Electric vehicle demand might be softening, but investors appear to be excited about the U.S. debut of a Chinese luxury EV brand.

Geely-owned Zeekr hit the New York Stock Exchange with a splash on Friday, making it the first major U.S. listing by a Chinese company since 2021, following China’s effective ban on foreign IPOs. The company’s stock price soared 38% in the first few minutes of trading, giving Zeekr a potential $7 billion valuation.

Zeekr’s market hype is noteworthy and may indicate that investors see value in the high-quality, low-price offerings of Chinese automakers. But if the public EV market thus far has taught us anything, it’s that the higher the shares jump in the early days, the further they have to fall. And Zeekr’s debut comes not only as customers shy away from steep EV prices, but also amid price wars and geopolitical tensions that put the automaker’s market position at risk. 

Nonetheless, Zeekr managed to sell 21 million shares at $21 per share to raise $441 million, an upsize from earlier plans to sell 17.5 million shares between $18 and $21, pointing to strong investor sentiment. Those funds will help Zeekr as it plans to expand outside of China in 2024.

Zeekr hasn’t shared its plans for launching any EVs in the U.S., but stiff competition in the homeland amid other automakers has eaten into every company’s profits, causing many to look to outside markets. 

Europe is a big target for Zeekr as it rolls out EVs that compete with models from legacy European automakers. The company began shipments of its flagship Zeekr 001 shooting brake SUV to the Netherlands at the end of 2023, and it plans to step up deliveries of that model and the Zeekr X urban SUV to six European countries in 2024. Zeekr has said it expects its international presence to reach eight countries by 2025. 

Other Chinese companies disrupting the European EV market include BYD, SAIC and Great Wall Motor. 

While Zeekr hasn’t announced any passenger vehicle launches in the U.S., the automaker does plan to put its vehicles on American roads as part of a partnership with Waymo, Alphabet’s self-driving technology unit. In December 2021, Geely and Waymo agreed to build an all-electric, self-driving ride-hail vehicle by integrating Waymo’s AV tech into a Zeekr vehicle. Neither Waymo nor Zeekr has shared any updates on timing for the launch of this vehicle, though Zeekr’s filings highlight that the two are still going ahead with the project. 

Previous renderings of the purpose-built vehicle have depicted something like a minivan. Zeekr hasn’t confirmed, but it’s likely the Waymo vehicle will be modeled on Zeekr’s fifth model, the Mix, which debuted in April at the Beijing Auto Show alongside the automaker’s SEA-M architecture. In a regulatory filing, Zeekr said its Waymo vehicles will be based on SEA-M, which is a beefed-up version of the original Sustainable Experience Architecture (SEA) that can support a range of mobility products from robotaxis to logistics vehicles. 

Zeekr is a young company, but backing from Geely means the automaker has had a healthy start to vehicle deliveries this year. In the first four months ended April 30, Zeekr delivered 49,148 vehicles. By comparison, competition like Xpeng and Nio delivered 31,214 units and 45,673 units, respectively, during the same period, according to regulatory filings and press releases. 

Despite its promise, Zeekr is still operating at a loss. 

In regulatory filings, Zeekr reported bringing in $7.3 billion (51.7 RMB) in revenue in 2023. That’s up from around 32 billion RMB at the end of 2022, which would have been around $4.6 billion according to the exchange rate at the time. Mind, operating expenses also increased substantially, so the net loss of $1.7 billion at the end of 2023 was 8% higher than it was at the end of 2022. Zeekr’s recorded gross margin in 2023 was 15%. 

Zeekr said in filings that it is still preparing financial statements for the first quarter of 2024 and that it expects vehicle sales revenue to be higher than Q1 2023, but lower than Q4 2023 due to “seasonality that impacted our delivery volume, as well as lower average selling price primarily caused by the change in our product mix.” Zeekr also estimates gross profit in Q1 to be lower than last quarter’s. 

And in Europe, the Commission is exploring introducing import tariffs on EVs made in China to protect European manufacturers.  

Where there’s hype, there’s risk

Zeekr isn’t the first EV upstart to get a warm reception from the public markets. That doesn’t mean it’ll stay that way, particularly if Zeekr keeps operating at a loss. 

Perhaps more salient is the fact that Zeekr’s U.S. IPO comes amid scaling geopolitical tensions between the world’s two largest economies. While Zeekr holds a lot of promise after getting so much money from the IPO, it’s not without challenges — particularly on the regulatory side from both Beijing and Washington. 

As a Chinese company, Zeekr has flagged that one of its risk factors is the influence the Chinese government is capable of exerting over business operations. In its prospectus, Zeekr said the government “may intervene with or influence our operations as the government deems appropriate to further regulatory, political and societal goals.” 

In the U.S., Zeekr points out that continued regulatory and legislative hurdles may adversely affect its market price. Hurdles like the enactment of the Holding Foreign Companies Accountable Act (HFCAA), which results in increased scrutiny of Chinese firms and additional oversight that could put a company at risk of delisting or make investors lose confidence. 

If Zeekr does plan to launch any of its vehicles in the U.S., it will face heavy scrutiny. Recent discussions in Congress have raised concerns about connected and autonomous Chinese vehicles – that are priced significantly lower than U.S. or European manufacturers – collecting and transmitting data potentially back to the Chinese Communist Party. 

And in Europe, the Commission is exploring introducing import tariffs on EVs made in China to protect European manufacturers.