Summary of Key Points
Avita Technology has once again submitted its IPO prospectus for the Hong Kong stock market. The company relies on a "light-asset model" to integrate resources from three major players: Changan (manufacturing), Huawei (intelligence driving/infotainment systems), and CATL (batteries). However, in its four years of existence, it has incurred losses amounting to nearly 13.2 billion yuan, with a gross profit margin of only 9.4%. Whether this "three-no" (no manufacturing capability, no in-house intelligence driving technology, and no choice of battery suppliers) model can convince investors is crucial to the success of its listing.
I. The "Three-No" Light-Asset Model: A Cost-Saving Strategy or a Restrictive Factor?
Avita's light-asset approach essentially means it avoids taking on the heavy lifting itself: it outsources vehicle manufacturing to Changan, relies on Huawei for its intelligent systems, and uses batteries exclusively from CATL. While it claims this allows it to "focus on user value," there are several significant issues:
- High Dependence: In the past three years, its purchases from Changan, Huawei, and CATL have accounted for as much as 82.4%, meaning it is almost entirely dependent on these suppliers. Its battery supply is exclusively tied to CATL, leaving it with no power to switch suppliers, resulting in high costs (CATL made a profit of 10.1 billion yuan from selling batteries to Avita while investing only 930 million yuan).
- Profit Sharing: Despite four years of losses and a 9.4% gross profit margin, Avita is largely profiting for its upstream suppliers—CATL and Huawei.
- Unproven Core Competencies: Although Avita boasts some strengths, such as original design and vehicle integration (for example, its car models do not follow industry trends), these have not yet translated into tangible financial benefits.
II. Who Really Owns Avita? The Puzzle of Shareholder Interests
Avita's equity structure reflects a complex landscape of shared control:
- Changan Has the Upper Hand: With a direct and indirect stake of 41.57%, Changan is the dominant shareholder, providing both manufacturing and supply chain support.
- CATL's Hold: A Binding Factor: Holding 9.38% of Avita's shares, CATL controls a significant portion of its business through exclusive battery supplies.
- Huawei as a Partner: Although not a direct investor, Avita spent 11.5 billion yuan to acquire a 10% stake in Huawei's subsidiary, Yiwang, and they are collaborating on the development of new vehicles (three models planned for 2026-2027).
- Controversial Employee Stock Ownership: The employee platform, Zhiyue Xintu, holds 1.88% of Avita's shares at a lower transfer price than external investors, which has raised concerns from the Securities Regulatory Commission about potential conflicts of interest. Avita explains this as reflecting different shareholder priorities.
III. The Mystery of Core Value: Beyond Merely Piecing Things Together
What is Avita's true core competitiveness?
- Surface Highlights: Original design (car models that do not mimic others), vehicle integration (combining technologies from multiple partners), and a customer experience approach that combines direct sales and dealership models.
- Deep-seated Issues: Avita functions more as an integrator than a creator, relying on third-party technologies from CATL and Huawei. Compared to companies like Li Auto (which develops its own batteries) and Xpeng Motors (which develops its own intelligence driving systems), Avita lacks a distinct competitive advantage.
IV. The Road to Listing: Will Investors Buy into the Story?
The current capital market is very cautious about automotive companies:
- Poor Financial Performance: Four years of losses and a 45% decline in sales volume in the first five months of this year (while the industry only saw a 20% drop), with a gross profit margin far below that of leading players like Li Auto (which exceeds 20%).
- Challenging Hong Kong Stock Market: The Hang Seng Automotive Index has fallen by 25% since the beginning of the year, and even companies like Li Auto and Xpeng Motors have faced skepticism. Avita lacks both innovative technologies and profitability prospects, making it difficult to attract investors.
- Uncertain Future Plans: Avita plans to boost profits through premium products, overseas expansion, and cost reduction, but these goals are ambitious and dependent on external factors (fierce competition in the premium market from companies like Tesla, and significant investment required for overseas expansion, as well as constraints on battery prices from CATL).
In Conclusion
Avita's light-asset model is a double-edged sword. While it enables rapid progress by leveraging industry giants, its heavy reliance on these suppliers also makes it vulnerable to financial risks. To succeed in its listing, Avita must convince investors that it can move beyond being a mere integrator and develop its own core technologies. Otherwise, it will struggle to attract the funding it needs.