xpeng from its reputable investors like Alibaba, and the sovereign wealth funds of Qatar and Abu Dhabi.

With stiff competition already existing in the market, Xpeng has tried to set itself aside with a distinguishing feature, one of which is the XPILOT which adds some extra features such as automated parking. Xpeng intends to use this as a major advantage in their rivalry with Tesla.

As a result of the fact that the Chinese market has had favorable policies which include tax break policies and new energy vehicle subsidies, it has raised hope, following the extension till 2022.

The recent filing was quoted to have included from Xpeng “Although we do not currently export any of our Smart EVs (electric vehicles) to the United States, it is not yet clear what impact these tariff negotiations may have or what further actions the governments may take, and tariffs could potentially impact our raw material prices,” the SEC filing said.

This was to give further clarity to investors concerning the plaguing trade wars between the U.S and China.

With concerns also for the legislation passed by the U.S government, which would require a tight cross-examination of Chinese firms listed in the U.S, which could see some firm being delisted, Xpeng reported that “If any such deliberations were to materialize, the resulting legislation may have a material and adverse impact on the stock performance of China-based issuers listed in the United States. It is unclear if this proposed legislation would be enacted”

With a lot of uncertainties already in the market between the U.S and Chinese trade relations, one can’t say what would become of this particular filing, but this going through will help give Xpeng a strong backup to compete with other markets.