Chinese electric vehicle (EV) maker Hozon New Energy Automobile signed agreements on Wednesday to raise at least 5 billion yuan ($690.96 million) from three regional government-backed investment firms.
Hozon, which sells EVs across China and overseas markets such as Thailand, Indonesia, and Malaysia, is raising the new capital from Tongxiang State-Owned Capital Investment and Operation, a company wholly owned by the finance bureau of a local government in Tongxiang City in eastern China’s Zhejiang Province.
The other two investors are linked to the local governments in Yichun City in southeastern China and Nanning City in southern China, respectively.
As part of the deal, Hozon said in a statement that the three investors will support the firm in its pursuit of an IPO, but it did not illustrate the details of its listing plan.
Hozon said that the new funding will allow it to increase investments in product R&D, technological innovation, development of intelligent connected vehicles, and export expansion.
Tongxiang, Yichun, and Nanning are the three Chinese cities where Hozon has built its domestic EV production facilities. After the launch of its first smart production base in Tongxiang in 2018, the firm launched operations at its Yichun production base in January 2022.
Hozon started building its third factory in Nanning in partnership with the local government in 2020, with an estimated total investment of over 3.5 billion yuan ($483.6 million). Its export-focused Nanning factory is fulfilling overseas orders of about 5,000-6,000 knock-down EV parts this year, according to co-founder and CEO Zhang Yong.
The investment followed the completion of a 7-billion-yuan ($967.2 million) investment in August 2023, just one month before Reuters reported Hozon’s plan to target a Hong Kong initial public offering (IPO) of up to $1 billion with the help of China International Capital Corporation (CICC) and Morgan Stanley.
Hozon is looking to roll out the IPO after a slow year of EV sales. The firm delivered almost 127,500 vehicles in 2023, down approximately 16.2% from the previous year. Its overall sales volume last year represented only 51% of its initial sales target of 250,000 units.
China’s intensified EV competition landscape and a decelerating global EV demand have continued to dampen the firm’s sales performance this year. Its total delivery number in the first quarter was estimated at 24,400, down 6.9% from the same period in 2023. This would make it harder for Hozon to achieve its annual sales target of 300,000 vehicles.
Founded in 2014 with Shanghai as its global headquarters, Hozon announced in August 2023 to set up its international headquarters in the Hong Kong Science Park, followed by its partnership with Hong Kong-based car dealer and distributor Dah Chong Hong to bring its EVs to customers in the city by 2024.
It became a so-called “key corporate partner” of the government of the special administrative region in March and received a subsidy of HK$200 million ($25.5 million), alongside the government’s “assistance in raising a $200-million cornerstone investment,” according to a joint statement at the time. The two parties did not specify the terms of the cooperation.
Outside of China, Hozon has set up production facilities in Thailand and Indonesia. Its smart factory in Thailand started operations in November 2023, while its Indonesian factory is estimated to be put into operation in Q2 2024.
The firm announced in January to build its third overseas factory in Malaysia. The factory will be ready for production in 2025.
