Zero-running cars, failed to lead

Zero-run cars delivered more than 10,000 in March, seemingly among the first echelon, but a large number of them are low-cost models, and the market may not give it a valuation comparable to the new forces of car manufacturing.

Wen 丨 BT Finance Han

"510-610KM NEDC endurance, 4 seconds performance zero hundred acceleration" - zero-running car's pure electric SUV C11 slogan is quite cool.

Extreme acceleration is not only the performance of the car, but also the delivery of zero-run.

According to China Securities News and other media reports, the delivery of new energy vehicles in March was released, Xiaopeng (NYSE: XPEV/09868.HK) led with 15,000 units, and Nezha and Ideal (NASDAQ: LI/02015.HK) delivered more than 10,000 vehicles. Also among the "10,000 cars" are zero-run cars. According to the data released by the company, the delivery volume in March of zero run increased by 193% month-on-month to 10,059 units, the year-on-year growth rate was also as high as more than 200%, and the cumulative delivery volume in the first quarter increased by 410% year-on-year.

Looking at the deliveries in March alone, Weilai (NYSE: NIO/09866.HK), which has a market value of nearly $40 billion, delivered 9,985 vehicles in the month, and it is also a younger brother in front of zero running. But at the same time, many media also pointed out that there is a problem with the "delivery quality" of zero-running cars.

The capital market is always a coincidence - just when the delivery volume "takes off", the zero-run car delivers the hong Kong stock exchange, sprints to the Hong Kong stock IPO listing financing, ahead of Nezha, Weima and other second-echelon players of new energy car manufacturing, which makes many analysts unexpected.

Behind the many beautiful scenes, the zero run that is about to land in the secondary market, how is the business performance?

It is difficult to find it in the data of the association

The entrepreneurial story of zero-run cars is also full of romanticism and dream spirit. The founder of the company, Zhu Jiangming, is one of the main founders of dahua shares (002236.SZ), an A-share listed security company, and once served as vice chairman of Dahua shares. At a zero-run car strategy conference, Zhu Jiangming announced that "in three years, zero-run intelligent driving technology will surpass Tesla", which has aroused strong concern in the market.

In addition to the delivery data released by their respective companies, the market often pays attention to the data officially released by the Association of New Energy Vehicles.

BT Finance noted that the "New Energy Automobile Industry Monthly Report" released by the Association is currently updated to January, and in the top 10 of the pure electric market in that month, there was no zero running figure.

In terms of subdividing into various regional markets, among the 10 sample cities such as Beijing, Shanghai, Guangzhou, and Shenzhen, only one model of zero-run cars was on the list that month, ranking fifth in Hefei and tenth in Hangzhou. And Hangzhou is also the "base camp" of zero running.

Although the flagship model of the "zero-run car" is usually a pure electric SUV (such as C11), the current composition of 10,000 vehicles may mainly be low-cost cars - the above-mentioned zero-run T03, which costs less than 100,000 yuan.

The "delivery quality" of zero-run cars has also been exposed to problems, and there are chaos in the newspaper. On March 28, a column of Hubei Jingshi reported that the sales staff of zero-running cars ran away with money, causing 6 owners in Wuhan to be defrauded of more than 400,000 yuan. Compared with Tesla, Ideal, NIO, etc., which need to be strictly booked through the official website or App, and the sales consultant only provides order assistance, zero-run cars seem to have room for improvement.

R&D expenditure is not as good as "Wei Xiaoli"

Returning to the earnings report of zero-run, can the company support the dream of "three years later, zero-run intelligent driving technology will surpass Tesla"? Let's look at R&D spending.

According to the zero-run prospectus, in terms of R&D investment, the company's expenditure in the three-year period from 2019 to 2021 was 358 million yuan, 289 million yuan and 740 million yuan, respectively, totaling nearly 1.4 billion yuan. In terms of employee composition, the company's R&D personnel accounted for about one-third (33.9%) by the end of 2021.

Compared with the R&D expenses of the "new car-making forces" in 2021, which exceeded 3 billion yuan and 4 billion yuan, the R&D expenses of zero running were lower. From 2019 to 2021, the R&D expenses of Ideal Automobile were 1.169 billion yuan, 1.100 billion yuan and 3.286 billion yuan, respectively, WEILAI was 4.429 billion yuan, 2.488 billion yuan and 4.592 billion yuan, and Xiaopeng Automobile was 2.070 billion yuan, 1.726 billion yuan and 4.114 billion yuan.

Let's look at revenue and profitability. From 2019 to 2021, the zero-run car camp recorded 117 million yuan, 631 million yuan and 3.132 billion yuan, ushering in a significant improvement in 2021. In the past three years, the company's gross profit margin recorded -95.7%, -50.6% and -44.3%, respectively, showing a gradual improvement trend.

"Wei Xiaoli" each burned almost tens of billions of dollars to kill a blood road, and zero running is still in a state of loss. From 2019 to 2021, the company's losses recorded 901 million yuan, 1.100 billion yuan and 2.846 billion yuan respectively, with a total loss of nearly 5 billion yuan in three years.

The company said in the prospectus, "We mainly focus on the high-end mainstream new energy vehicle market in China with prices between 150,000 yuan and 300,000 yuan", we can calculate an account - the company will deliver 8,050 and 43,748 electric vehicles in 2020 and 2021, respectively, and it is not difficult to conclude with the revenue of the current year, each vehicle brings revenue of 78,000 and 72,000 yuan, respectively, not only from "150,000 yuan to 300,000 yuan" still has a certain distance, and in 2021 it will not rise but fall.

