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China's cash-hungry electric vehicle (EV) start-ups, are actively looking to private equity and venture capital for funding, as they seek alternative financing sources in the face of tougher thresholds for initial public offerings (IPOs) on Shanghais Star Market.
Evergrande New Energy Vehicle Group, Geely Automobile and WM Motor Technology were three of the most recent assemblers of electric cars to be turned away in recent months from Star Market, as the Nasdaq-like market - set up in July 2019 at the order of the Chinese President Xi Jinping - tightened its definition of what passes muster as "technology" and "innovation" to qualify for a Star Market listing.
WM Motor, backed by the largest Chinese company Tencent Hodings, the internet search engine Baidu and China's largest state-owned carmaker SAIC Motor, halted its Star Market listing in April, even after it completed its pre-listing tutorial programme three months earlier.
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Geely, the owner of Volvo Cars and 9.7-per cent shareholder of Daimler, withdrew its listing application in June on Star Market, which would have raised 20 billion yuan (US$3.1 billion) to finance its push to have 10 electric cars in its vehicles portfolio by 2025.
Evergrande NEV, which is supposed to assemble electric cars for the world's most indebted property developer, shelved its 30 billion yuan Star Market IPO in late September, losing a vital lifeline for China Evergrande Group and its US$300 billion in liabilities.
The research headquarters of China Evergrande New Energy Vehicle Group in Shanghai on September 24, 2021. Photo: Bloomberg alt=The research headquarters of China Evergrande New Energy Vehicle Group in Shanghai on September 24, 2021. Photo: Bloomberg
These applicants fell victim to Star Market's tighter approval procedure, requiring substantial investments in research and development (R&D), as well as products that contain "hard technologies." Electric carmakers failed to convince the review committee that they possessed core technology that could help them lead the future of mobility. A trio of Chinese EV makers with the best prospects of grabbing market share from Tesla - Li Auto, NIO and Xpeng - are listed in New York and Hong Kong.
Electric cars "remain a bright spot in China's economy and the market still expects to see a bunch of IPOs by prospective carmakers in the coming two years," said Ivan Li, a fund manager at Loyal Wealth Management. "But they need to invest more capital into R&D and churn out a certain number of intelligent vehicles that are well received by drivers before submitting listing applications again."