Changan Automobile's Chairman, Zhu Huarrong, made a bold commitment, declaring, "As long as Avita needs support, we will back them wholeheartedly—be it funds, manpower, or technology." This promise has materialized into tangible action, as Avita Technology's CEO, Chen Zhuo, recently announced during a key supplier communication meeting on October 11 that the company is currently in the midst of a Series C funding round, aiming to raise a staggering 10 billion yuan.

This kind of financing, particularly exceeding 10 billion yuan in a single round, is a rare occurrence even during the most feverish periods of investment in the automotive industryGiven the 2024 landscape, where the enthusiasm for financing in the new energy vehicle sector has sharply declined, Avita's endeavor becomes even more significant.

According to incomplete statistics from Wall Street Insights, the automotive industry saw 232 financing events in the first half of the year, marking a 10.1% decrease year-on-year, with reported total transaction values only reaching 34.89 billion yuan

Such figures highlight the importance of Avita's current funding, especially considering the robust backing from Changan Automobile, which plays a vital role in bolstering confidence among investors.

The last time Avita sought additional funding was in September 2022, where they raised 3 billion yuan, attracting investments from institutions including Changan Automobile, Southern Assets, and the Chongqing Industrial Mother Fund.

As capital flows swiftly into Avita, so does its valuation, set to rise significantly after the completion of this funding round; from the 14.085 billion yuan valuation it held during the last funding round, it is projected to soar beyond 30 billion yuanSuch a leap could provide the confidence that Avita desperately requires in this competitive market.

However, the landscape for newer entrants remains fraught with challenges; Avita is in a critical phase of expansion.

In recent months, established players like Li Auto and Seres have transitioned from losses to profitability, while competitors such as Leap Motor, Zeekr, NIO, and Xpeng have achieved significant monthly sales thresholds

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As the race intensifies among domestic new energy car makers, Avita, which has been in operation for merely three years, finds itself still navigating through its growth phase.

For instance, Avita reported sales of just 4,537 vehicles in September, significantly trailing the critical threshold of 20,000 units—a stark reminder of the urgency it faces in boosting sales figures.

Nonetheless, there lies a silver lining within Avita's framework, where their proactive stance is evidentThe year 2023 marks their first complete year of vehicle deliveries, with a total of 29,600 vehicles delivered throughout the year, and 40,904 units sold in the first nine months aloneNotably, sales surged by 47% in September, post the launch of the Avita 07.

The remarkable performance following the launch of new models signals a growing momentum for Avita amid a fiercely competitive marketplace.

Yet, prior to realizing these optimistic projections, Avita’s pathway to expansion is littered with hurdles.

First and foremost is the financial aspect related to expanding production capabilities and operational outreach.

The automotive industry is notoriously capital intensive

Data from the National Bureau of Statistics points to a 19.4% increase in fixed asset investments within the automotive manufacturing industry in 2023, which notably surpasses national averages.

Changan plans to invest 10.721 billion yuan in 2024 to launch multiple new and revamped products, earmarking over 40% of this investment for fixed assets.

Additionally, substantial research and development costs cannot be overlookedAs an example, Xiaomi is projected to allocate 24 billion yuan exclusively for R&D in 2024.

In contrast to its competitors, Avita started as a joint venture between Changan and NIOAlthough NIO has since exited the collaboration, A partnership with CATL and Huawei has provided Avita with essential support, rendering their R&D expenditures relatively modest.

However, within the broader context of the company's operations, these funds are still significant

For instance, Changan reported a 58.64% increase in R&D spending in 2023, totaling 9.008 billion yuan.

Reflecting the heavy outlays, Avita’s total assets stood at 12.746 billion yuan, with net assets amounting to 706 million yuan and a staggering debt-to-asset ratio nearing 94.46% as of mid-2024. The financial strain is clear.

Secondly, a pressing concern alongside increasing sales is the necessity to generate revenue amid lossesAccording to Changan's announcement, Avita recorded revenue of 6.152 billion yuan in the first half of 2024, with a net loss of 1.395 billion yuan after adjustments.

Much like their cohort of emerging automakers, Avita is grappling with the financial realities of strategic investment lossesChangan had previously indicated in its 2023 annual report that significant investments in product development, brand promotion, channel establishment, and talent acquisition would hinder short-term profitability.

Following the logic prevalent in emerging industries, the focus at this stage lies on efficient investments with hopes of scaling via substantial commercial operations

Yet, with competition among new energy vehicle makers reaching a fever pitch, striking a comprehensive balance between expenditures and revenues presents an urgent trial for Avita.

In light of the intense pressures, Avita continues its unique path in exploration.

