Produced by Radar Finance Hongtu | Text by Meng Shuai | Edited by Shenhai

Following NIO, Li Auto, XPeng, and Leapmotor, another emerging automaker has launched a sprint towards the Hong Kong Stock Exchange. On June 26th, Nezha Auto's parent company, Hozon New Energy Auto Co., Ltd. (hereinafter referred to as "Hozon Auto"), submitted its listing application to the Hong Kong Stock Exchange.

From 2021 to 2023, Nezha Auto's annual revenue increased from 5.087 billion yuan to 13.555 billion yuan, but its revenue growth rate has shown a significant slowdown. Meanwhile, during the three-year period, Nezha Auto accumulated losses exceeding 18.3 billion yuan, losing tens of thousands for every car sold.

Behind the pressure on its performance, Nezha Auto is facing a sales decline. After winning the new force sales champion in 2022, Nezha Auto subsequently delivered two less impressive results. Last year, Nezha Auto ranked 8th among all Chinese brands that only produce new energy passenger cars. In the first five months of this year, Nezha Auto's cumulative deliveries declined by 13.4% year-on-year.

Since the company's establishment in 2014, Nezha Auto has successively released multiple models. Although it has not yet landed on the capital market, if roughly calculated based on the information disclosed in this prospectus regarding cross-round financing, Nezha Auto's valuation is approximately 42.4 billion yuan.

While participating in the domestic new energy vehicle battle, Nezha Auto has also made overseas its focus. In 2023, Nezha Auto exported a total of 17,019 new cars, accounting for 13.7% of its total sales for the year and contributing 12% of its sales revenue.

It is worth mentioning that many investors stand behind Nezha Auto, among which 360, helmed by Zhou Hongyi, is undoubtedly one of the more high-profile "sponsors." As the Chief Executive Officer of Nezha Auto, Zhang Yong has also attracted controversy for Nezha Auto on several occasions. However, under the influence of Zhou Hongyi and Zhang Yong's traffic generation, Nezha Auto has indeed gained more exposure than before.

Nezha Auto plans to go public in Hong Kong

On June 26th, Nezha Auto's parent company, Hozon Auto, submitted a listing application to the Hong Kong Stock Exchange, aiming to become the fifth emerging automaker listed on the Hong Kong Stock Exchange. With the disclosure of the prospectus, Nezha Auto's financial data in recent years has also been revealed.

The prospectus shows that from 2021 to 2023, Nezha Auto recorded revenues of 5.087 billion yuan, 13.05 billion yuan, and 13.555 billion yuan, respectively. Judging from the aforementioned data, the speed of Nezha Auto's revenue growth has significantly slowed down last year. In 2022, Nezha Auto's revenue increased by 156.5% year-on-year, but last year, Nezha Auto's revenue growth rate directly dropped to 3.9%.

Compared with its peers, Nezha Auto's revenue scale last year was still relatively low. According to financial data released by various companies, in 2023, Li Auto, NIO, XPeng, and Leapmotor recorded revenues of 123.851 billion yuan, 55.618 billion yuan, 30.676 billion yuan, and 16.747 billion yuan, respectively, meaning that Nezha Auto's revenue is at the bottom compared to the previous players.

Similar to the trend of revenue growth, Nezha Auto's gross margin is also increasing year by year. The prospectus shows that in 2021, Nezha Auto's gross margin was -34.4%. By 2022 and 2023, Nezha Auto's gross margin further increased to -22.5% and -14.9%, respectively.

The overall gross margin of Nezha Auto has improved mainly due to product portfolio optimization, a greater focus on smart new energy vehicle models with increased average selling prices, increased international sales, and improved cost-effectiveness through cost control measures.

However, Nezha Auto's gross margin has not yet turned positive. In this regard, Nezha Auto stated that it is still increasing production and delivery volumes to achieve economies of scale.

Like most emerging automakers, Nezha Auto has also been in the quagmire of losses for years. The prospectus shows that from 2021 to 2023, Nezha Auto recorded annual losses of 4.84 billion yuan, 6.666 billion yuan, and 6.867 billion yuan, respectively. Based on this calculation, Nezha Auto's cumulative losses have exceeded 18.3 billion yuan in just these three years.

Further breakdown shows that Nezha Auto's revenue mainly relies on the sale of cars and components. The prospectus shows that from 2021 to 2023, Nezha Auto's revenue from the sale of cars and components accounted for 93.4%, 97.9%, and 97.8% of total revenue, respectively.

However, behind the pressure on its performance lies Nezha Auto's anxiety regarding sales. Looking back at 2022, Nezha Auto took the sales crown of new forces with an annual delivery volume of 152,073 vehicles.

