Is the American dream stable for the ＂light speed＂ IPO of the polar krypton car under two years old？

Wen | Fangfang, New Economic Observer Mission

On December 13, 2022, Geely Automobile officially announced that its high-end pure electric brand Extreme Krypton Automobile had secretly submitted the IPO registration documents to the US Securities and Exchange Commission on December 7. At this point, this "traditional new force" established less than two years ago began to break through the IPO.

The data shows that in 2022, a total of nearly 72,000 new cars were delivered, which further narrowed the gap with the new forces’ head camp. However, despite the rapid growth, there are many "problems" in Krypton cars compared with "Wei Xiaoli": performance loss, low gross profit margin, and doubtful high-end positioning are very prominent. Nowadays, the extremely krypton car in the initial stage of development is so eager to go public, is it really hot enough?

01, a rising star, losses.

Compared with other brands of Geely Automobile, the daily performances of Krypton Automobile, which was established in 2021, are showing its more independent existence. But no matter from the development process or business performance, we can’t put it outside Geely Automobile to observe.

Before Krypton Automobile, Geely Automobile had tried many times to transform and upgrade with electrification, but it didn’t splash much water in the new energy market.

In 2015, Geely Automobile released the new energy strategy of "Blue Geely Action" and set an extremely aggressive sales target: by 2020, the sales of new energy vehicles will account for 90% of the total sales. However, at that time, Geely Automobile bet on "oil to electricity", which led to a general market reaction. In 2019, Geely Automobile launched a geometric brand focusing on the field of high-end pure electric vehicles, which is at the same level as Lectra, and the degree of attention can be seen.

But again, the geometric brand has little thunder and rain, and has not broken out its due potential. In 2020, Geely Automobile actually sold 68,000 new energy vehicles (including Geely, Link and Geometry brands), and the proportion of new energy was only 5.15%, far from reaching the target of 90%.

Until March 2021, Geely once again launched the extremely krypton car that positioned the high-end electric vehicle market, while the geometric car returned to the mainstream mass market. Once the former came out, it quickly launched the first mass-produced new car with an average sales price of more than 300,000 yuan, and ran all the way up with the strong support of the group.

Drawing of the delivery table of the new car-making forces in 2022: New Economic Observation Mission

In 2022, Kyk 001 delivered nearly 72,000 new cars, and the average order amount reached 336,000 yuan. Especially in the fourth quarter of 2022, the sales volume of Krypton in January 2001 exceeded 10,000 vehicles for three consecutive months, which was basically able to compete with the head camp of the new forces. It is also the ever-increasing sales of Krypton 001 that makes the capital market begin to re-evaluate the prospective map of Geely Automobile’s new energy.

But the question is, is Geely’s electrification transformation really successful this time? I’m afraid it’s too early to draw a conclusion. Because cars sell well, it doesn’t mean high profitability. At this point, new forces such as "Wei Xiaoli" have already had a deep understanding.

First of all, like "Wei Xiaoli", Krypton cars sell well, but their operating conditions are not satisfactory. Geely Automobile’s interim financial report in 2022 shows that in the first half of 2021 -2022, Kyo Automobile achieved revenue of 2.868 billion yuan and 8.828 billion yuan respectively. However, under the rapid growth of revenue, the net loss is constantly expanding. In the same period, the brand’s net loss reached 1.01 billion yuan and 759 million yuan respectively. In other words, in just one and a half years, Krypton has lost 1.769 billion yuan.

The crazy "burning money" of sub-brands also directly dragged down the overall profitability of Geely Automobile. In the first half of 2021-2022, the net profit of Geely Automobile was 4.847 billion yuan and 1.552 billion yuan respectively, and the year-on-year decline rate of net profit reached 12.4% and 34.81% respectively. As for the reasons for the further expansion of losses, Geely Automobile stated directly in the financial report that the relatively high operating costs of Krypton Automobile in the early stage of development and the confirmation of share-based payment fees in the current period were one of the reasons that adversely affected the profitability of the Group during the period.

