Author: Lushi Ming

Editor: Dafeng

In the domestic automotive industry, Chery has always been a rather unique presence. For example, it continues to invest in the development of traditional fuel-powered vehicle technology amidst the rise of the new energy era; it is the only major automotive group in China that has yet to go public; and while its domestic sales are unremarkable, it leads the country in vehicle exports... However, with a series of recent announcements, Chery may be poised for a remarkable transformation. On the news front, Chery recently made its debut on the Fortune Global 500 list (ranked 385th), followed by showcasing its advanced solid-state battery technology at an innovation conference, and then celebrating the roll-out of its 15 millionth vehicle globally. Meanwhile, rumors persist that Chery is about to launch an IPO in Hong Kong. These announcements encompass both facts and aspirations, with the facts worthy of celebration but the aspirations still facing numerous obstacles. Especially when it comes to going public, Chery still has much ground to cover given its insufficient strength in new energy and heavy reliance on traditional fuel-powered vehicles.

Challenges in the Transition to New Energy

In the era of new energy vehicles, Chery can be described as an early starter but a late bloomer compared to other traditional automakers. Back in late 2014, Chery launched its eQ electric vehicle based on the QQ platform. By 2016, it had obtained the fourth new energy vehicle production license issued by the National Development and Reform Commission. However, despite this early advantage, Chery remained relatively complacent about new energy for a long time after obtaining the license.

Even amidst the wave of new-entrant automakers and as Geely, Great Wall, Changan, SAIC, and GAC were all evolving through new energy and smart technologies, Chery failed to make a notable impression. The only notable achievements were the launch of the Chery eQ1 (also known as the Chery Xiao Mayi) and QQ Ice Cream in March 2017 and December 2021, which performed reasonably well in the A00-class pure electric vehicle market. However, as the new energy market evolved with higher-end products and slower growth in demand for A00-class vehicles, Chery's inaction caused it to miss out on the expanding new energy market.

Chery Xiao Mayi Source: YoujiaIt wasn't until 2022, when new energy vehicle sales exploded, that Chery finally woke up and began to make strides in the new energy sector. That year, Chery comprehensively deployed its "Yao Guang 2025" forward-looking technology strategy, planning to invest over RMB 100 billion in core technology research and development over five years, with over 25,000 R&D personnel, to achieve upgrades in 19 core technologies including platform architecture, chips, high-efficiency hybrid engines, hydrogen energy, electric drive systems, batteries, intelligent interaction, autonomous driving, and smart cloud platforms. After more than a year of catching up, Chery New Energy finally achieved impressive results.

In September 2023, Chery New Energy sold 58,900 vehicles, up 183.4% year-on-year, ranking fourth in the industry. In the first three quarters of this year, Chery New Energy sold 331,800 vehicles, a year-on-year surge of 186.4%. However, compared to industry giants like BYD, Chery's new energy sales, while growing rapidly, are still relatively small in scale.

Recently, Yin Tongyue commented on Chery's new energy vehicle business, stating, "We are actually the worst-performing company." Despite the challenges, Chery continues to push hard to gain more strategic space. At the recent 2024 Chery Innovation Conference, Chery showcased its solid-state battery technology and announced plans to launch targeted operations in 2026 and mass production in 2027. Solid-state batteries offer higher energy density and safety, widely regarded as the key to revolutionary breakthroughs in new energy vehicles. Chery's solid-state battery technology is undoubtedly attracting more consumer attention. However, it's worth noting that industry standards for all-solid-state batteries have yet to be established, and many technical challenges remain unsolved, leading some companies to engage in hype.

Inverted Sales of Fuel-Powered Vehicles for Export

It's difficult to turn a big ship around, and even though Chery has accelerated its pace in the new energy race, its core business remains focused on fuel-powered vehicles. In the first three quarters of 2024, Chery Holding Group sold a total of 1,752,793 vehicles, up 39.9% year-on-year, representing 93% of its 2023 annual sales. Among them, 1,421,005 were fuel-powered vehicles, up 24.9% year-on-year, accounting for 81% of total sales. Exports totaled 829,353 vehicles, up 24.5% year-on-year, accounting for 47.3% of total sales. As the global automotive industry accelerates its transition to new energy, the future of fuel-powered vehicles seems uncertain. Chery's high proportion of fuel-powered vehicle sales undoubtedly poses a hidden risk for the future.