In 2023, there were a total of 146 new energy passenger car brands in China, of which only 16 brands had sales of over 100,000 vehicles, accounting for a combined market share of 66.6% of the entire year. That year, Nezha Auto sold a total of 105,278 new energy passenger cars, ranking 8th among all Chinese brands that only produce new energy passenger cars. Even compared to its previously set annual sales target of 250,000 vehicles, Nezha Auto's performance clearly has a significant gap.

In the first five months of this year, Nezha Auto delivered a total of 43,564 new cars, down 13.4% compared to the delivery volume of 50,285 in the same period of 2023. Under the circumstances that some emerging automakers, such as Li Auto, have exceeded 35,000 vehicles in monthly deliveries, Nezha Auto's monthly deliveries for multiple months this year have even failed to exceed 10,000 vehicles.

Regarding the decline in car sales in the first five months of the year, Nezha Auto explained in the prospectus that it was mainly due to the company's efforts to rationalize and simplify its domestic production capacity and global supply structure during this period to further promote international initiatives, which temporarily affected car production. Nezha Auto emphasized that it has been pursuing an overseas expansion strategy, expanding into overseas markets with high growth potential, and has made significant progress in implementing this strategy.

Regarding how to further move towards profitability, Nezha Auto has proposed several measures. First, it will continue to launch new models and implement rapid product iterations, focusing on higher-priced products.

It is reported that in 2021, Nezha Auto's overall average selling price was 71,000 yuan. Afterward, Nezha Auto's overall average selling price increased to 84,000 yuan in 2022 and further rose to 109,000 yuan last year. In the first four months of this year, Nezha Auto's overall average selling price has increased to 113,000 yuan, and Nezha Auto expects this trend to continue in the future.

Secondly, Nezha Auto also plans to further expand overseas markets. It will customize products, services, and strategies based on the characteristics and customer needs of each overseas market to enhance its revenue and profitability.

In addition, Nezha Auto also plans to increase revenue sources by providing more value-added services, such as car rental services, battery cascading utilization services, and software subscriptions; improve overall cost-effectiveness by continuously implementing strategies of independently developing core automotive components and procuring non-core automotive components from suppliers; and further enhance manufacturing efficiency through technological innovation and economies of scale.

Valued at 42.4 billion yuan, holding high the banner of going overseas

Although it has not yet officially landed on the capital market, Nezha Auto can be considered a veteran player among emerging automakers.

As early as 2014, Zhejiang Hozon New Energy Automobile Co., Ltd. was registered and established. In 2017, the company was granted approval by the National Development and Reform Commission for an electric passenger car production project with a capacity of 50,000 electric vehicles. A year later, the company also obtained production qualifications granted by the Ministry of Industry and Information Technology.

Subsequently, the company officially launched the Nezha brand in June 2018. In the prospectus released this time, Nezha Auto also explained why the brand chose the name "Nezha."

Nezha originates from ancient Chinese mythology. Nezha's image of being young, brave, determined, breaking through oneself, and defending justice is well-known among the global Chinese community. This is a concise embodiment of Nezha Auto's brand spirit: committed to being a new energy intelligent automaker that manufactures accessible dream cars for people around the world.

In July 2018, the company's first mass-produced car, the Nezha N01, rolled off the production line and was officially launched at the Guangzhou Auto Show in November of the same year. In 2020, Nezha delivered its second mass-produced model, the Nezha U, and its third mass-produced model, the Nezha V.

In November 2021, Nezha Auto launched the industry's first self-developed intelligent vehicle platform integrating high intelligence, high safety, high scalability, and environmental friendliness - the Shanhai Platform. The following year, Nezha Auto launched the Haozhi Technology Platform, including Haozhi Supercomputing, Haozhi Electric Drive, and Haozhi Extended Range.

After several years of development, Nezha Auto currently sells models including the small pure electric SUV Nezha AYA series (including the Nezha V and Nezha AYA two generations), the compact pure electric SUV Nezha X series (including the Nezha U and Nezha X two generations), the mid-size extended-range and electric SUV Nezha L, the sporty technology coupe Nezha S, and China's first mass-produced two-door four-seat pure electric sports car, the Nezha GT.

As of the end of last year, Nezha Auto had a total of 7,932 employees. If divided by function, the largest proportion of Nezha Auto's employees are production personnel, reaching 3,096 people. Followed by sales and marketing personnel, R&D personnel, with numbers reaching 2,249 and 2,132, respectively. In addition, Nezha Auto also has 455 general and administrative support staff.

If divided by region, most of Nezha Auto's employees are located in China, mainly distributed in Nezha Auto's headquarters in Shanghai and its vehicle plant in Tongxiang. In addition to domestic employees, Nezha Auto also has 66 full-time employees in Thailand, Indonesia, Brazil, Mexico, and the Netherlands.

