Summary of Key Points
Avita has submitted its prospectus to the Hong Kong Stock Exchange for the second time (the first attempt was unsuccessful due to the failure to complete the listing process within 6 months). In 2025, it saw a double increase in sales and revenue, yet it still incurred a loss of 3.48 billion yuan (with a cumulative loss of 11.2 billion yuan). The losses are mainly attributed to substantial initial investments and weak bargaining power in procurement. Avita is focusing on generating profits through its premium models and expanding overseas. It has formed a close partnership with Huawei, investing tens of billions to acquire a 10% stake in HiWay Intelligent, which also participates in the sales channels. However, this reliance carries certain risks. Currently, Avita faces dual challenges: a shift in the capital market towards AI technologies and intense competition in the automotive industry, making it urgent to raise funds through a listing.
Why Is Avita Hurrying to Submit the Prospectus Again?
The Hong Kong Stock Exchange requires that a prospectus must be submitted within 6 months; otherwise, it becomes invalid. Avita's first submission in November 2025 expired in May 2026, so they urgently updated and resubmitted it on June 30. Why the rush?
- The automotive industry is in a competitive phase of elimination: Profit margins are declining (only 3.4% in the first five months), and competitors are all seeking to raise funds through listings. Although Avita has the support of Changan, it still needs capital from the market.
- Limited time window: Vice President Ma Xinjie emphasized that there is a specific period for listing on the Hong Kong Stock Exchange, and missing this window could lead to a negative cycle—capital may become even less willing to invest in electric vehicles if the timing is delayed.
Despite Increased Sales, Why Is There Still a Loss of 3.4 Billion Yuan?
Despite selling 122,000 units in 2025 (a nearly doubling of sales), with revenue increasing by 68.7% to 25 billion yuan and a gross margin rising by 3 percentage points to 9.4%, Avita still lost 3.4 billion yuan (a reduction from the previous year's loss). The reasons for the loss are straightforward:
- Substantial initial investments: Production only began at the end of 2022, which is an early stage of development. Expenses for product research and development, advertising, and opening 4S stores were substantial—32.8 billion yuan were spent on sales and marketing (14.9 billion yuan on advertising) and 20.8 billion yuan on R&D (although this has tripled, it's still less than the amount spent on sales).
- Lack of bargaining power in procurement: Although sales have increased, Avita is smaller compared to larger manufacturers, resulting in higher costs for components. The cost per vehicle is higher when sales volume is lower.
How Can Avita Generate Profits?
Avita has outlined four strategies to turn around its financial situation:
1. Focus on more expensive vehicles: By targeting mid-to-large premium SUVs and launching a new model with annual sales targets of 100,000 units, Avita can increase profits and enhance its brand image.
2. Earn higher margins overseas: Overseas revenue accounted for 5.5% of total sales in 2025 (up from 1.5% in 2024), with operations in 43 countries. Higher prices and less competition in foreign markets can help improve profitability.
3. Reduce costs: As sales increase, Avita will have more bargaining power with suppliers and can optimize its R&D and marketing expenses.
4. Avoid price wars: By focusing on brand prestige rather than competing on low prices, Avita can maintain its premium image.
The Deep Partnership with Huawei: A Boon or a Risk?
Huawei is mentioned 154 times in Avita's prospectus (compared to only 80 mentions for CATL), indicating the strength of their relationship:
- Financial investment: In 2025, Avita used 10 billion yuan in cash to acquire a 10% stake in HiWay Intelligent and appointed a director to its board.
- Increased influence from Huawei: Huawei's involvement has expanded beyond providing technology (such as intelligent driving and infotainment systems). Now, they are participating in product development and sales strategies, with Avita using the Huawei Qiankun App for orders and jointly building brand presence stores.
- Risks: If Huawei's technological support fails or the partnership changes, Avita could be affected, as it has become increasingly dependent on them.
Is Listing Possible?
The road to listing is not smooth due to unfavorable external factors:
- Changing capital trends: Investors are shifting towards AI and semiconductors, making electric vehicles less attractive. The automotive index has dropped by 19.6%, and Xiaomi's market value has shrunk by 800 billion yuan.
- Intense competition in the industry: Domestic sales have declined by 20.6%, with 544 new cars launched in the first five months, resulting in meager profits.
- Changan's reduced expectations: Changan originally aimed for Avita to sell 800,000 units by 2030 but has now lowered this target to 500,000 units after integrating Avita with Deep Blue, reflecting the industry's pressing challenges.
It's uncertain whether Avita will successfully list, but time is of the essence. Any delay could mean missing out on critical funding from the capital market.