Chery Automobile has officially gone public.
With an offering price of HK$30.75 per share and a fundraising target of 9.1 billion yuan， Chery has secured the position of the largest vehicle IPO in Hong Kong this year.
However， this news may leave many with a sense of surprise， questioning how a company of Chery’s stature is only now making its public debut.
One might wonder， “Weren’t they already listed?”
Currently， many automakers， like WM Motor， NETA Auto， and HiPhi， are yet to IPO. In contrast， the Chinese A-share market boasts established players such as BYD， Seres， Great Wall Motor， and various state-owned enterprises， while the Hong Kong market includes Geely， Leapmotor， and the “Wei-xiao-li” trio (Nio， Xpeng， and Li Auto).
Chery， a significant state-owned enterprise with nearly 270 billion yuan in revenue， has faced a prolonged journey to its IPO. What could be the reasons behind this 21-year wait? Was it a lack of desire?
On the contrary， the company has been eager to go public.
Chery’s pursuit of an IPO began as early as 2004， a process that has spanned two decades. During these years， Chery has encountered numerous setbacks in its attempts to list.
Consider the year 2004: Chery was on the verge of an IPO. Its Chery QQ model， with an entry-level price of 40，000 yuan， achieved remarkable sales of 40，000 units in its debut year， later surpassing 100，000 units， rivaling the sales of Volkswagen’s Santana.
Seizing this momentum， Chery initiated its IPO process. However， an unexpected turn of events led to a halt due to an equity dispute with SAIC Motor.
The core of the issue stemmed from Chery’s agreement earlier on: to obtain manufacturing licenses， it had exchanged 20% of its shares for SAIC’s involvement. This particular asset transfer remained unresolved， prompting the China Securities Regulatory Commission (CSRC) to flag it as a “potential dispute，” thus blocking the IPO.
This failure caused Chery to pause its listing efforts for four years， with the next attempt scheduled for 2008.
The year 2008 likely evokes a sense of déjà vu for many seasoned investors， as it marked the onset of the global financial crisis.
At this juncture， not only Chery but all IPOs across China were suspended. The only recourse was to wait.
Consequently， in 2009， Chery， observing an improving economic outlook， reapplied for its IPO. However， this attempt was again unsuccessful due to various technicalities， including exceeding the shareholder limit of 200 individuals. Following this rejection， Chery missed its optimal window for listing.
In the subsequent years， the company’s financial performance began to falter.
Chery’s early and deep-rooted engagement in international markets made it particularly vulnerable to the global financial crisis. For instance， in 2009， Chery’s subsidiary in Russia incurred a loss of 30.73 million yuan， its Uruguayan subsidiary lost 59.15 million yuan， and its Malaysian subsidiary reported a loss of 8.04 million yuan.
More critically， Chery’s internal competitiveness was also a significant factor. The brand had consistently struggled to gain a competitive edge domestically. The QQ’s success， driven by its affordable pricing， seemed more of an anomaly， as Chery failed to produce another hit model thereafter.
In an effort to break this cycle， Chery channeled substantial resources into a multitude of sub-brands that are not widely recognized. These included brands like Riich， Rely， Karry， Qoros， Cowin Auto， Arrizo， Tiggo， and Fengyun – the sheer number often makes it difficult to distinguish them.
A particularly memorable example might be Cowin Auto， which was controlled by Yibin State-owned Assets (a major shareholder of Wuliangye)， and reportedly offered baijiu with car purchases. However， due to a lack of strong brand identity and product overlap among these sub-brands， they also incurred significant losses， further exacerbating Chery’s financial woes.
With its IPO prospects dimming， Chery shifted its strategy in 2016. The company planned to spin off its Chery New Energy division for a separate listing. However， due to mediocre electric vehicle sales and negative net profits， this plan was again halted.
Chery then entered a period of relative inactivity for several years.
The turning point arrived in 2019. By this time， Chery had divested most of its sub-brands. The strategic investment of 19.6 billion yuan (with 10 billion yuan actually received) from Qingdao Wudaokou partially addressed Chery’s capital needs.
Furthermore， years of technological advancement had transformed Chery from a company known for “waiting in line for repairs” to a respected “engineer’s brand.” For instance， its third-generation ACTECO 1.6TGDI engine， boasting a thermal efficiency of 37.1%， was recognized as one of the “China Heart” top ten engines. The Tiggo 8， equipped with this engine， sold 116，500 units in 2019.
Crucially， the burgeoning overseas market played a pivotal role.
