Cathay Capital launches $227m China automobile fund
Cathay Capital Private Equity has launched a RMB1.5 billion ($227 million) China automobile sector fund with cornerstone investments from Yangtze River Industry Fund and French auto supplier Valeo.
Cathay CarTech Fund - the GP’s first renminbi-denominated vehicle to date - has received RMB375 million from Valeo, contributing to a first close of unspecified size. It follows participation by Valeo in Cathay’s first VC fund earlier this year alongside fellow French auto player Michelin.
“In addition to investing more than 11% of its original equipment sales in R&D on a global basis, and with more than 3,000 development staff in China, Valeo is also actively looking into the potential of local start-ups, which form a particularly vibrant ecosystem in China,” Jacques Aschenbroich, chairman and CEO of Valeo, said in a statement. “Through CarTech Fund, we plan to identify and develop more innovative products and technologies for our customers.”
The fund will target companies developing advanced mobility technologies, including autonomous driving and internet-connected cars. A geographic focus on the Chinese market is expected to leverage regional momentum in electric vehicles and smart cars.
China is considered the world’s largest automotive market with an estimated 200 million cars currently on the road. It is also increasingly seen as a leader in new mobility technologies due to growing domestic political pressure to curb congestion and pollution. The government has mooted a plan for electric vehicles to represent about one-fifth of nationwide car sales by 2025.
Early fundraising activity in China’s advanced auto technology space included the launch of a dedicated smart car fund by SAIC Motors and Alibaba Group in 2015 with a view to raising RMB1 billion. Meanwhile, NIO Capital, a PE firm established by Chinese electric car company NIO, NextEV, Sequoia Capital and Hillhouse Capital, has raised RMB10 billion for investments in electric vehicle supply chain companies. Last month, NIO reportedly initiated a process to raise a separate $500 million fund for the sector.
Founded in 2006, Cathay focuses on cross-border middle-market investment with a number of funds mandated across China, Europe, and North America. It maintains bases in Shanghai, Beijing, Paris, Munich, New York, and San Francisco.
Recent activity by the GP in the Chinese car space includes participation in a Series B funding round of undisclosed size for Momenta, a company that develops road sensors and mapping software for driverless cars. It has also backed a RMB300 million Series B for online car services platform Lechebang.
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