The Journey of Chinese Electric Vehicles Going Global: Opportunities and Challenges for ZEEKR

The way of Chinese electric cars going overseas: The opportunities and challenges of ZEEKR

ZEEKR, which was established only three years ago and has successfully been listed in the United States, has become an unignorable force in China's auto industry with its strong development momentum and global ambition. Behind the rapid development is the strong support from its parent company, GEELY, and the strategic layout of the electric car industry. ZEEKR's goal is to create high-end, intelligent, and environmentally friendly electric cars and provide users with a supreme travel experience. Its product includes ZEEKR 001, ZEEKR 001 FR, ZEEKR 009, and ZEEKR X models, which have been widely praised for their performance, design, and user experience. The successful listing of ZEEKR, not only injected new vitality into its development but also set a new benchmark for the international development of China's electric car industry.

1. ZEEKR was listed on the US stock market three years after its establishment, setting a record for Chinese new energy vehicle companies

On May 10, ZEEKR was listed for trading on the New York Stock Exchange under the ticker symbol ZK, becoming the fourth new Chinese car maker brand listed in the United States following NIO, Xpeng, and LI. ZK opened at 26 dollars, surging 23.8%, far above the 21.00-dollar IPO offering price at the top of the guidance range. During the trading, the stock price once rose to 29.36 dollars, and the intraday gain expanded to 39.8%, eventually closing about 34.6% higher. As of the day of the draft, the stock came to 28.26 dollars.

Before the IPO, the number of shares held by Li Shufu, the founder, and chairman of ZEEKR, was 1,822,000,000, accounting for 80.4% of the voting rights of the company, and was diluted to 74.6% after the issuance. CATL and Mobileye are partners in ZEEKR's industrial chain and are also original investors. They continued to subscribe for ZEEKR shares in this IPO.

According to the prospectus, 60% of ZEEKR's revenue comes from car sales. Its sales volume and delivery speed have constantly set new records, with a cumulative delivery volume breaking 200,000 units on January 8, setting a record for the fastest delivery by new China-made car forces. At the same time, from January to April, a total of 49,148 units were delivered, a year-on-year increase of 111%, firmly occupying the sales champion of pure electric cars with a price of more than 200,000 yuan in China.

The gross margin of ZEEKR climbed to 15% over three years, ranking among the forefront of the industry. In 2023, the revenue from car sales was 33.9118 billion RMB, a 72% increase from the 19.6712 billion RMB in 2022, and the gross margin more than doubled from 4.7% in 2022 to 15.0%. The gross margin of the whole vehicle in the high-end pure electric field is second only to Tesla's 19%, more than NIO's 10% and Xpeng's -2%.

At his speech on the NYSE, ZEEKR CEO An Conghui stated that it took ZEEKR 37 months from the establishment of the brand to going public, which has set the fastest record from the launch to IPO of EV brands. Behind this is the accumulation of parent company GEELY's 37-year entrepreneurship and pioneering exploration of the third lane in the electric vehicle industry.

2.Born from GEELY: A highly valued high-end positioning brand

ZEEKR was established in March 2021. The name ZEEKR stands for “ZERO-Electric-Evolution-Era” that reflects its vision for the future era of electric vehicles. The goal of ZEEKR is to create high-end, smart, environmentally friendly electric cars to provide users with the ultimate travel experience. Its product portfolio mainly includes ZEEKR 001, ZEEKR 001 FR, ZEEKR 009 and ZEEKR X.

The ZEEKR brand is positioned as a high-end electric vehicle brand. This has been the long-held ambition of Chairman Li Shufu to manufacture high-end models "like Mercedes-Benz" to compete withTesla, the global frontrunner in electric vehicles.

GEELY has high expectations for ZEEKR. It has invested heavily in technology, talent, capital, and supply chain. On April 15, 2022, and November 30, 2022, ZEEKR subsidiary Ningbo Weirudi separately signed ten-year loan agreements with GEELY for a total of RMB 970 million and RMB 110 million.

Before the launch of its first car, the ZEEKR 001, a significant portion of ZEEKR's revenue came from selling batteries and other components as well as research and development services to GEELY.

In April 2021, the first ZEEKR car, the 001, debuted at the Shanghai International Automobile Industry Exhibition.

In October 2021, ZEEKR began delivering its first car, the ZEEKR 001. Since then, sales have maintained a high rate of growth, with 6,000 units sold 2021, increasing to 72,000 units in 2022. With the introduction of the new ZEEKR 009 and ZEEKR X models in 2023, annual sales reached 119,000 units, an increase of 65% year-on-year.

In November 2022, ZEEKR launched its second model, ZEEKR 009, a luxury six-seater MPV. According to Frost & Sullivan, this is the world's first high-end MPV based on a pure electric platform, with deliveries starting in January 2023.

In April 2023, ZEEKR released the compact SUV model ZEEKR X. This model features a spacious interior design, advanced technology, and excellent driving performance, with deliveries beginning in June 2023.

In October 2023, ZEEKR released the 001 FR, a crossover hatchback model based on the ZEEKR 001, with deliveries of the ZEEKR 001 FR commencing in November of the same year.

ZEEKR's sales performance is impressive. ZEEKR 001 ranked first in sales of high-end electric cars in China from Q1 to Q3 in 2023, with sales reaching 52,680 units. The ZEEKR 009, launched in September 2022, sold 13,672 units, ranking sixth.

In 2024, ZEEKR's globalization strategy will accelerate. In addition to entering the markets of eight European countries, it will also enter Southeast Asia, the Middle East, South America, Australia, and other markets in 50 countries and regions. As of the end of April this year, ZEEKR has built nearly 380 stores worldwide.

3. Opportunities and challenges coexist, can the overseas market ride the wind and waves?

The Chinese government has proposed policy support for the development of electric vehicles as a strategic emerging industry, which accelerats technological innovation and the application of core technologies. In March 2022, the 14th Five-Year Plan for the Modern Energy System was released to emphasize the improvement of low-carbon electrification. By 2025, the sales of new energy vehicles will account for 20% of the total new car sales.

In 2022, China became the world's largest new energy vehicle market, with sales reaching 6.5 million units. According to Frost & Sullivan data, China is the world's leading new energy vehicle manufacturing country with a complete industrial chain. By 2027, it is estimated that the sales volume of new energy vehicles in China will reach 17.9 million units, with a compound annual growth rate of 19.8% from 2023.

After successfully listed in the United States, ZEEKR plans to implement a global strategy and expand market share by exploring opportunities in overseas markets, such as the pure electric vehicle market in Europe and the Robotaxi in the United States. ZEEKR plans to cooperate with multiple brands under GEELY to expand the sales network through its extensive existing overseas sales and distribution network.

However, on the first day of trading, the Joe Biden administration plans to increase tariffs on Chinese cars imported into the United States. It is reported that it will be announced as soon as local time on the 14th. It will increase the tariff on Chinese electric vehicles from the current 25% to 100% and imposing additional taxes on other Chinese goods including semiconductors and medical equipment.

According to ZEEKR's prospectus, the risk warning section mentions that ZEEKR may be affected by Chinese and international policy situations affecting its sales volume. Investors are advised to consider carefully.