HONG KONG -- Electric vehicle startup WM Motor, one of China's ambitious challengers to Tesla, said it raised 10 billion yuan ($1.47 billion) from a group of state-backed investors -- among others -- after the successful stock market listings of bigger domestic rivals.
The latest round of fundraising was led by the investment arm of the Shanghai government and SAIC Motor, one of the largest Chinese state-owned car companies, WM Motor said in a statement on Tuesday.
The regional governments of Hubei Province and the cities of Suzhou, Hengyang, Hefei and Guangzhou invested through funds they control. Existing investors Baidu, the Chinese search engine conglomerate, and U.S.-based Susquehanna International Group also participated in the fundraising.
The new funding, which WM Motor says is the largest single round of financing for any emerging domestic EV startup, are expected to provide much-needed capital for the five-year-old company in order to challenge Tesla on its home turf. WM Motor's bigger domestic competitors, including Li Auto, Xpeng Motors and Nio, all have completed initial public offerings in the U.S. and have seen their stocks surge thanks to growing investor interest in green vehicles.
The Shanghai-based company, which also counts Tencent Holdings among its investors, said it will recruit 3,000 top engineers globally in the next three to five years to build an ecosystem that connects drivers, vehicles and the external environment, as well as adapting to the needs of Chinese customers and road conditions. The funds will also be spent on expanding its store network, branding and marketing.
"The completion of the funding round reflects the confidence of investors on the prospect of China's smart new energy vehicle industry," WM Motor's founder and CEO Freeman Shen said, adding that many are strategic investors committed to long-term development of the company.
Chinese media reported recently that the company is working with financial advisers for a STAR Market IPO in Shanghai and is expected to file the application in October. A WM Motor spokesperson said it had no comment on the IPO.
The portfolio of WM Motor's new investors highlight the growing reliance of EV startups on state capital, as private investment slows and competition rises. In April, the capital of the southern province of Anhui agreed to rescue Nio, which was facing a cash drain, by agreeing to invest 7 billion yuan for a 24.1% stake in Nio's China entity.
Analysts expect state capital -- including that from local governments and state-owned companies -- to play a bigger role in the future of Chinese EV startups, and Beijing's determination to expand the sector will keep the money flowing.
That is especially true for WM Motor, which has closer ties with players in the traditional automobile industry thanks to the background of its management, according to analysts.
"Compared to founders of major EV startups, the management of WM Motor has deeper connections with the government and the industry," said Feng Linyan, an analyst at Beijing-based research company EqualOcean.
Shen was a board member and group vice president at Geely, China's largest private automaker, before founding WM Motor. He oversaw Geely's high-profile acquisition of Swedish automaker Volvo Cars from Ford in 2010 and served as chairman of Volvo after the deal was completed. WM Motor co-founder Lobo Lu and Chief Technology Officer Yan Feng also previously worked at SAIC before joining the company.
By contrast, the heads of Nio, Li Auto and Xpeng Motors spent most of their careers in the internet industry before moving to car manufacturing.
Feng said the experience of WM Motor executives in the traditional auto industry will help the company raise capital and secure policy support, which will be crucial in the next stage of competition.
Currently, WM Motor has two models for sale -- a compact crossover SUV, called the EX5, and a mid-sized all-electric SUV, the EX6 Plus. Last year it unveiled the concept SUV model Evolve, which is slated for production in 2021.