ZEEKR: Why did the 'dark horse of pure electric vehicles' choose to delist through privatization less than a year after its IPO?

On May 7, 2025, before the U.S. market opened, $GEELY AUTO(00175.HK) submitted a privatization proposal to $ZEEKR Intelligent Tech(ZK.US). Dolphin Research summarized the key points of the announcement:

1) Core content: Geely Automobile currently holds approximately 65.7% of ZEEKR's shares, and plans to acquire the remaining 34.4% from minority shareholders, making ZEEKR a wholly-owned subsidiary of Geely and delisting it from the NYSE.

2) Acquisition price: Geely plans to acquire ZEEKR at $25.66 per share, a 13.6% premium over the closing price before the announcement (ZEEKR's stock price was $22.6 on May 6).

3) Acquisition options: a. Cash: Minority shareholders can choose to accept the offer in cash ($25.66 per share). b. Stock swap: Alternatively, they can opt for a stock swap, where each ZEEKR ADS can be exchanged for 12.3 shares of Geely Holding (based on Geely's 30-day average price of HK$16.14 per share, exchange rate: 1 USD = 7.7503 HKD).

4) Geely's funding method: The privatization funds will be raised through a combination of new share issuance, cash reserves, and debt financing (if needed).

Dolphin Research's take: This privatization move by Geely was somewhat unexpected but understandable. Here are the potential reasons:

1. Most importantly: ZEEKR's valuation is too low, significantly below other new energy vehicle (NEV) makers.

ZEEKR's valuation is much lower than its peers. At its IPO, ZEEKR was positioned as Geely's premium pure-electric brand (carrying all of Geely's high-end aspirations). The IPO price was $21, and it surged to $28 on the first trading day, indicating high expectations. However, its current valuation (0.7x 2024 P/S for the auto business, excluding battery and R&D income) is far below peers like Nio, XPeng, and Li Auto (XPeng was at 1.5x P/S).

Note: The chart shows ZEEKR's auto business valuation at IPO.

Initially, the market believed ZEEKR was undervalued, expecting at least 1x P/S for its auto business. Some investors even assigned value to its battery and R&D income (mostly intercompany transactions), especially given ZEEKR's strong sales momentum (monthly sales hit 20,000 units).

But Dolphin Research emphasized in its deep-dive reports (ZEEKR: Spoiled by Daddy, Toxic or Beneficial?, ZEEKR: 'Negative' Legacy or Dark Horse?) that intercompany transactions shouldn’t be valued unless they scale beyond Geely. Thus, ZEEKR's IPO valuation was fair, and future upside depended on sustained hit models (ZEEKR only had one hit model, the 001, at the time).

The ZEEKR 001 (a pure-electric shooting brake) was a hit (monthly sales peaked at ~14,000 units in June 2024). The 7X (a mid-size SUV) was the next hoped-for hit but faltered after four months (~10,000 units initially, then declined). ZEEKR's in-house battery tech was mediocre, but its motors were competitive, contributing to the 001's appeal. Back then, ZEEKR was seen as a dark horse.

But today, ZEEKR's valuation has trended downward, contrary to expectations. Based on ZEEKR + Lynk & Co's 2025 target of 710,000 units (assuming 500,000 NEVs, though Dolphin estimates ~400,000 due to declining competitiveness), ZEEKR's auto business valuation is only ~0.4-0.5x P/S. The key question: Why is ZEEKR's valuation shrinking? This is likely the direct reason for the privatization.

Potential reasons:

① ZEEKR's heavy reliance on Geely for support:

Geely's support included:

a. Factory provision: Critical assets like factories weren’t on ZEEKR's books but remained under Geely. As of 2024, ZEEKR's fixed assets (¥3B) were <10% of total assets (vs. Li Auto's ¥22.1B, Nio's ¥25.8B, XPeng's ¥11.5B).

b. Loans: Geely provided loans to ZEEKR.

c. Asset transfers: Geely injected battery/R&D assets into ZEEKR, generating additional revenue/margins—but these were intercompany transactions.

This led to ZEEKR's high debt ratio (1.31x in 2024, among the highest in the sector). The market dislikes complex intercompany structures.

Details are in Dolphin's report: ZEEKR: Spoiled by Daddy, Toxic or Beneficial?

② Post-Lynk & Co merger, internal synergy issues may persist (potential power struggles between Lynk & Co and ZEEKR): The original plan was for Lynk & Co to phase out ICE vehicles, with ZEEKR focusing on mid-size pure-EVs and large hybrids (C-D segment), while Lynk & Co would handle small pure-EVs (A-segment) and mid-size hybrids. But Lynk & Co still produces ICE vehicles (~40-50% of sales from Dec 2024 to Mar 2025), conflicting with ZEEKR's NEV branding and creating investor skepticism.

For context, see Dolphin's analysis: ZEEKR: Plunges 25% Overnight—Is Swallowing Lynk & Co a Blessing or Curse?.

Lynk & Co's 900 (a large PHEV SUV priced at ¥289,900-396,900) has been a hit (10,000 orders in one hour, 30,000 in three days), potentially surpassing ZEEKR in NEV sales. This could shift internal power dynamics.

③ Declining competitiveness of ZEEKR's pure-EV models:

Sales of ZEEKR's 001 and 007 have slumped. The 001 (a shooting brake) once sold 14,000/month but dropped to 3,000 by Mar 2025. The 007 (a mid-size sedan) peaked at 10,000/month for three months before falling to 5,000.

The 001 initially succeeded in a niche (premium shooting brakes at ~¥300K) with strong tech (motors). But it now faces competition from the Xiaomi SU7 (a sporty sedan with superior specs and design) and XPeng's P7 (value + advanced ADAS). ZEEKR's ADAS lag and eroding tech edge have hurt its appeal.

④ ZEEKR's cash crunch, and Geely's reluctance to keep bailing it out:

As of 2024, ZEEKR had ~¥9B in cash—far below peers (XPeng: ¥42B, Li Auto: >¥100B, Nio: ¥41.9B net cash). With rising R&D costs and sliding sales, this isn’t sustainable. Geely seems unwilling to keep funding ZEEKR, hence Lynk & Co's continued ICE production despite branding conflicts.

2. Geely believes privatization will enable deeper internal integration and synergy:

Geely's official rationale is to align with the "Taizhou Declaration," eliminate redundancies, cut costs, and boost competitiveness. The real issue: Geely's internal "horse race" model failed, and post-merger synergies remain elusive. Privatization could let Geely restructure its NEV brands more freely.

Impact on Geely:

Strategically, this could be positive long-term, but execution risks remain. The ¥16.2B (~$2.24B) deal would consume 37% of Geely's 2024 cash (¥43.6B), potentially requiring dilutionary equity/debt raises—a near-term negative.

<End>

Disclosures: Dolphin Research Disclaimer