Deals and IPOs

Chinese scooter start-up Niu is taking over Beijing streets, growing quickly in Europe, and is now filing for a US IPO

Key Points
  • Niu Technologies filed Monday for a $150 million initial public offering in the U.S.
  • Produced exclusively out of the southeastern Chinese province of Jiangsu, Niu scooters stand out from other brands in China for their sleek, sporty design and technology that guards against theft.
  • Wang Xiao Pian, 38, said her Niu store in Beijing has sold more than 300 scooters in August, and at least as many in September so far.
An electric-scooter of Niu Technologies Group Ltd. is displayed on a road in Beijing, China, 11 August 2018. 
Wan xiaojun | AP

A Chinese start-up that is trying to make electric scooters as high-profile as Tesla made the electric car is looking to go public in New York.

Niu Technologies filed Monday for a $150 million initial public offering in the U.S. Shares are set to be traded on the Nasdaq under the ticker NIU.

Produced in the southeastern Chinese province of Jiangsu, Niu scooters stand out from other brands in China for their sleek, sporty design, relatively higher quality, customer service and technology that guards against theft. For example, Niu owners can use a smartphone app to track the real-time GPS location of a scooter, and get notifications whenever the battery is removed, or the scooter is tampered with. Its brand name "xiao niu" implies coolness in Mandarin as well.

Like Tesla, Niu still operates at a net loss. But its net loss margin narrowed from 65.6 percent in 2016 to 24 percent last year, or 184.7 million yuan ($27.9 million), according to Niu's prospectus. Excluding share-based compensation expenses and a change in convertible loan fair value, the net loss margin was 8.3 percent in the first six months of this year, versus 14 percent a year ago.

'There's no competition'

Wang Xiao Pian, 38, said she began selling Niu scooters in 2015 and opened a store in Beijing's central east Dongcheng district in April 2017. She said the store sold more than 300 scooters in August, and at least as many in September so far.

Most sales are driven by word-of-mouth and store promotions, Wang said. She added that Niu management holds online and offline training session for her staff of six roughly every two weeks, and frequently sends representatives to check on the store's appearance.

"I don't think anyone can compete with us," Wang said. "There's no competition. I think next year will be better than this year."

In contrast, a nearby store selling scooters from 19-year-old Aima – which state media CCTV named as a leading national brand – said it has sold about 200 vehicles both in August and September.

"Most people buy these scooters to send and pick up their children from school, buy groceries or commute to work," said Aima store operator Zhu Daosi, 32, noting it's probably a bit excessive for them to spend the extra 1,000 yuan or more for a Niu scooter for such trips.

"But," Zhu said, "Niu still has a competitive edge."

Source: Niu Technologies data

Anecdotally, some online postings for secondhand scooter sales note the seller would like to upgrade to Niu. Through its smartphone app and customer service, the company has a dedicated group of fans who share pictures of decked out scooters online and swap tips on maintenance. The Niu app had more than 457,000 registered users as of June 30, according to the company.

That's still a fraction of the 700 million two-wheeled vehicles in China as of Dec. 31, 2017, according to the filing.

Niu Technologies was co-founded in 2014 by Baidu's former chief technology officer, Li Yinan, and Token Yilin Hu, formerly of Microsoft China. The vehicles range in price from 2,999 yuan ($436) to 9,999 yuan ($1,455) or more, and can travel about 45 kilometers (27 miles) to more than 150 kilometers on a single charge, depending on the model.

The first Niu scooters were crowdfunded. Now, Niu said, it has stores in more than 150 Chinese cities and distributors in 23 other countries. The company claims to have sold more than 431,000 e-scooters globally as of June 30.

Early investors include GGV Capital and IDG Capital, according to Crunchbase. Credit Suisse, Citigroup and Needham are the underwriters for the public offering.

While China is Niu's largest market by far and the company has no stores in the U.S., Europe is a growing market, accounting for about 12 percent of net revenues in the first half of this year. Net revenue from overall electric scooter sales nearly doubled in the first six months of this year to 514 million yuan ($75.6 million), according to Niu's prospectus.

Plans for the future

Like Tesla, Niu's e-scooters use batteries made of lithium ion, rather than heavier and less efficient lead. Niu claimed, citing analysis from a Shanghai-based consultancy, that it's the largest lithium-ion battery-powered e-scooter company in China.

The company's four-year road to growth has reportedly been relatively smooth. Niu claimed in its prospectus to have not experienced any product recalls, massive refunds or outbreaks in quality issues since it began to sell e-scooters.

However, the company did note a fire accident in April at a rented facility caused a loss of 22.3 million yuan in damaged inventories and repair costs.

In addition, its co-founder Li was convicted in January 2017 of insider trading in shares of a Shenzhen-listed company during his work at another firm. His prison sentence ended in December 2017, and Li is no longer involved with company operations, the prospectus said. The filing shows he still owns more than 40 percent of the company through a Cayman Islands fund administered by an independent trustee.

The company says it plans to use funds raised from the public offering to expand production from roughly 380,000 units a year to 700,000 units and 1 million annually by 2019 and 2020, respectively. Niu also said it intends to spend more on research and development, and distribution, especially in Southeast Asia and India.

The biggest challenge for Niu will likely be regulation, said Jim Fields, co-founder of Shenzhen-based Relay, which has made informational videos for many Chinese companies that have gone public in the U.S. Niu is not a client.

At least in Beijing, few scooter riders wear helmets and no driver's license or license plate is required. However, policies can change quickly.

In May, the State Administration of Market Supervision and the National Standardization Administration limited the weight of electric scooters to 55 kilograms and the speed limit to 25 kilometers an hour, beginning April 15, 2019.

Niu noted in its prospectus the resulting need to upgrade vehicles could result in more sales. Early "N" models weigh about 95 kilograms, while the "UM" model released in the last several weeks weighs about 40 kilograms, according to online materials. The company noted that some municipal governments such as Xiamen, Shenzhen and Dongguan have prohibited electric scooters in certain districts, but said the limited number of restrictions does not have a substantial effect on its revenue.

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