Shares in Chinese electric car maker Xpeng Motors rose more than 40 percent at its New York debut as a boom in Tesla’s share prompted the country’s start-ups to speed up its expansion plans.
Xpeng, backed by e-commerce group Alibaba, rose as much as 67 percent on the New York Stock Exchange on Thursday before trimming some of those gains to close at $ 22 a share.
The jump came after the company this week increased the size of its initial public offering – which raised $ 1.5 billion and Xpeng to more than $ 10 billion – due to high demand.
Xpeng is the second Chinese EV maker to hit U.S. markets in recent weeks after competitor Li Auto, which sells hybrid sports equipment, also raised $ 1.5 billion in its Nasdaq debut in July.
Concerns about the ability of EV start-ups to control costs and scale up in the face of stiff competition have been overwhelmed in recent months by the desire of investors not to miss the next Tesla. The California Group’s share price has risen nearly 1,000 percent over the past 12 months, making Toyota the world’s largest automaker in terms of capitalization.
Xpeng, founded in 2014, is led by Chinese entrepreneur and former director Alibaba He Xiaopeng. Mr’s record and the company’s technical capabilities have led analysts to anoint the company as one of China’s leading potential challengers to Tesla, the leader in the EV industry.
The Guangzhou-based group sets itself up as a maker of “smart” premium electric cars. The tech-charged cars offer automatic driving features and the distance they can travel on a single battery charge is comparable to that of Tesla, but at a lower price.
Jixun Foo, a managing partner at GGV Capital and an early investor in Xpeng, acknowledged that the EV sector benefited from a “Tesla halo”.
But he added that the growth potential of start-ups would be determined by their ability to compete with traditional automakers, rather than with EV rivals. “Most players talk about tens of thousands of units a year against a 20-meter unit market,” Mr Foo said.
Xpeng said funds raised in its IPO would be used to scale up its infrastructure for sales and charging, as well as to invest in autonomous driving software and the launch of a third model by the end of 2021.
However, some analysts expect a threat to Xpeng from cheaper Tesla models in China, such as the locally made Model 3.
“The lower price points of Xpeng. . . means it faces the task of selling its cars to more price-sensitive consumers, and will be more exposed to price competition from larger rivals [carmakers], ‘Bernstein said in a note prior to the fleet.
Xpeng’s list was heavily overwritten by investors. The company sold 99.7 million U.S. shares for $ 15 each, well above the previously targeted range of $ 11 to $ 13 per share.
There was “significant long-only” investor participation, according to one person with knowledge of the deal, referring to interest from large long-term investors.
The bookmakers of the deal included JPMorgan, Credit Suisse and Bank of America.