It can be said that the climbing road of Krypton automobile is based on Geely automobile’s continuous blood transfusion. Nowadays, extremely krypton cars are eager for IPO. On the one hand, it can be seen that the capital market still shows great tolerance for new forces; On the other hand, it is also the bad situation caused by the group’s long-term blood transfusion behind the crazy burning of money by extremely krypton cars, which is in urgent need of IPO financing.

02, the core indicators are not good, not as good as "Wei Xiaoli"

Geely Automobile’s explanation of the development status of Krypton automobile in the financial report also gave the latter time to change course. However, with the acceleration of the electrification transformation of traditional car companies and the crazy invasion of cross-border people such as Huawei and Xiaomi, the competition faced by extremely-krypton cars is becoming increasingly fierce, and this battle is more filled with strong smoke compared with the increasingly mature head camp of new forces.

Schematic diagram of the comparison of the revenue of the new car-making forces in the first half of 2022 Tabulation: New Economic Observation Mission

First of all, from the volume point of view, the positioning of Krypton 001 has a certain competitive relationship with "Wei Xiaoli" and so on. In recent months, it has broken the sales performance of 10,000 vehicles, posing a great threat to the models such as Weilai ET5 and Tucki P7. However, judging from the volume of both sides, the revenue of extremely-krypton cars still cannot be compared with "Wei Xiaoli". According to the data of various financial reports, in the first half of 2022, Weilai, LI and Xpeng Motors achieved revenues of 20.2 billion yuan, 18.2 billion yuan and 14.8 billion yuan respectively, while the revenue of Krypton Automobile was only 8.8 billion yuan.

Graphic tabulation of gross profit margin of the new force of making cars in the first half of 2022: new economic observation group

At the same time, judging from the gross profit margin of various companies, there is a big gap between the profitability of extremely krypton cars and the head camp of new forces. According to An Conghui, CEO of Krypton Automobile, in the first half of 2022, the gross profit margin of Krypton automobile was around 5%. In the same period, the gross profit margins of LI, Weilai and Xpeng Motors reached 22.09%, 13.8% and 11.55% respectively.

The more serious situation is that Li Xiang, the founder of LI, revealed that the company is about to reach the turning point of breakeven. Li Bin, the founder of Weilai, also said that it is expected to break even in the fourth quarter of 2023. Obviously, the first batch of new car-making forces have touched the threshold of performance and profitability, while extremely krypton cars are still struggling in the whirlpool of losses.

Despite the poor performance, the capital market’s evaluation of extremely krypton cars is not low. In August, 2021, Krypton Auto completed the Pre-A round of strategic financing of US$ 500 million (equivalent to RMB 3.24 billion), with five ecological partners including Intel Capital and Contemporary Amperex Technology Co., Limited participating. After the completion of the investment, five companies got 5.6% of the shares of Extreme Krypton Automobile, and Geely Automobile’s shareholding dropped to 48%, but it is still the single largest shareholder of Extreme Krypton Automobile. At that time, the valuation of Krypton cars had reached $9 billion.

According to informed sources, this IPO in the United States will seek a valuation of more than 10 billion US dollars, and it is planned to be listed in new york as early as the second quarter of 2023. The reason why we abandoned the HKEx and chose new york as the listing place is to seek a higher valuation.

Looking at the new force "predecessors" car companies, "Wei Xiaoli" has taken the lead in listing in the United States. It took four years, six years and five years for the three companies to go public. If Krypton can really successfully pass the IPO within the predicted time, it means creating a record of the shortest time to market for new forces. And its valuation of nearly 70 billion yuan, although there is still a certain gap with Weilai (134 billion yuan) and Ideal (156.7 billion yuan), has surpassed the current market value of 57.6 billion yuan in Xpeng Motors and the zero-running car listed in September last year (the market value as of January 13 was 26.7 billion yuan).

It can be seen that although the performance is not satisfactory, the capital market still has high hopes for extremely krypton cars. However, there is a lesson that the stock price of the zero-run car broke and fell by more than 33% on the first day of listing. It is still unknown whether the extremely-krypton car can re-sample for the listing of new forces.

03, "Benchmarking Tesla", the road to high-end is not easy.