Another noteworthy data is that in 2021, the company sold a car, the average loss is about 65,000 yuan, and some people on the Internet describe zero run as "selling one and losing one". Compared with the same industry, ideal car has accumulated a net loss of 4.444 billion yuan in the past three years, roughly calculating a loss of 35,800 yuan per car sold - the price of zero sports cars is not as expensive as ideal, and the loss of each car is more than ideal.

Who exactly is the comparable object of zero run

After nearly two years of development, China's new energy vehicle market has developed two market segments - one is the affordable market represented by Wuling Hongguang Mini, and the price of a single vehicle is usually 100,000 yuan or even less than 50,000 yuan; second, it is the mid-end to high-end new energy vehicle market represented by the new forces of car-making, and the single price is aimed at 200,000 yuan to 500,000 yuan.

It can be said that the two markets of low-end and high-end are clearly distinguished. So which end of Zero Run is it?

Zero Run has delivered three models so far, from first to last, S01 priced at 150,000 yuan, T03 priced at less than 100,000 yuan, and C11 priced at about 200,000 yuan, spanning two markets from low-end to mid-range.

The first S01 did not have any splash, claiming to focus on zero running in the high-end mainstream new energy vehicle market, and the real best selling was actually the second model, the T03 in the low-end price range. According to the company's prospectus, as of December 31, 2021, the company delivered 2708 S01, 46162 T03 and 3965 C11.

This also means that at this stage of zero running, competitors are actually low-end brands such as Wuling Hongguang Mini and Euler Black Cat, which are backed by large factories such as SAIC and Great Wall. So what does the low-end market value most? The answer is the amount of walking. Comparing with a comparison, it can be found that the Hongguang Mini sold 426,500 vehicles in 2021, and Euler sold 135,000 vehicles in 2021, which is much higher than the zero-run T03.

Coupled with the backing of traditional car brands, these best-selling low-end electric vehicles have obvious first-mover advantages in cost, supply chain and technology, and the zero-run T03 that builds cars from scratch is a very strong opponent. Suppose that if the price competition in this range continues to intensify, and competitors who rely on traditional auto giants burn up money, can zero run be overwhelmed?

In recent years, with the rise in costs, low-end electric vehicles that have little oil and water are facing greater challenges, and it has recently been rumored that Euler, the leader of low-end cars, has stopped taking orders, which can be seen in the industry situation. In other words, the bone of the low-end electric vehicle originally has no meat, and no matter how it is nibbled, the amount that can be eaten into the stomach is also very limited.

Looking at the high-end market, if compared with Wei Xiaoli, how about zero running? Separately dismantled out of the high-end model, zero-run C11 can not become a rival to the new forces. Sales of the C11 even declined, and the data showed that the sales volume of C11 in February was 1137 units, down 46% month-on-month. On March 18, Zero Run also announced an increase in the price of the entire C11 series, with the highest increase of 30,000 yuan. Although almost all new energy vehicles are increasing in price, for price-sensitive consumers, will they choose zero running, or BYD and Wei Xiaoli, which have higher brand recognition? The answer is not much suspense.

Whether on a low-end track or a mid-to-high-end track, zero-run is not a frontrunner.

Can investors accept zero run?

In any case, zero run is going public, and how to value and price the company has become a problem in front of investors.

From the perspective of price-to-book ratio, the current price-to-book ratio of the three "Wei Xiaoli" companies is 4 times-7 times. The zero-run prospectus shows that the total asset value of the company is as high as 12.5 billion yuan, which means that if the valuation is simply given to the same multiple as "Wei Xiaoli", the market value of zero-running may be between 50 billion yuan and 80 billion yuan.

Among the assets of zero running, the more "valuable" part is its car-making qualifications. According to public reports, in December 2020, Zero Run acquired 100% of the equity of Fujian Xinfuda Automobile Industry Co., Ltd. for 510 million yuan, solving the problem of car manufacturing qualifications. In March 2021, the company signed a cooperation project with a total investment of 4 billion yuan with a total investment of 4 billion yuan to build a production base for 200,000 new energy vehicles per year, which is scheduled to be put into operation in 2023. In April of the same year, Zero Run obtained the car manufacturing qualification issued by the regulatory authorities.

Tens of billions of yuan of assets are inseparable from several rounds of financing before the company's listing. According to Tianyan, Zero-run Automobile experienced a total of 7 rounds of financing before listing, with a cumulative amount of more than 10 billion yuan. It is reported that the valuation of zero run in the Pro-IPO round reached 22 billion yuan.

As mentioned earlier, the founder of Zero Run comes from dahua shares, the A-share security leader, which also appears in the history of Zero Run financing, supporting the development of Zero Run with real money and silver. In September 2021, Dahua said on the investor interactive platform that it held 9.43% of the shares after the Pre-IPO financing. The "Yongjin system", which was once famous for speculating in futures, also appeared in the financing process of zero-run cars, and Shanghai Electric, star capital Sequoia and Gopher, which were listed in A-shares, also appeared behind zero-run.

According to the company's prospectus, zero-run cars plan to raise funds for the research and development of intelligent electric vehicles, increase production capacity, and enhance brand awareness. In terms of cash flow, the company held cash and cash equivalents of 4.338 billion yuan at the end of 2021, although it has been greatly improved over the previous two years, but compared with the cash reserves of Ideal, Weilai and Xiaopeng in the same period of 50.16 billion yuan, 47 billion yuan and 45.36 billion yuan, it is still too little. Assuming that like other new forces, it can raise tens of billions of funds through IPOs, it seems that it is still difficult to compare with the scale of Wei Xiaoli's cash flow, and the key to future survival still depends on business fundamentals.

Who am I, where I come from, and where I'm going – the zero-run car that is about to land on the capital market is also facing such a soul torture. What is certain is that before these questions can be answered clearly, the market may be difficult to give the zero run with low-end models to support sales with a "Wei Xiaoli" valuation multiple.

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