A key aspect of its strategy has involved adapting to market demands and the shifting dynamics of consumer preferences.

Historically, the industry has viewed extended-range electric vehicles as temporary solutions to range anxietyEven influential figures like Volkswagen's CEO, Feng Sihan, expressed skepticism, categorizing extended-range technology as transitionalHowever, highlighting genuine customer value remains paramount; as Avita's Vice President, Hu Chengtai, eloquently articulated, the real concern is understanding what experiences or needs these technologies can fulfill for customers.

In reality, sales growth for extended-range models has vastly outpaced that of pure electric models over the past three years

Data reflects that from 2021 to 2023, growth rates for extended-range vehicles stood at 206%, 116%, and 173%, respectively, while pure electric models experienced only 157.4%, 67.5%, and 24.4% growth.

According to the latest data from the China Passenger Car Association, extended-range vehicle sales surged by 89% in September 2023, significantly outpacing the overall growth rate of 50.9% for new energy vehicles in the same month.

Avita has skillfully aligned its offerings with consumer trends, successfully launching its first extended-range model, the Avita 07, on September 26. Positioned as a mid-sized new energy SUV, Avita 07 marks the brand's third volume production model.

Public data reveals that within 17 days of its launch, the Avita 07 generated a staggering 25,386 pre-orders, achieving a record high of 3,508 orders in a single day on October 7.

Given the surging demand within this segment and the escalating order backlog for the Avita 07, the likelihood of Avita achieving the critical goal of 20,000 units in sales during the fourth quarter seems promising.

Compounding this momentum, another extended-range variant, the Avita 12, is set to debut on October 15, with rumors suggesting availability of an extended-range version of the Avita 11 later this quarter

Hence, it is reasonable to anticipate that Avita's sales could rapidly escalate.

Furthermore, to synchronize with this accelerated sales cadence, Avita is streamlining its operational strategy.

With the rise of new energy vehicle players, self-management of retail outlets has emerged as a prevalent model to aid these newcomers in maintaining competitive pricing.

In a strategic pivot, Avita has opted for a lighter modelBeginning in April, the company transitioned from self-managed stores to a partnership model, aiming to implement this approach in approximately 120 new outlets by year-end.

Currently, projections suggest that by year-end, the number of Avita outlets could reach between 470 and 500. By June, Avita had successfully engaged with 115 key sales districts, alongside 216 outlets and 1,430 personnel on reshaping its operational framework.

While a shift away from a self-reliant system may lead to diminished control over pricing, adopting a partnered model can significantly mitigate initial investments in store construction and ongoing operational costs, thereby alleviating financial burdens.

Coupled with the enthusiastic market response to the Avita 07, one can reasonably predict that, through its asset-light and efficient partnership approach, Avita could witness rapid market penetration and likely enter a period of explosive sales growth.

For Avita, which is eagerly eyeing a share of the diminishing middle-to-high-end automotive market, this strategy appears to be a prudent dual-benefit approach.

Nevertheless, there are concerns regarding whether this partner-driven model might tarnish Avita's high-end brand identity

However, the collaborative strategies between Avita and Changan have presumably prepared them to counteract such challengesThe global premiere of the Avita 012 in August, with a price tag of 700,000 yuan and a limited release of just 700 units, underscores Avita's unwavering commitment to maintaining its premium positioning.

Investing in assets to enhance strength hints at a long-term strategy aimed at an eventual IPO.

With a clear focus on the mid-to-high-end automotive market, Avita's transformation of its operational model can only temporarily alleviate liquidity pressuresTo cultivate robust brand strength, market influence, and economies of scale, Avita has devised a series of core strategic initiatives.

Since August, Avita has been quite active in its strategic maneuvers.

Initially, Changan announced that Avita Technology intends to purchase 10% of Huawei's shares in Yiwang, involving a transacted sum of 11.5 billion yuan

This was shortly followed by the signing of a partnership agreement with Qatar’s ALATTIYA automotive group, signaling a strategic push into the Middle Eastern market.

In conjunction with this, Avita has rolled out multiple mid-to-high-end new models, focusing heavily on the extended-range sector; reports indicate that Avita plans to release a total of 17 new models over the next three years, including a five-seat SUV, a large six-seat SUV, MPVs, and coupes.

Through this continuous expansion, Avita is strategically enhancing its valuation across multiple dimensions—assets, branding, and market presenceConsequently, the need for substantial funding to propel this expansion culminates in the creation of the 10 billion yuan financing plan.

From a long-term perspective, leveraging public listings for financing remains a critical avenue that Avita cannot afford to overlook