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Chinese EV Brand Nezha Raises $306 Million in First Tranche of Series C Led by HD Capital

Eurora Wang / Dec 07, 2020 06:48 PM / Business & Tech

Nezha, an electric vehicle (EV) brand owned by the lesser-known Chinese automaker Hozon Auto, has closed 2 billion yuan ($305.5 million) in the first tranche of its Series C round led by the country’s equity investment firm HD Capital, the company announced on Thursday.

The first tranche also includes capital commitments from a group of large-scale investment institutions, said the firm, which expects the total size of the Series C round to “far exceed” its initial target of 3 billion yuan ($458.3 million).

The lead investor, HD Capital, manages nearly 50 billion yuan ($7.6 billion) across multiple equity investment funds and focuses on strategic investments in the intelligent EV industry. It is an investor in Contemporary Amperex Technology Co Ltd (CATL), a Chinese lithium-ion battery manufacturer that supplies EV makers like Tesla.

The funding may prepare Shanghai-based Nezha to be more financially prepared to rival domestic EV upstarts. Its major homegrown competitors include Nio, Xpeng Motors, and Li Auto, all of which are listed in the US and have seen their stock prices rally in recent months after China’s EV sales bounced back in Q3 thanks to a domestic market that largely recovered from the pandemic.

The completion of the first tranche of Series C round came after Nezha announced on July 20 its plans of raising 3 billion yuan, and subsequently, launching an initial public offering (IPO) on Shanghai’s Nasdaq-style STAR Market in 2021.

The IPO plan signals its official entry into a race with other unlisted Chinese EV players to become the first EV fundraiser on the Chinese tech board to capture a piece of the country’s tech IPO boom.

Joining the race are WM Motor, which had closed 10 billion yuan ($1.5 billion) in September from a group of largely government-backed investment platforms; China Evergrande New Energy Vehicle Group, the EV unit of indebted property developer Evergrande Group; and ENOVATE, which had raised over 5 billion yuan ($764.6 million) in October and was mulling an IPO in 2021.

“The development of automobile enterprises require money, large amounts of money. Even for those [EV firms] who have already raised capital in the public market, they have continued their fundraising efforts. The more, the better,” Zhang Yong, the firm’s co-founder and CEO, told domestic media outlet 21st Century Business Herald in September.

Sales ambitions

Launched in October 2014 with an initial registered capital of 626 million yuan ($95.7 million), Hozon Auto spent the first few years building its research centres and smart factories, and obtaining production qualifications from the local authorities before it could introduce its debut vehicle model, Nezha N01, to the market in November 2018, according to its website.

By far, Nezha has launched three mass-produced EV models, namely Nezha N01, Nezha U, and Nezha V, with total deliveries of nearly 30,000 cars. The latest model Nezha V, which hit the stands in November, has sold over 5,000 units in its first month after the market debut, of which 1,067 units have been delivered.

Zhang said in the interview that Nezha targets to make a total of five EV models available for consumers and aims to book an annual sales volume of 400,000 vehicles by 2025 — a somewhat bold ambition as he expects the firm to register a total sales volume of 20,000 vehicles this year.

The firm showcased its new concept car, Eureka 03, in September at Beijing International Automotive Exhibition 2020. The new model, powered by AI-based intelligent security technology, automated parking functions, and Service-Oriented Architecture (SOA), is expected to be available in the market by 2021.

Nezha had completed a Series B round at 3 billion yuan ($458.3 million) led by a government-led industry fund in April 2019, with participation from strategic investors. It did not specify the investors of the previous round.

In December 2017, the firm had raised 1.25 billion yuan ($191.1 million) from Zenity Mobility, an industry investment group that focuses on China’s mobility market.

Originally published in Deal Street Asia


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