The reason why Nezha Auto recruits employees abroad is mainly because going overseas has become one of Nezha Auto's current important strategies. The prospectus shows that in 2023, Nezha Auto exported a total of 17,019 new cars, accounting for 13.7% of its total sales for the year and contributing 12% of its sales revenue.

Among them, Southeast Asia is a key market for Nezha Auto. As early as 2021, Nezha Auto began studying right-hand drive models to prepare for its expansion in the Thai and Southeast Asian markets. In 2022, Nezha Auto became the first emerging Chinese new energy automaker to launch right-hand drive models.

According to a report by CIC Consulting, Nezha Auto is one of the top 3 new energy passenger car brands in the Southeast Asian market in 2023, measured by insurance premiums. The Nezha AYA series launched by Nezha Auto ranked first in sales among Southeast Asian small pure electric vehicles in 2023, with a market share of up to 52.0%. In the future, Nezha Auto will continue to vigorously develop Latin America, the Middle East, and Africa, and subsequently expand to Europe at an appropriate time.

To date, Nezha Auto's factories in Thailand and Indonesia have begun mass production, and the Malaysian factory has been put into construction. As of December 31, 2023, Nezha Auto has arranged or established around 100 sales and after-sales outlets overseas. In addition, Nezha Auto has also cooperated with overseas third-party charging network operators to provide users with a good charging experience.

From Nezha Auto's perspective, its layout in overseas markets will help it further diversify its revenue sources, strengthen scale effects, and enhance profitability. To better carry out its globalization endeavor, Nezha Auto will also hold and manage overseas assets through its Hong Kong company and plans to strategically promote global expansion with Hong Kong as its headquarters.

It is worth mentioning that if roughly calculated based on the information disclosed in Nezha Auto's prospectus regarding cross-round financing, four investors acquired 8.08% of Hozon New Energy's equity at a cost of 3.426 billion yuan. Based on this calculation, Hozon New Energy's valuation is approximately 42.4 billion yuan.

According to the "2024 Hurun Global Unicorn List" released by Hurun Research Institute previously, Hozon Auto was ranked 197th on the list with an enterprise valuation of 30 billion yuan.

For reference, as of the close of July 5th, the market capitalizations of the four emerging automakers in Hong Kong stocks were 168.2 billion Hong Kong dollars for Li Auto, 78.25 billion Hong Kong dollars for NIO, 57.52 billion Hong Kong dollars for XPeng, and 31.42 billion Hong Kong dollars for Leapmotor.

Can traffic become the antidote for Nezha Auto?

When mentioning Nezha Auto, some people may immediately think of Zhang Yong, while others may think of Zhou Hongyi, but actually, Nezha Auto's earliest founder was Fang Yunzhou.

It is understood that Nezha Auto's Chairman Fang Yunzhou is a postdoctoral fellow from Tsinghua University. As early as 2014, Fang Yunzhou innovatively proposed that new energy vehicles are the key nodes of mobile internet, energy internet, and smart transportation. Currently, Fang Yunzhou is mainly responsible for the group's overall strategic planning, product development, business development, and business decision-making.

Another co-founder of Nezha Auto is Zhang Yong, who serves as the Chief Executive Officer of the company. Now 48 years old, Zhang Yong has long been responsible for operation management and channel construction in the new energy automobile industry, with rich execution and management experience.

Before joining Nezha Auto, Zhang Yong served as the general manager of Beijing Foton Motor Co., Ltd. and the deputy general manager of Chery New Energy Automobile. From 2014 to 2018, Zhang Yong also served as the deputy general manager of Beijing New Energy Automobile Co., Ltd. and the manager of Beijing New Energy Automobile Marketing Co., Ltd.

It was not until January 2018 that Zhang Yong officially joined Nezha Auto. Currently, Zhang Yong is mainly responsible for overseeing the group's daily operations and management as well as the implementation of the group's business plans at Nezha Auto. Compared to the low-key Fang Yunzhou, Zhang Yong has a relatively higher exposure in the outside world.

Last October, when discussing the progress of the IPO, Zhang Yong said that Nezha Auto raised 10 billion yuan in financing last year and also raised several billion yuan this year. Currently, there are over 10 billion yuan in funds on its balance sheet, and it is not in a hurry to IPO. "The market is not good now, and it doesn't matter much whether it goes public or not."

In March this year, on the eve of the official launch of Xiaomi's car release conference, Zhang Yong joined Zhou Hongyi in a live broadcast. This live broadcast by the two not only test-drove the upcoming Nezha L model but also showcased the expanding Tongxiang production base.

However, there were some "minor incidents" during the livestream. During the session, Zhou Hongyi was "firing on all cylinders." He not only directly pointed out the lack of logic in Nezha Auto's current naming conventions and the inadequacies in its product marketing and planning, but also suggested that Zhang Yong should take a cue from Xiaomi Auto in showcasing their production facilities.

