Ideal Auto plans to be listed on Nasdaq, with a market value of tens of billions of dollars

Li Auto plans to be officially listed on the Nasdaq market on the evening of July 31, Beijing time, with the stock code "LI". This will be the second domestic "new car-making force" to be listed in the United States after NIO.

It is reported that Ideal Auto's actual fundraising scale may reach at least approximately US$500 million, making it the company with the largest IPO fundraising among all Chinese companies listed in the United States since 2020; at most it may reach US$1 billion, matching the fundraising scale of NIO when it went public in 2018.

Ideal Auto plans to use the raised funds for new product research and development, further development of capital expenditures including production equipment, and operating capital. In addition, the prospectus also revealed Ideal Auto's product planning. Ideal Auto plans to launch a large SUV in 2022 and continue to use an extended-range powertrain.

As the first company in China to commercialize extended-range electric vehicles (EREV), Ideal Auto began mass production of its first model, the Ideal ONE, in November 2019. As of June 30, 2020, it had delivered more than 10,400 Ideal ONEs. It also plans to launch a full-size premium electric SUV in 2022, which will be equipped with a new generation of EREV powertrain, and further develop mid-size and compact SUVs to target a wider user group.

In the TOP 10 sales list of China's new energy medium and large SUVs (including hybrid, plug-in hybrid, pure electric and extended-range electric) in the first half of 2020 released by the China Association of Automobile Manufacturers, Ideal ONE accounted for 46% of the total sales of the top ten with a total sales volume of 9,666 units.

In terms of financial data, in 2019, Ideal Auto's revenue was 284 million yuan (RMB, the same below), including 281 million yuan in vehicle sales revenue and 3.4 million yuan in other sales and service revenue, covering charging, Internet of Vehicles connection, FOTA upgrades, warranty extensions, membership services, etc.

In the first quarter of 2020, the first completed quarter after the delivery of Ideal ONE, Ideal Auto's revenue was 852 million yuan, including 841 million yuan in vehicle sales revenue and 10.62 million yuan in other sales and service revenue.

In 2018 and 2019, Ideal Auto's net losses were 1.532 billion yuan and 2.438 billion yuan respectively, with a total loss of less than 4 billion yuan in two years. The scale of the loss is rare among "new car-making forces" with a certain scale. In the first quarter of 2020, Ideal Auto's net loss was 77.11 million yuan, while in the same period of 2019 it was 358 million yuan.

In addition, after recording a gross profit of -95,000 yuan in the fourth quarter of 2019, Ideal Auto's gross profit reached 68.29 million yuan in the first quarter of this year, with a gross profit margin of 8.02%, of which the gross profit margin of the whole vehicle was 8.45%.

According to Li Bin, founder and chairman of NIO, in the Q1 earnings conference call, “NIO’s second quarter vehicle gross margin is expected to reach 5%, and the overall business gross margin can reach 3%.

Obviously, in terms of cost control, Ideal Auto performs significantly better than NIO. One reason is that the extended-range electric technology used by Ideal Auto is cheaper than pure electric technology; another reason is Li Xiang's "almost abnormal requirements for cost and efficiency."

In the first quarter of 2020, Ideal Auto's sales and administrative expenses were 112 million yuan, while NIO's sales and administrative expenses in Q1 were 848 million yuan.

In a sense, NIO is committed to providing the best experience for its customers and even its employees, while Li Auto's logic is that "healthy cash flow is king."

As of the first quarter of 2020, Ideal Auto had cash and cash equivalents of 1.054 billion yuan.

IPO 前，理想汽车创始人、董事长兼 CEO 李想共持有 25.1%的股份，并享有 70.3%的投票权;总裁沈亚楠和首席财务官李铁则各自持有 1.1%和 1.0%的股份。此外，汽车之家联合创始人樊铮则持有 6.1%的股份和 2.4%的投票权。

Among external investors, Wang Xing and Meituan’s wholly-owned subsidiary hold a total of 23.5% of Ideal Auto’s shares and 9.3% of the voting rights. Before Ideal Auto submitted its F-1 filing, Wang Xing was the only director other than the management.

After completing a US$550 million Series D financing round led by Meituan’s wholly-owned subsidiary on July 1, Ideal Auto’s valuation was US$4.05 billion.

Considering the current market environment and the opinions of many secondary market analysts, it may be inevitable that Ideal Auto will reach a market value of US$8 to US$10 billion in a relatively short period of time after its listing.