Neta Auto, which Zhou Hongyi has continuously cheered for, is finally preparing to go public.

According to a document from the Hong Kong Stock Exchange on June 26, Hezhong New Energy Automobile Co., Ltd., the parent company of Neta Auto, has officially submitted an IPO application to the Hong Kong Stock Exchange. If successful, this will mark Neta Auto's entry into a new stage in the capital market and become the fifth Chinese new-energy vehicle company to list in Hong Kong, following NIO, Li Auto, XPeng, and Leapmotor.

Neta Auto has made full preparations for this IPO. Public information shows that two months ago, Neta Auto raised 5 billion yuan in financing from multiple institutions. Zhou Hongyi, the founder of 360 Security Technology, as one of Neta Auto's major shareholders, has also frequently generated buzz and momentum for Neta Auto this year.

Hezhong New Energy's prospectus shows that the company has 2.84 billion yuan in cash on its books and a loss of 6.867 billion yuan for fiscal year 2023. Based on the current situation, the cash on hand is insufficient to cover losses for the next six months.

Seeking to go public is one of the important ways for a company to grow and expand, but at this time, Neta Auto's rush to IPO is more about addressing its immediate difficulties. In the fiercely competitive current market, can Neta Auto win the favor of capital?

▍Not going public means being eliminated?

Since the beginning of this year, Neta Auto investors, Zhou Hongyi, and Zhang Yong have interacted frequently, which has given Neta Auto tremendous attention and significantly increased its popularity. Zhang Yong, CEO of Neta Auto, also said on social media: "After the launch of Neta L, the number of leads, attention, and orders have reached the highest level since the end of 2022." This achievement has sparked renewed market attention on Neta Auto. Their actions are also considered to be creating momentum for Neta Auto's IPO.

It's not the first time that Neta Auto has attempted an IPO. As early as July 2020, Neta Auto announced plans to launch an IPO on the STAR Market, aiming to complete the listing in 2021. However, due to various reasons, Neta Auto ultimately failed to achieve its goal. In February 2022, there were rumors again that Neta Auto was preparing for an IPO in Hong Kong, but the company denied it.

Since its inception in 2014, Neta Auto has raised a total of ten rounds of financing, with a cumulative amount of 22.84 billion yuan. However, according to the prospectus, the company has been in a loss-making state for the past three years, with net losses of 4.84 billion, 6.666 billion, and 6.87 billion yuan from 2021 to 2023, totaling over 18 billion yuan. As of December 31, 2023, Neta Auto's cash and cash equivalents were only 2.84 billion yuan. At the rate of losses in 2023, its cash reserves are only enough to support it for more than five months.

In April this year, Neta Auto officially announced that Tongxiang State-owned Capital Investment and Operation Co., Ltd., Yichun Jinhe Equity Investment Co., Ltd., and Nanning Minsheng New Energy Industry Investment Partnership (limited partnership) would jointly provide a total investment of no less than 5 billion yuan to Hezhong Auto. This money has given Neta Auto some breathing room.

In the terminal market, Neta Auto's sales performance has not improved. From 2021 to 2023, Neta Auto delivered 64,230, 152,073, and 124,189 vehicles, respectively. In 2022, Neta Auto briefly topped the list of new forces, but sales began to decline in 2023. The situation in 2024 remains pessimistic. In May this year, Neta Auto delivered 10,113 vehicles, a year-on-year decline of 22.4%. From January to May this year, it delivered 43,564 vehicles, only 14.5% of its annual sales target of 300,000 vehicles.

In the view of industry insiders, Neta Auto's early focus on the to B and to G markets may be one of the reasons. Many of Neta Auto's sales in the early stages were primarily based on government vehicle procurement, corporate and institutional group purchases, and also on shared mobility companies. After a strategic shift, it began to focus on the C-end market, selling vehicles through dealers and direct stores, with the former contributing over 80% of Neta Auto's revenue in 2023.

Market analysts believe that the main purpose of Neta Auto's capital operation this time is still to raise funds. If the listing is successful, sufficient funds may help Neta Auto expand rapidly and have greater flexibility to respond.

▍Will overseas markets become a "lifesaver"?

According to the prospectus, Neta Auto stated that the funds raised from this Hong Kong Stock Exchange listing will be mainly used for strategic expansion in overseas markets to enhance the global influence of the Neta brand, enrich the company's product portfolio, and improve smart vehicle hardware and software technology. It will also be used to expand the company's sales, service, and charging infrastructure network in China, as well as provide funding for digital marketing and operating user communities.

Neta Auto emphasized in its prospectus that the overseas new energy vehicle market has significant growth potential, expected to grow from 5.2 million vehicles in 2023 to 13.6 million vehicles in 2028, with a compound annual growth rate of 21.4%. In terms of overseas business, Neta Auto achieved exports of 17,019 vehicles in 2023, accounting for 13.7% of total sales and contributing 12.0% of sales revenue for the same year.

According to a report by CIC Consulting, from January to May 2024, Neta Auto exported 16,458 vehicles, ranking first in the export volume of new-energy vehicle companies. Based on insurance data in 2023, Neta Auto has become one of the top three brands in the Southeast Asian market.

Neta Auto stated that it has now extended to the mid- to high-end market with higher profit margins and will deepen its experience in China into overseas markets. It will vigorously develop Latin America, the Middle East, and Africa in the future and expand to Europe at an appropriate time. Neta Auto's move into overseas markets also requires a significant amount of funding.

Will a focus on overseas expansion bring significant incremental growth? Someone close to Neta Auto told Auto Insight that the most obvious issue with Neta Auto currently lies in its products, with a lack of differentiation being its "Achilles' heel." Especially in the current era of homogenization, Neta Auto does not have a prominent moat, and its market share is easily eroded by new energy vehicle models from traditional automakers.

At the same time, this person also noted that in terms of the current "traffic-generating" effect, Neta Auto is facing a double-edged sword. Some of Zhang Yong and Zhou Hongyi's previous actions were considered sensational, and it remains to be seen how much influence they can maintain in the future.

However, Auto Insight also noted that Neta Auto's overseas expansion is not just about selling cars but also about building factories locally, indicating a focus on long-term development. The domestic market is highly competitive, and going overseas may allow Neta Auto to find a different path from that of NIO, XPeng, and Li Auto.

Going public is not the end. A harsh reality in the new energy vehicle market is that, apart from BYD and Li Auto achieving continuous profitability, most other brands are still in a loss-making state. Moreover, the current capital market is not very enthusiastic about new car companies. Judging from the experiences of NIO, XPeng, Li Auto, and their current share prices, going public is far from a complete success, and there are still many "hurdles" to overcome in the future.