China’s luxury electric vehicle (EV) brand, Zeekr, made its debut on the New York Stock Exchange, signaling investors’ excitement about the company. The stock price surged by 38% in the first few minutes, giving Zeekr a potential valuation of $7 billion. This successful IPO suggests that investors recognize the value in the high-quality and low-price offerings of Chinese automakers.
However, the current state of the EV market indicates potential challenges for Zeekr. Demand for EVs is softening as customers shy away from steep prices. Moreover, there are ongoing price wars and geopolitical tensions that could impact Zeekr’s market position.
To expand beyond China, Zeekr plans to target the European market, where it will compete with legacy European automakers. The company has already started shipping its flagship Zeekr 001 shooting brake SUV to the Netherlands and aims to deliver this model as well as the Zeekr X urban SUV to six European countries in 2024. Zeekr anticipates expanding its international presence to eight countries by 2025. Other Chinese companies, including BYD, SAIC, and Great Wall Motor, are also disrupting the European EV market.
While Zeekr hasn’t announced any specific plans for passenger vehicle launches in the U.S., it has partnered with Waymo, Alphabet’s self-driving technology unit, to develop an all-electric, self-driving ride-hail vehicle. The details and timing of this launch are yet to be revealed. Speculations suggest that the Waymo vehicle might be based on Zeekr’s fifth model, the Mix, which was unveiled at the Beijing Auto Show. This collaboration with Waymo could provide Zeekr with an opportunity to enter the American market.
Although Zeekr has had a healthy start to vehicle deliveries this year, with 49,148 units delivered in the first four months, the company is still operating at a loss. In 2023, Zeekr reported revenue of $7.3 billion but recorded a net loss of $1.7 billion. The company expects vehicle sales revenue to be higher than the first quarter of 2023 but lower than the fourth quarter of 2023 due to seasonal factors and changes in product mix.
Despite the enthusiasm surrounding Zeekr’s IPO, there are risks involved. The IPO comes at a time of escalating geopolitical tensions between China and the United States. Zeekr acknowledges the influence the Chinese government can exert on its operations and the potential regulatory challenges it may face in both Beijing and Washington. Additionally, regulatory and legislative hurdles in the U.S., such as the Holding Foreign Companies Accountable Act, could affect Zeekr’s market price and investor confidence. Concerns have also been raised about connected and autonomous Chinese vehicles potentially collecting and transmitting data back to the Chinese Communist Party.
In Europe, the Commission is considering the introduction of import tariffs on EVs made in China to protect European manufacturers. These potential trade barriers could impact Zeekr’s expansion plans in the European market.
Overall, while Zeekr’s U.S. IPO has generated excitement, it is crucial to consider the various challenges and risks that the company may face. The success of Zeekr’s future endeavors will depend on its ability to navigate these obstacles effectively.