In 2022， Chery exported 450，000 vehicles， representing 37% of its total sales. In the following years， overseas sales even accounted for half of its total sales， leading to a significant improvement in Chery’s financial standing.
With renewed confidence， Chery relaunched its IPO plan in 2022. However， fate intervened at a critical moment when Qingdao Wudaokou， Chery’s largest shareholder， announced a liquidity crisis， causing the IPO to fail once again—a testament to its challenging circumstances and unyielding perseverance.
Subsequently， to address the financial void left by Qingdao Wudaokou， Chery attracted investments from companies such as Luxshare Precision， CATL， and Gotion High-tech. While these investments resolved the capital shortage， they complicated the ownership structure， making the IPO review process even more protracted.
In summary， Chery’s repeated IPO failures over the past 21 years can be attributed not only to unfortunate timing but also to two persistent issues: debt and ownership structure.
Regarding debt， this is largely intertwined with the company’s performance. Even today， Chery’s domestic competitiveness remains somewhat lacking. In August of this year [current year]， Chery sold 45，000 vehicles， ranking 13th. Its presence in the new energy market is also somewhat reliant on the Luxeed (powered by Huawei’s HarmonyOS) to boost its sales.
Consequently， Chery has expended significant resources with limited returns， leading to an asset-liability ratio that has occasionally exceeded 90% (compared to the typical 60-70% for traditional automakers)， marking it as a high-risk entity among its peers. Without strategic investment， it’s likely the company would have faced severe difficulties much earlier.
The influx of capital from financial institutions and external investors has led to a surge in Chery’s shareholder count and an increasingly convoluted ownership hierarchy， thereby impeding its IPO approval. Both the A-share and Hong Kong stock markets mandate a clear and simplified ownership structure for listing.
So， what led to Chery’s successful IPO this year?
The most crucial factor， in my opinion， is Chery’s significant breakthroughs in overseas markets in recent years， which have finally helped it escape the vicious cycle of “poor performance leading to complex ownership.”
As early as 2001， recognizing its limitations in the domestic market， Chery embarked on its international expansion， guided by a Syrian auto dealer. It subsequently expanded rapidly into markets like Russia， Brazil， and Latin America.
While languages may differ， the value proposition of good products at affordable prices is universally understood.
For instance， in Brazil， the Tiggo 8 is priced from 130，000 Brazilian reals (approximately 173，000 RMB)， undercutting comparable Japanese models by 10-20%， a strategy that has established Chery’s advantage in cost-effectiveness.
Particularly after the Russia-Ukraine conflict， Chinese vehicles experienced a surge in the Russian market， with Chery’s sales skyrocketing post-2022. Russia alone accounted for 60% of Chery’s export growth， becoming its largest overseas market.
As a result， Chery’s debt situation significantly improved， with its debt ratio gradually decreasing to 88.6%. This also provided Chery with a stronger impetus to address its ownership structure.
In 2022， after Qingdao Wudaokou’s liquidity crisis， Chery initiated reform measures and introduced more capital. Ultimately， its main shareholders became three entities: Wuhu Holdings， Luxshare Precision， and the employee stock ownership plan， Ruichuang.
However， the complex shareholding tiers continued to impede the IPO process.
It is important to note that Chery intended to list Chery Automobile Co.， Ltd. (referred to as Chery Automobile). The aforementioned three entities controlled Chery Automobile through Chery Holding Group， involving intricate cross-shareholdings and nested structures that made it difficult to disentangle. This complexity led to unclear responsibilities and increased audit difficulties.
Therefore， this year， Chery streamlined its ownership structure through a “shareholder descent” operation， allowing these three entities to directly control Chery Automobile. This move paved the way for Chery to successfully pass the IPO review.
Furthermore， the choice to pursue a listing on the Hong Kong Stock Exchange， known for its faster pace and more lenient requirements， and less scrutiny of past performance， is also a valid strategic decision. Had Chery persisted with the A-share route， its IPO plans would likely have remained in limbo indefinitely.
In essence， Chery’s IPO is a significant achievement. Beyond reducing reliance on bank loans and lowering capital costs， it is expected that Chery will allocate these funds towards increased R&D investments and further expansion into overseas markets.
Chery’s persistent need for capital is evident; its debt ratio remains above 80%. The successful IPO has provided much-needed financial infusion， largely thanks to the company’s overseas market performance.
The transition from a loss-making enterprise to a profitable one has not been an easy journey， and Chery has charted a path for domestic Chinese automakers. Its strategy， in essence， has been to focus on internal improvements and to be prepared for opportune moments.
