Electric vehicle (EV) startup Leapmotor, co-founded by Chinese surveillance equipment maker Dahua Technology, has raked in 4.3 billion yuan ($663.9 million) in a Series B round of financing from investors including the local government in eastern China’s Hefei City.
Other investors are SDIC Chuangyi Industry Fund Management, a wholly-owned subsidiary of State Development & Investment Corporation (SDIC), investment firm ZJU Jiuzhi Investment Management, and Chinese financial service firm Yongjin Group’s private equity (PE) unit Yonghua Capital, the startup announced on Wednesday.
Hangzhou-based Leapmotor, which counts Sequoia Capital China among its early backers, said that the Series B round exceeded its initial target by over 1 billion yuan ($154.3 million).
The fresh funds will be used for Leapmotor’s continued investments in product R&D, sales channel expansion, and brand promotion.
Founded in 2015 in Hangzhou City, eastern China’s Zhejiang Province, Leapmotor delivers three EV models including small-sized all-electric coupes C11 and T03, as well as its first all-electric sport utility vehicle (SUV) model S01, which just started presale on January 1.
The startup sold a total of 3,024 vehicles in December 2020, up 49% from one month earlier. It has booked a total sales volume of 10,266 for the whole year of 2020, according to official data.
IPO lineup of Chinese EV makers
The new financing comes as the startup is mulling an initial public offering (IPO) on China’s Nasdaq-style STAR Market. Leapmotor’s co-founder and president Wu Baojun told several Chinese media outlets in late 2020 that the firm plans to file for an IPO application in H2 2021 and targets to go public by the end of 2021 or in early 2022.
“We aim to strengthen our connection with the capital market like domestic peers NIO and Li Auto,” said Wu, cited in a report from financial publication 21st Century Business Herald last November. “There will be another funding round before our planned IPO.”
Leapmotor could join a string of Chinese EV companies that have tapped the public market for more capital to finance their next stage of development. Following NIO’s $1-billion New York IPO in 2018, Xpeng also completed a $1.5-billion listing in the US last August, one month after Li Auto’s $1.1-billion Nasdaq IPO debut. Shares of the three companies have gained significantly in recent months.
Although Beijing is slowly phasing out subsidies to the EV industry, demand has shown no sign of decay in the world’s biggest EV market. According to the China Association of Automobile Manufacturers (CAAM), the gross sales volume of EVs reached almost 1.4 million in China, up 10.9% from 2019.
US market research firm IDC expects the number to grow to over 5.4 million by 2025, as China has pledged to lift up the EV penetration rate to around 20% by then in its attempts to curb vehicle emissions and promote high-tech industries.
Sequoia Capital China first invested in Leapmotor’s Series Pre-A round in late 2017 to become its first external shareholder. The Series Pre-A round was closed in January 2018 at 400 million yuan ($61.7 million).