GAC AION, which is affiliated with the Chinese state-owned automaker Guangzhou Automobile Group (GAC), has pocketed 18.3 billion yuan ($2.5 billion) in a Series A round to become the most valuable startup in China’s electric vehicle (EV) industry.
The five-year-old EV subsidiary reached a valuation of over 103.2 billion yuan ($14.2 billion) following the fundraising that saw the participation of 53 strategic investors.
Following the funding round, GAC’s shareholding has reduced to 76.9% from 93.5%, the parent company disclosed in filings to stock exchanges in Shanghai and Hong Kong on Friday.
GAC, one of China’s major manufacturers of new energy vehicles (NEVs), is doubling down on the all-electric segment with its AION brand at a time when mainland China has risen to become the world’s biggest consumer of EVs. Out of the 4.2 million EVs sold worldwide in the first half of 2022, 57.1% were delivered to customers in mainland China, according to data from market research firm Canalys.
Despite being a late-comer in China’s increasingly competitive EV market, AION’s links to the state-owned automotive parent may help it take on rivalry from more mature domestic competitors such as NIO, XPeng, and Hozon Auto.
Strategic resources
The investment follows GAC’s efforts to diversify its subsidiary’s cap table and help it rope in strategic partners to accelerate future growth.
Lead investors in the Series A round include PICC Capital, the alternative investment arm of Chinese listed insurer PICC Group; power system operator China Southern Power Grid’s investment platform; the hundred-billion-yuan China Structural Reform Fund; Shenzhen Capital Group; CITIC Securities’ private investment unit Goldstone Investment; and Guangzhou Industrial Investment Fund Management.
The investment is expected to “greatly improve the comprehensive competitiveness of AION for future development,” said GAC in its filing to the Hong Kong stock exchange. The parent said that the deal will help the startup combine “upstream and downstream” resources for the development of EV elements such as battery materials, new-generation batteries, automotive chips, intelligent driving, and smart cockpits.
The new funding ensured AION’s production and offered sufficient financial support to the R&D of key technologies, said GAC.
Founded in July 2017 and headquartered in Guangzhou, AION has introduced to the market a series of all-electric vehicle models. Its sales volumes in the first nine months of 2022 reached 182,300 units, compared to 120,200 and 60,000 in the same periods in 2021 and 2020, respectively.
In a statement, the startup said that it has maintained strong growth in terms of monthly EV sales so far this year, with its monthly sales hitting a record high of over 30,000 units in recent months. It claims a compound annual growth rate (CAGR) of more than 120% despite impacts from the pandemic, supply chain crunch, and cost increases.
The Series A round is the latest move by AION to transform itself into a mix-ownership EV brand from a largely state-owned business — an endeavour that it started in August 2021.
The GAC affiliate completed its Series A fundraising by flotation at Guangzhou Enterprises Mergers and Acquisitions Service, a national equity transaction platform in southern China’s Guangzhou City — a process different from the common practice of raising capital through a private funding round.
During the process, the startup engaged a valuation institution qualified in securities and futures business to appraise the value of its entire equity interest. It then publicly selected subscribers and finalised the consideration for subscription by way of competitive negotiations, thereby determining a universal subscription price. Its shares were valued at 13.2 yuan ($1.8) apiece in the Series A round.