The IPO of ZEEKR, a Chinese EV maker backed by Geely, is set to start trading on the NYSE under the symbol (NYSE: ZK) after pricing at $41 per share, with a market cap of $5 billion. This IPO is significant for China, which has faced challenges in the US market since Didi Chuxing’s listing and subsequent delisting in 2021. Investors and bankers will closely watch how Wall Street receives this deal to determine if China has become “investable” again.
ZEEKR’s prospectus reveals a rapidly growing but unprofitable company, with revenues surging by 62% in 2023 to $7.3 billion. The company earned a positive gross margin of 15% on its EVs, but also recorded an operating loss of $1.15 billion for the year. ZEEKR’s majority owner, Geely, is determined to go global as a premium EV manufacturer from China. The company plans to enter six European countries in 2024 and target another 38 markets in Southeast Asia and the Middle East.
The prospectus also highlights related party transactions, with Geely owning over half of ZEEKR’s shares and influencing capacity and cost of goods sold. ZEEKR’s tech-forward approach includes autonomous driving technology from Mobileye and NVIDIA’s embedded DRIVE Thor AI chips. The company offers a broad product range targeted at the higher-end market in China, including the luxury ZEEKR 009 van and the urban SUV Zeekr X. ZEEKR envisions vehicles evolving into a “smart mobility space” where passengers can watch entertainment, work, or eat while automation takes over driving.
China’s EV market is seen as more advanced and competitive than the US or Europe, with well-funded players like Geely and BYD positioned to survive the industry shakeout. ZEEKR’s sophisticated international expansion strategy puts European automakers on alert as Chinese brands compete in higher-end markets. American car makers may need to focus on innovation, cost-efficient production, and advanced technology to survive the transition to electric vehicles. Chinese EVs are now cheaper, more fun to drive, and have more features than internal combustion cars, leading to a shift in consumer preferences and sales trends.
As ZEEKR’s IPO marks China’s push to dominate the global EV market, the future of the auto industry is in play. China’s strategy of leveraging its domestic market to gain scale and drive innovation before expanding overseas poses a challenge to traditional players. American car companies must adapt to the changing landscape and focus on innovation to stay competitive in the rapidly evolving EV market. The increasing popularity and affordability of Chinese EVs highlight the need for American car makers to embrace the transition to electric vehicles to remain relevant in a changing industry.