When reviewing the livestream afterward, Zhou Hongyi candidly mentioned that, although there were some minor conflicts during the broadcast, the overall effect was quite good. "Conflicts make the show interesting," he said, adding that the livestream "might have been the most-watched in Nezha's history."

Zhou Hongyi's "pointed remarks" towards Zhang Yong were because the company Zhou Hongyi leads, 360 Security Technology Inc. (commonly known as 360), is actually a behind-the-scenes investor in Nezha Auto. According to the prospectus, prior to the IPO, the founder Fang Yunzhou and his controlled entities held a total of 11.82% of the company. Related investors under coordinated action arrangements, including entities like Yichun Entity and Yichun Xinhe, held 20.28% of the company. Additionally, Minsheng Equity, Huading Capital, and 360 Security held 11.46%, 9.82%, and 9.12% of the company's shares respectively.

However, the investment in Nezha Auto has also placed a significant burden on 360, led by Zhou Hongyi. In 2022, 360 recorded a net profit loss attributable to the parent company of 2.204 billion yuan, marking 360's first loss since 2014. The investment loss of 1.293 billion yuan in 2022 was mainly due to the impact of losses from Hozon Auto under the equity method and investment losses from the disposal of the Opera Limited project.

Like Zhou Hongyi, Zhang Yong, the CEO of Nezha Auto, is also a figure of interest. After the livestream with Zhou Hongyi, Zhang Yong posted on social media, accepting Lao Zhou's criticisms and stating that he would learn from Lei Jun's marketing strategies.

During another livestream in April, a viewer asked Zhang Yong, "If I buy a Nezha car, will you open the car door for me?" Zhang Yong responded, "As long as I have the time, I don't mind bowing 90 degrees to open the car door for you." However, Zhang Yong's posture of crossing his legs during the livestream was compared by many netizens to Lei Jun's demeanor, with some commenting that he seemed to have an air of superiority.

Afterward, Zhang Yong responded on Weibo, stating that his posture of crossing his legs was due to "a bad back" and used the term "bootlicker" to address netizens comparing him to others. However, Zhang Yong later deleted that Weibo post and published an apology video, admitting that he was impulsive at the time of the post and clarifying that he had no intention to allude to Lei Jun, for whom he expressed great respect.

Just as one controversy subsided, another arose. On June 3rd, Zhang Yong posted on Weibo, saying, "Today I heard a cold joke, which I deeply feel: No one is starting businesses anymore; everyone is working on crafting an entrepreneur's IP." Many netizens interpreted this post as a veiled jab at Zhou Hongyi.

On June 4th, Zhang Yong addressed the controversy on Weibo, saying, "I posted casually, not expecting such a strong reaction, and some people with ill intentions have maliciously misinterpreted my original meaning."

Zhang Yong also mentioned in this Weibo post that, with the help and support of Zhou Hongyi, Nezha has received unprecedented attention and boosted its product orders. "Our internal review unanimously agrees that the success of the L model owes half of the credit to Lao Zhou."

According to Zhang Yong, Zhou Hongyi, as an investor in Nezha Auto, has invested a substantial 1.9 billion yuan and is now further advocating for domestic new energy vehicles. "As a successful entrepreneur, his continuous support for domestic new energy vehicles is commendable and should be supported, not baselessly questioned."

On the same day, Zhou Hongyi also posted a video on social media, saying, "A friend sent me a message saying they saw Zhang Yong talking nonsense again." Zhou Hongyi commented that Zhang Yong shouldn't get carried away just because the order volume for the Nezha L has increased. He also suggested that Zhang Yong should continue to manage the traffic well and use the success of the Nezha L as a turnaround point.

In Zhou Hongyi's view, the initial major issue for Nezha Auto was its lack of brand awareness, which has recently improved somewhat. Therefore, he advised Zhang Yong to maintain a humble and cautious attitude and to effectively manage traffic. "Whether the traffic is generated or leveraged, I believe traffic represents customer acquisition capability and reflects users' awareness and attitudes toward you."

However, some voices argue that while traffic and marketing can bring more attention to Nezha Auto, they cannot solve all problems entirely. Firstly, traffic and marketing are just one aspect of brand building and market promotion; they need to be combined with the product's quality, performance, and service to achieve better results. If the product itself has issues, high traffic and excellent marketing strategies will still struggle to regain consumer trust.

As market competition intensifies and consumer demands evolve rapidly, relying solely on traffic and traditional marketing methods is insufficient to sustain a brand's foothold in the market. To address this challenge, Nezha Auto must focus on continuous innovation and upgrades of its products while deeply understanding consumer needs. By consistently improving user experience and service quality, Nezha Auto can prevent falling behind and maintain a competitive edge.