Chinese electric vehicle maker Zhejiang Leapmotor Technology has shelved a plan to raise $1.5 billion through an initial public offering (IPO) in Hong Kong because of lukewarm investor interest, said two sources with direct knowledge of the matter.

Bankers and advisers had hoped a deal of the size planned by Leapmotor, which would have been Hong Kong's largest IPO so far in 2022, would revive the city's flagging new issue market.

Instead, the deal has been put on hold and Leapmotor is considering cutting the size of the transaction, one of the sources said.

The decision to pause the Hong Kong IPO was made after the company met with investors over the past week to gauge sentiment towards the company and its listing plans, the sources said.

A smaller IPO size would be more attractive to cautious investors and the deal could be brought back if market conditions improve, the first source said.

Leapmotor did not respond to an emailed request for comment.

The sources could not be named as the information was not yet public.

Leapmotor produces four electric vehicle models that mainly target China's middle- and lower-end mass market in a 79,500 yuan-300,000 yuan ($11,466.40-$43,269.44) price range, according to its website and prospectus filed with the Hong Kong Stock Exchange. Bigger EV makers such as Nio Inc see themselves more as China's challenger to Tesla Inc, mainly producing more expensive and high-end cars. Leapmotor was ranked 12th in terms of sales in the first seven months among all EV makers in China, with a market share of 2.3%, according to data from the China Passenger Car Association. It was founded in 2015 in Hangzhou, capital of China's Southeastern Zhejiang province, by the country's second-largest surveillance equipment maker Zhejiang Dahua Technology and its founders. The firm also counts investment major Sequoia Capital China and state-owned Shanghai Electric Group Corp among its main backers.

Leapmotor had planned to use the proceeds of the IPO for research and development as well as to boost its production capacity and sales network.

It was not immediately clear what impact the IPO's shelving will have on its operations and growth plans.

Volatile financial market conditions caused by Chinese economic growth concerns, the Russia-Ukraine war, high inflation and tightening monetary conditions in major economies have hit investor sentiment in 2022. Hong Kong IPO volumes have crashed nearly 90% year to date to the lowest level in nine years. There has been just $2.36 billion raised so far this year, not including secondary listings of Tianqi Lithium, China Tourism Group Duty Free Corp and others, compared with $22.2 billion in the same period of 2021, according to Refinitiv data.

($1 = 6.9333 Chinese yuan renminbi)