Earlier today, news broke that Xpeng, a China-based electric vehicle company has raised $500 million, adding to its 2019-era $400 million Series C. The round, a Series C+ investment, brings the company’s capital raised to date to around $2.2 billion.
Xpeng’s huge fundraise comes on the heels of a recent boom in the value of some public EV companies, including Tesla, Nio and Nikola. Speculation into the future value (and therefore present-day worth) of EV companies has led to their ranking on lists of most-popular stocks with some retail investors, underscoring their popularity.
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You might anticipate that the public-market enthusiasm is helping drive outsized private investment into global EV startups. After all, it’s often true that public market activity has an impact on private market enterprise; if shares of a particular industry rise sharply, the value of their private cognates can similarly rise, and investment in the sector can pick up tempo.
Upon reading about the Xpeng round this morning, that the event was likely part-and-parcel of rising deal volume for private EV companies was our first hunch. In honor of scratching our own itches with data whenever possible, TechCrunch decided to dig and find out.
So, is public market optimism in EV companies driving more investment into private EV companies?
What the data say
To test whether EV investment is rising or falling amongst private companies, The Exchange ran a range of queries today against Crunchbase data, looking at rounds for companies marked as “electric vehicle” firms in its data, discounting crowdfunding, secondary market activity, all post-IPO rounds and any other nonequity rounds.
Here’s what we found:
- 2020: $3.61 billion from 63 rounds [query].
- 2019: $6.98 billion from 151 rounds [query].
- 2018: $7.40 billion from 174 rounds [query].
- 2017: $7.28 billion from 126 rounds [query].
- 2016: $1.62 billion from 92 rounds [query].
As with all midyear data, we are comparing calendar 2019 with 2020 results only through July 20. We’ll need to adjust our 2020 results so that they are more directly comparable: Through 55% of this calendar year, the private EV market saw $3.61 billion in investment. Annualizing that total works out to $6.56 billion, a number somewhat close to the 2019 result, though the lowest full-year figure since 2016.
Executing the same calculation against round count gives us an expectation of around 114 or 115 in 2020. That’s quite a bit lower than what was recorded in 2019 and the preceding two years.
Of course, all private-market data is laggy and fills in over time, so we should expect 2020’s first half to attract more deals and dollars in the next few quarters as they become known. This will bring its tally closer to 2019’s pace, though the 2020 deal count feels low even given proper caveats. (Notably we can compare and contrast today’s data with this, similar data-pull from a few years ago, showing mild accretion of new deals over time for years past.)
Returning to our question, then, no, it does not appear yet that a recent boom in the value of public EV companies has led to a boom in private-market investment in similar firms. So far, at least.
Why not?
I have a hunch regarding why this is the case: During the first two quarters of this year, car sales volume was weak in many parts of the world as the COVID-19 pandemic scrambled economic activity and buying patterns. Parts of the world are slowly getting back on their feet, while others are still struggling. The first half of 2020 was therefore not an obvious time to invest in electric car companies, as it wasn’t clear how much trouble the global consumer was in.
In that light, 2020’s EV private market activity almost feels strong, instead of weak, even if it is currently tracking a bit under its 2019 pace. Wouldn’t we expect worse numbers in the year that brought us headlines like “China’s Car Sales Suffer Worst-Ever Quarter as Coronavirus Destroys Demand” from April, and “U.S. car sales just had their worst quarter since the Great Recession” from July?
Perhaps. Read another way, EV investment didn’t drop precipitously in the first half of 2020 despite a global pandemic. You can spin it a few different ways, but I’m a little bullish based on the figures.
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