JL Warren Capital

JL Warren Capital LLC is a leading independent equity research firm focused on Chinese companies and listed multinationals in China. We employ a bottom-up research approach that takes great care to avoid the acquisition of material non-public information. Through investigative due diligence including channel surveys and interviews, our research helps clients to pinpoint the dislocations in the market.

Investment Advisors

Investment Advisors, JL Warren Capital

Junheng Li

Equity Bottom-Up

<p>After <a href="https://www.smartkarma.com/entities/li-auto-inc" target="_blank" data-smartkarma-citation="entities:28812:1" rel="noopener">Li Auto Inc. (LI US)</a>  IPO in the US on July 30<sup>th</sup>, another Chinese EV IPO is imminent in next few weeks – <a href="https://www.smartkarma.com/entities/guangzhou-xiaopeng-motors-technology-co-ltd" target="_blank" data-smartkarma-citation="entities:29217:1" rel="noopener">Xpeng Motors (XPEV US)</a> (IPO expected in Aug).  Xpeng is dealing with a couple of ongoing allegations of IP thefts from <a href="https://www.smartkarma.com/entities/tesla-motors-inc" target="_blank" data-smartkarma-citation="entities:20279:1" rel="noopener">Tesla Motors (TSLA US)</a> . Last year, a former software engineer at Tesla downloaded over 300k classified files including the copy of Autopilot source code just before leaving the US to work as “the Head of Perception” at Xpeng.  In 2018, a former senior hardware engineer at Apple Autopilot program took confidential files including detailed schematic drawings of a circuit board and joined Xpeng after returning to China. Both stories are well reported by Chinese media and couple potentially have negative impact on the company’s branding. It’s not clear how long the pending lawsuits will linger in the US and if there will be a resolution.  Neither of the suspect is working at Xpeng now, although the management included employee misconduct in the Risk Factors in S1.  According to our checks, orders for XPeng (G3 and P7) exiting July was ~1,500, vs 2,276 delivery in June.  Delivery in June was not an accurate indicator of demand.  It is likely to be upped as XPeng prepares for its IPO.  P7 (compact sports sedan) competes directly with TSLA MIC M3 in pricing, range and features.  So why would or should consumers buy TSLA knockoff if the real thing is selling at similar prices. </p>

After Li Auto Inc. (LI US)  IPO in the US on July 30th, another Chinese EV IPO is imminent in next few weeks – Xpeng Motors (XPEV US) (IPO expected in Aug).  Xpeng is dealing with a couple of ongoing allegations of IP thefts from Tesla Motors (TSLA US) . Last year, a former software engineer at Tesla downloaded over 300k classified files including the copy of Autopilot source code just before leaving the US to work as “the Head of Perception” at Xpeng.  In 2018, a former senior hardware engineer at Apple Autopilot program took confidential files including detailed schematic drawings of a circuit board and joined Xpeng after returning to China. Both stories are well reported by Chinese media and couple potentially have negative impact on the company’s branding. It’s not clear how long the pending lawsuits will linger in the US and if there will be a resolution.  Neither of the suspect is working at Xpeng now, although the management included employee misconduct in the Risk Factors in S1.  According to our checks, orders for XPeng (G3 and P7) exiting July was ~1,500, vs 2,276 delivery in June.  Delivery in June was not an accurate indicator of demand.  It is likely to be upped as XPeng prepares for its IPO.  P7 (compact sports sedan) competes directly with TSLA MIC M3 in pricing, range and features.  So why would or should consumers buy TSLA knockoff if the real thing is selling at similar prices. 

XPeng IPO Preview: TSLA Copycat, 1500 Orders Exiting July