XCHG files for IPO

The second-largest seller of fast-charging stations for electric vehicles in Europe hopes to refresh its coffers through a U.S. listing

Key Takeways:

  • XCHG has filed to list on the Nasdaq, reporting 46% year-on-year revenue growth in the first nine months of last year
  • Founded by two former Tesla engineers, the company hopes to differentiate itself with its fast-charging stations that feed unused power back into the grid


By Edith Terry

Little-known fast-charging station maker XCHG Ltd. is aiming to juice up its coffers with a Nasdaq IPO that looks quite modest, at least based on the company’s expected market value of less than $100 million. But there’s always the chance the fundraising could surprise on the upside, powered by the company’s solid prospects and a relatively strong underwriting team that includes Deutsche Bank, as well as China-focused powerhouses Huatai Securities and Tiger Brokers.

XCHG’s electric vehicle (EV) chargers are part of a global energy storage solutions market that’s expected to be worth $90 billion by 2026, according to third-party market data in its IPO prospectus filed earlier this month. The market is growing fastest for fast chargers using direct current (DC), with demand seen growing about 33% annually from 4.0 TWh in 2021 to 52.0 TWh in 2030. XCHG is the second-largest seller of DC fast chargers in Europe, though that market is fragmented and highly competitive, according to the prospectus.

So, who exactly are the competitors for XCHG, which also uses the name XCharge? U.S. giant Tesla (TSLA.US) is one of the biggest, with its world-leading global network of 50,000 plus “Superchargers.” The fourth largest EV charger maker is China’s NaaS Technology (NAAS.US), according to EV Magazine. Other major charging stations makers include EVgo (EVGO.US) and Blink Charging (BLNK.US).

Blink Charging currently trades at a price-to-sales (P/S) ratio of 1.72, while EVgo trades slightly lower at 1.56. A similar P/S ratio of about 1.6 would give XCHG a market value of about $60 million, based on its projected sales for this year.

While it professes to be a global leader, XCHG’s actual sales are still quite small in terms of units sold. The company’s DC fast-charger sales more than doubled from 807 in 2021 to 1,934 in 2022, and totaled 1,443 in the first nine months of last year. At the same time, it claims to have sold more than 40,000 chargers worldwide since its founding nearly a decade ago.

Similarly, XCHG’s revenues are still quite modest, though they are rising at a rapid clip. The figure grew 46% to $28 million in the first nine months of last year from $19.2 million in the year-earlier period. Its gross margin has also been steadily improving from 35.2% in 2021 to 44.2% in the first nine months of last year. But its operating expenses tripled from $6.3 million to $18.4 million over the same period, mostly due to pre-IPO share-based compensation of $7.5 million. The bottom line was that the company swung into the red with a net loss of $6.7 million in the first nine months of 2023, reversing a net profit of $700,000 in the year-earlier period.

XCHG’s product lines include the C6EU, a smart DC charger with a maximum output power of 200 kW, and the C7 Ultra-Fast chargers with a maximum output of 400 kW, as well as the newer Net Zero Series with an output power of 210 kW. By comparison Tesla’s Superchargers have an output of 250 kW. One differentiating factor for XCHG’s Net Zero Series is its ability to return excess power to the grid, a factor that could make them attractive to buyers by lowering their operating costs.

Out of Tesla

XCHG was set up in 2015 by former Tesla project managers Hou Yifei and Ding Rui, who initially set their sights on their home China market that has aggressively promoted new energy vehicles (NEVs) through a range of government incentives.

The pair saw an opportunity in charging stations, which were sorely lacking when China’s NEV boom began around 2009. Hou was responsible for Tesla’s public charging stations during his time at the company. He left after just a little over a year with the company after figuring he and Ding could improve on those chargers by adding cloud-based management software to the hardware. Ding was also at Tesla for a relatively short period of just under two years.

The pair set out to provide clients from the energy and transport sectors with packages for their vehicle fleets or service stations, including State Grid Corp, the country’s largest electric grid operator. By 2018, they had supplied 20,000 charging points in China, mostly in Beijing and Shenzhen. By comparison, all of China had 321,000 public charge points at the end of 2017, according to independent data.

The company opened an office in Hamburg as it began to explore the European market that has also taken off recently. The European business, which like China also has strong government backing, has lately overtaken its China revenues. Its backers in Europe include Shell Ventures, which participated in its series B and C funding rounds in 2021 and 2023. Its European revenues rose 120% year-on-year to $18.2 million in 2022, compared to just $4.2 million from China and $6.9 million from other countries.

So, what should we expect from this listing? Seeking Alpha analyst Donovan Jones gave it a thumbs down for decelerating revenue growth, uneven operating results, and its largely unproven Net Zero Series of products despite their capacity to return unused power to the grid. But the Net Zero Series could also be a game changer if charging station operators like its ability to reduce their costs, since XCHG is one of the few companies making such “battery to grid” chargers.

In 2023, XCHG said it would use funds from its latest funding round to build a charger factory in the U.S. for the Net Zero Series, which it launched last August in Texas. In the prospectus, the company says it will use another 50% of the IPO proceeds for investment in the Texas facility, while 20% will go to R&D, 20% to global market expansion, and 10% to working capital.

XCHG at least showed the foresight to focus first on the European market that has been quick to develop, rather than the U.S. where development has been slower. The number of installed chargers in Europe in 2021 was 45,000 units compared to 23,100 in the North America. The number in Europe was expected to grow 83.6% annually between 2022 and 2026, slightly ahead of the 81.5% forecast for North America, according to the prospectus. That would translate to an installed volume of 910,000 chargers in Europe by 2026, well ahead of the 544,200 in North America.

So, the market clearly has huge potential for anyone who can develop popular chargers to power a future generation of NEVs. Now, XCHG just needs to power up its business and show it can emerge as a global leader in the space.

The Bamboo Works offers a wide-ranging mix of coverage on U.S.- and Hong Kong-listed Chinese companies, including some sponsored content. For additional queries, including questions on individual articles, please contact us by clicking here.

To subscribe to Bamboo Works free weekly newsletter, click here

Recent Articles