Tiggo 8L Source: Chery Automobile Official WebsiteMeanwhile, despite Chery's rapid overall sales growth, its sales structure shows that the overseas market is growing faster than the domestic market, making Chery increasingly reliant on overseas markets for sales and profits.

Looking back at historical data, from 2021 to the first nine months of 2023, Chery's overseas sales were 269,200, 450,000, and 648,000 vehicles, respectively, with year-on-year growth rates of 136.3%, 67.2%, and 110%, respectively, accounting for an increasing proportion of total sales from 28% to 51.7%. Subtracting overseas sales from total annual sales, we can calculate that Chery sold 692,700 and 782,700 vehicles domestically in 2021 and 2022, respectively, with an estimated sales volume of around 880,000 in 2023, representing an average annual growth rate of around 13%. The typical path for Chinese automakers expanding overseas is to first achieve sales growth in the Chinese market before expanding overseas. Chery, however, stands out as one of the few companies with an "inverted" sales structure.

This "inversion" can be spun as "internationalization," but it can also be seen as a reflection of Chery's lack of high-end product support. Among Chery Group's overseas businesses, Saudi Arabia, Mexico, Peru, Brazil, and other countries are the main markets. These countries have little domestic automotive industry and are highly dependent on imports, belonging to developing countries with less demanding requirements for automotive products. As a result, Chery Group has been able to rapidly expand its overseas market and see a surge in sales. However, on the flip side, Chery struggles to penetrate more developed automotive markets.

Image: Chery Malaysia 4S StoreIn addition, other Chinese automakers such as BYD, Changan, and Geely have also been expanding overseas while achieving high growth in their domestic markets in recent years.

Chery's strong performance in overseas markets is undoubtedly an advantage, but for a Chinese company, the true test of its comprehensive competitiveness lies in standing out in the more competitive Chinese market. Faced with underwhelming domestic sales, Chery urgently needs to make progress in the new energy sector.

A 20-Year Dream of Going Public, Within Reach?

The development of new energy vehicle technology is extremely capital-intensive, and Chery has long relied on bank financing, with its funding needs well-known in the industry. In fact, as one of the few domestic automakers that have yet to go public, Chery Automobile has always harbored a "dream of going public." Being listed on the secondary market would not only provide Chery with a stable long-term capital supply but also activate its equity incentive mechanism and accelerate its strategic transition to new energy.

Recently, multiple media outlets reported that Chery Holding Group is considering an initial public offering (IPO) of its automotive division, Chery Automobile, in Hong Kong, with a business valuation of approximately RMB 50 billion (approximately USD 7.1 billion). However, the market doesn't seem enthusiastic about this news. A significant reason is that Chery is almost annually rumored to be pushing for an IPO, only for the rumors to eventually fizzle out.

For example, at the end of 2023, there were rumors that IDG Capital was in talks with Chery Holding Group to acquire equity, and that Chery Holding Group planned to submit an IPO application as early as 2024, with a corresponding valuation of around RMB 150 billion for Chery Automobile. Earlier IPO rumors date back to 2004, when Chery Automobile first announced plans to go public, only to be denied by the company's officials. Since then, Chery Automobile or its related investors have been rumored to be planning an IPO in 2006, 2009, 2012, 2016, and 2019. But despite trying various methods, including backdoor listings and mixed-ownership reforms, Chery has yet to achieve its listing goals.

It's worth noting that at the "Yao Guang 2025 Chery Technology DAY" conference, Yin Tongyue once again expressed his hope to complete the IPO plan by 2025. However, industry insiders are generally pessimistic about this.

Many believe that new energy vehicles have become an important indicator for assessing the development potential of automakers, and Chery's "lag" in this area undoubtedly adversely affects its market valuation. On the one hand, Chery currently lacks an independent and competitive new energy vehicle brand, which tends to attract investors and facilitate the IPO process. On the other hand, Chery faces an imbalance in its model lineup, particularly a scarcity of high-end models.

While Chery Group encompasses four passenger car brands - Chery, Jetour, EXEED, and iCAR - seemingly creating a comprehensive brand matrix, it actually hides many challenges. In particular, there is significant overlap between models under the Chery and Jetour brands in niche markets, leading to confusion in product lines and failing to achieve the desired synergies in market layout. As the only major domestic automaker that has yet to go public, Chery's journey to the stock market remains fraught with challenges and uncertainties. Whether it can achieve its IPO dreams by 2025 remains to be seen after withstanding the baptism of numerous market tests.