In addition to the embarrassing status quo, the problem of the extreme krypton car is that "ambition is not worthy of ability." From the emphatic wording of "the average order amount exceeds 336,000 yuan" in the sales posters of each issue, we can see that it is imperative for extreme krypton cars to hit the high end. After all, according to the definition of "high-end models" by the Federation, the starting price of products must exceed 300,000 yuan.

However, in the upsurge of "benchmarking Tesla" on the Internet, Extreme Krypton 001 played a configuration beyond Tesla such as "712km long battery life", hoping to raise the product positioning. However, in Tesla’s repeated price reduction boom, Krypton has lost its vital price advantage. As for the level of revenue and profitability, the two are not an order of magnitude.

One of the most critical problems that hinder krypton cars from taking the high-end road is that product problems emerge one after another.

Extreme krypton cars rank first in complaints. Image source: Car Quality Network

On January 1, 2023, Extreme Krypton Automobile announced that the new Extreme Krypton 001 was officially launched, and the new car was fully upgraded at the configuration level. However, it failed to take into account the rights and interests of old car owners. Since January 2nd, there have been hundreds of complaints about "sales promise not fulfilled" in the online complaint platform, ranking first in the complaint list.

According to the old owner of Krypton 001, after the launch of the new model of 001, the "old" owners who decided in advance have received the "overlord clause" to cancel the lifetime warranty, and the related rights and interests have also shrunk. The car owners accused the car of "cutting leeks" and did not hesitate to make false marketing to harm the legitimate rights and interests of consumers.

In addition, some car owners revealed that in addition to the change of rights and interests, the car also unilaterally locked the order automatically, which was inconsistent with the information promised at the beginning, and today’s terms are even more unreasonable. As of press time, Extreme Krypton Automobile has not announced the handling results of this incident.

Complaints against extremely krypton cars (partial) Image source: Car Quality Network

The actual situation is that there is a precedent for the "false marketing" of extremely krypton cars. On New Year’s Day last year, Extreme Krypton Automobile released the rights and interests of the Spring Festival, which led to the price of new cars under the same configuration being lower than the purchase price years ago, which triggered the rights protection of old car owners. After several rounds of games, Krypton finally reached a settlement with the old car owners in the form of "returning 5,000 yuan".

Since then, Krypton 001 has also experienced various questions and problems such as "disguised price increase", "replacement of motor", "EC light-sensing canopy goods are not on the right board" and "order delay". More importantly, after the incident, the authorities never paid enough attention to the owner of the extremely krypton car. Instead, they responded indifferently by destroying misleading legends and perfunctory apologies, which made the owner even more annoyed.

As we all know, one of the biggest differences between new forces and traditional car companies is that they are good at user marketing and often play the banner of "deeply linking users" in order to win the favor of more consumers. However, judging from the company’s performance, although it classifies itself as a new force, it still has the "arrogance and prejudice" of traditional car companies in its bones. This simple and rude response has had a negative impact on the brand image.

On January 9th of this year, the second new car, Extreme Krypton 009, was officially mass-produced, and it is expected to be officially delivered in the second half of January. The new car hit the "high-end" goal again, and the prices of the two models were 499,000 yuan and 588,000 yuan respectively.

However, even Jason Lin, vice president of Extreme Smart Technology, once said, "To meet the high end, it is not how much money is used to measure the high end, but whether you can represent the most important products in that market." No matter from the perspective of copying the bottom chip of Krypton 001 completely or the battery scheme that has not been optimized and upgraded, it is obvious that Krypton 009 has not controlled the core technology well.

To add insult to injury, the problem of false propaganda of Qianqiu Kyo 001 has not been properly solved, and Kyo 009 was controversial because of the advertisement "All pets are love" on the day of listing, and finally ended up deleting the advertisement. Prior to this, Li Xiang also questioned the interior space of the extremely krypton 009 and "poured cold water" on the listing of the new car. Nowadays, Krypton 009 has not been mass-produced and delivered, and it has suffered from public opinion crises one after another. This is really not a good sign.

For a company to be listed, the establishment time is too short, the loss situation of the company is increasing, and the product quality problems have been repeatedly criticized, which will become a stumbling block on the road to sprint IPO. Whether Geely can achieve the goal of high-end by relying on Krypton 009 can be successfully achieved, I am afraid it will take a long time to investigate.