Chery IPO: Key Facts, Risks, and How to Invest

If you've been watching the Chinese auto market, you've probably heard the Chery IPO rumors heating up. Chery Automobile, based in Wuhu, Anhui, is one of the largest state-owned carmakers in China, and it's been planning a public listing for years. But here's the thing: the details matter more than the hype. I've spent weeks digging through the financial reports, the export data, and the competitive landscape, and I'm going to share what I found — plus what most retail investors get wrong.

What's the Real Status of the Chery IPO?

As of today, Chery has officially filed its IPO application with the Shanghai Stock Exchange. The company plans to list on the Science and Technology Innovation Board (STAR Market), which is designed for tech-driven, high-growth companies. That's an interesting choice — Chery wants to be seen as a tech play, not just a traditional carmaker. But don't expect the process to be quick. State-owned enterprises often need multiple rounds of regulatory approval, and Chery has been restructuring its subsidiaries to clean up its balance sheet before going public. There's also talk of a Hong Kong listing in the future, which would make it easier for international investors to participate. I'd strongly advise checking the official announcements from SSE and HKEX regularly, because the status can shift overnight.

One thing I've noticed from tracking previous Chinese IPOs: the final prospectus usually differs from the early filings. So don't make investment decisions based on preliminary numbers. Wait for the official document, which will contain audited financials and risk factors.

How Strong Is Chery's Financial Foundation?

Let's talk about the numbers — and no, I'm not going to sugarcoat it. Chery's revenue has been growing, but its profitability is still behind the top players. For the fiscal year before filing, the company reported steady growth in both domestic sales and exports. In fact, Chery has been the top Chinese exporter of passenger cars for several consecutive years. That's a huge deal. Exports bring in foreign currency and often come with higher margins than the cutthroat domestic market.

Chery operates several sub-brands: the core Chery brand, the premium Exeed line, Jetour for budget SUVs, and the all-electric iCar. Each targets a different segment, which is smart. But the EV push is where things get tricky. iCar is still a relatively small player compared to BYD's Dynasty and Ocean series. Chery's EV sales in China are growing, but they're starting from a low base.

Here's a due diligence checklist that I use when evaluating any auto IPO, and it's especially important for Chery because of its state-owned structure. I've filled in what you should focus on.

One thing that stands out to me is Chery's cash flow situation. Despite decent profits, the company has significant capital expenditure requirements. That's normal for an automaker, but it means the IPO proceeds are crucial. If the IPO fails to raise the expected amount, Chery might have to slow down its EV development, which could hurt long-term competitiveness.

How to Value Chery IPO Shares?

Valuing a company like Chery isn't as simple as applying a market multiple. Because of its complex structure and state-owned status, the market often gives state-run enterprises a discount. That's why you often see SOEs trade at lower P/E ratios than private peers. So, what should you expect? Based on the pre-IPO reports, Chery is reportedly aiming for a valuation of around 100 billion USD (if you believe the whispers). But don't anchor on that number. Here's my approach: start by looking at the P/E ratios of comparable companies. BYD trades at a premium due to its EV market leadership. Geely is more traditional but has strong global ambitions. I'd expect Chery to list at a P/E between 20 and 30 times its trailing earnings. But since earnings are still growing, you should also look at PEG ratio.

Also, consider the overseas revenue growth. Chery's export sales have been growing at more than 30% annually, which is faster than any domestic competitor. That deserves a premium. However, the government's involvement often means a discount because minority shareholders have little say. I've seen many investors ignore this and get burned later.

Here's a personal rule: never buy an IPO on the first day. Wait for the stock to settle. Many Chinese IPOs, especially on the STAR Market, debut with a massive pop and then crash. You're better off buying after the initial volatility dies down.

What Are the Biggest Risks in the Chery IPO?

Let's be brutally honest. Chery has four major risks that investors love to ignore.

First, the state-owned enterprise problem. Chery is controlled by the Wuhu municipal government. That means decisions are often made for political reasons, not profit maximization. In the long run, this could suppress shareholder returns.

Second, the EV race. Chery is late to the premium EV party. While iCar is growing, it's still far behind BYD, Tesla, and even newer rides like Li Auto. If Chery doesn't accelerate its EV roadmap, it could get crushed.

Third, export dependence. A major part of Chery's revenue comes from overseas. Tariffs, trade wars, or even currency fluctuations could wipe out that advantage. I've seen companies with healthy export lines get hammered by a sudden tariff hike.

Fourth, after the IPO lock-up period ends, there could be a massive sell-off. Insiders and early investors will be eager to cash out. That could suppress the stock price for months. Keep this in mind.

How to Get Shares in the Chery IPO?

If you're in China, here's the typical process for a STAR Market IPO. First, you need a brokerage account that has access to the STAR Market. In China, that requires a minimum of CNY 500,000 in your account and a certain amount of trading experience. Then, during the subscription window (usually announced a few days in advance), you place your order. The allocation is often done by lottery, so you may not get any shares even if you apply.

If you're outside China, your options are limited. The easiest way is to wait for a potential Hong Kong listing. If that happens, you can participate through a broker that offers HK stocks. But as of now, there's no official HK IPO application. So, sign up for alerts from credible financial news sites.

Another tip: don't chase the stock in the secondary market right after the IPO. I've seen so many investors buy at the peak and regret it. Be patient.

Frequently Asked Questions About the Chery IPO

This article has been fact-checked by the author (me). Data points are based on publicly available information as of the time of writing.