Li Auto raises $242 million for Mach chip unit to expand beyond autos

• Li Auto will contribute 1 billion yuan and external investors 625 million yuan under the signed agreements.
• Li Auto will retain control and continue consolidating the unit's financial results, while 2 equity incentive plans will help attract and retain talent.

Li Auto (NASDAQ: LI) announced plans to bring outside capital into its Mach chip business, arranging separate financing for the unit as it seeks growth opportunities beyond the automotive market.

Its subsidiary Shanghai Mahe Xin Technology Co Ltd (MHX Technology) has signed subscription agreements for equity financing totaling 1.625 billion yuan ($242 million), the company said on Friday.

The subsidiary focuses on chips and domain controllers. Li Auto will invest 1 billion yuan through a wholly owned subsidiary, while external investors will contribute a combined 625 million yuan.

External investors include Hangzhou Jingtao, Lanchi Ventures, Huaye Tiancheng and MiraclePlus, according to the announcement.

In addition, Hangzhou Jingtao Additional Investor has been granted a one-time right to invest up to 500 million yuan on or before December 31, 2026, at the same price per unit of increased registered capital.

If that right is fully exercised, the financing and additional investment would total 2.125 billion yuan. Completion of the financing remains subject to customary closing conditions.

Li Auto said it will retain control of MHX Technology and continue consolidating its financial results after the financing. MHX Technology will also establish 2 equity incentive plans for employees and key contributors.

Assuming full utilization of both incentive plans and full exercise of the additional subscription right, Li Auto, external investors and entities administering the incentive plans are expected to hold stakes of 74.01%, 6.58% and 19.41%, respectively.

Establishing a dedicated platform for the chip and domain controller business will help it tap broader industrial opportunities, particularly in non-automotive sectors, and achieve greater economies of scale, Li Auto said.

The financing will support research and development and commercialization, while the equity incentives aim to attract, motivate and retain key talent, aligning participants' interests with the business's long-term growth.

The announcement formally confirms previously reported financing plans for the chip business. Local media outlet LatePost reported on September 21 that the unit was pursuing its first external funding round at a pre-money valuation of about 15 billion yuan.

Li Auto is also seeking external customers for its in-house technologies. President Ma Donghui said in September that chips and silicon carbide modules are relatively compact and adaptable, allowing them to be developed into standardized products for external sales.

The Mach M100, Li Auto's first mass-produced in-house driver-assistance chip, was formally unveiled in May. It uses a 5-nanometer automotive-grade process, delivers 1,280 TOPS of computing power per chip and is already used in the company's vehicles.

The company is also exploring a cloud inference chip based on a dataflow architecture, according to earlier reporting by LatePost. That approach could extend its chip business from vehicles to data centers.

Li Auto's financing arrangement follows a similar path to that of Nio Inc (NYSE: NIO). Nio's chip subsidiary GeniTech Co Ltd (Shenji) completed its first funding round of 2.257 billion yuan in February, with Nio retaining a 62.7% stake afterward.