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Text | Ning Chengque, Bowang Finance

The first general intelligent driving stock in China is coming.

Recently, WeRide, a star company in the field of autonomous driving, announced a major progress. The company has officially submitted its listing application documents to the U.S. Securities and Exchange Commission (SEC) and plans to list on the Nasdaq Stock Exchange with the stock code "WRD", marking its sprint towards the throne of "the first general-purpose autonomous driving stock in China".

The IPO has a strong lineup of lead underwriters, including top financial institutions such as Morgan Stanley, JPMorgan Chase and CICC, which will escort WeRide's road to listing.

WeRide stands out with its unique market positioning and technical strength, becoming the only company in the industry that can provide full-scenario autonomous driving commercial solutions from L2 to L4. This comprehensive coverage capability makes WeRide unique in the field of autonomous driving and attracts much attention.

Since its last round of financing, the company's valuation has soared to US$5.1 billion (approximately RMB 37 billion). If WeRide successfully lists on the Nasdaq, it is expected to become the largest IPO of a Chinese company in the United States since Didi went public in the United States in 2021.

As driverless technology matures and market demand grows rapidly, the IPO boom in the autonomous driving industry is intensifying. In this context, whether WeRide's true value can support its sky-high valuation of US$5.1 billion has become the focus of the industry.

Under the halo of "the first general-purpose autonomous driving stock", WeRide's technical strength, business model, market layout and other aspects will be subject to rigorous market testing.

01 Chief Scientist Starts Business and Creates WeRide

The story of WeRide begins with its founder Han Xu.

Han Xu, a technical leader who once served as the chief scientist of Baidu's autonomous driving division, resolutely left Baidu in 2017 and founded WeRide (initially named Jingchi Technology), officially starting the road to direct competition with his former employer.

He holds a Ph.D. from the University of Illinois and is a tenured professor at the University of Missouri. He has made great achievements in the fields of computer vision and machine learning, and his academic career has always been closely linked to these two cutting-edge technologies.

WeRide is a truly technology-driven company. As of June 30, 2024, 91% of its 2,227 employees are R&D personnel, bringing together top AI scientists and autonomous driving engineers. It is this team structure that has created WeRide's strong technical strength.

In terms of products, WeRide has formed a five-product matrix including self-driving taxis, self-driving minibuses, self-driving freight trucks, self-driving sanitation trucks, and high-level intelligent driving, providing a variety of services such as online car-hailing, on-demand public transportation, same-city freight, intelligent sanitation, and high-level intelligent driving solutions.

In terms of commercialization process, WeRide is on the right track, with revenue mainly coming from two major segments: one is the sales of L4 autonomous driving cars, including various types of robot vehicles and sensor kits; the other is the provision of L4 autonomous driving and advanced driver assistance system (ADAS) services, covering a full range of services including operations, technical support and ADAS research and development.

WeRide said that the company's commercial revenue ranks first among similar autonomous driving companies. At present, WeRide's autonomous driving vehicles have been tested and commercially operated in 30 countries and seven cities in Asia, the Middle East and Europe, becoming one of the L4 autonomous driving companies with the most operating countries, and also holds autonomous driving licenses in China, the United States, the United Arab Emirates and Singapore.

In the capital market, WeRide is also very popular and has successfully completed 10 rounds of financing, attracting many well-known investment institutions including He Xiaopeng, GAC Group, NVIDIA, Bosch, IDG Capital, etc., with a total financing amount of more than US$1.09 billion. After the D+ round of financing in 2022, the company's valuation reached US$5.1 billion (approximately RMB 36.977 billion).

It is particularly worth mentioning that WeRide has achieved remarkable success in overseas markets, especially in the Middle East. In the UAE, its Robotaxi service has been operating for nearly three years, with the scope of service continuously expanding, and a total of more than 20,000 orders completed, winning wide recognition from local citizens.

In addition, the company is also actively expanding in Singapore and Europe, and plans to further expand to more countries and regions such as East Asia, North Africa, and South America to accelerate the implementation of its globalization strategy.

As a leader in the field of general intelligent driving in China, WeRide's IPO in the United States is not only an important milestone in its own development, but also sets a new benchmark for Chinese autonomous driving companies on the international stage and has important symbolic significance.

02 Unstable performance, "bleeding" listing

Although WeRide is expected to be the first to achieve a breakthrough in the listing in the field of autonomous driving, its future development path is still full of challenges and uncertainties.

From the perspective of financial performance, WeRide's revenue data has experienced dramatic fluctuations in recent years. In 2021, WeRide's revenue was 138 million yuan, which surged to 528 million yuan in 2022, a year-on-year increase of 281.7%; and in 2023, revenue fell back to 400 million yuan, a year-on-year decrease of 24.2%.

WeRide's prospectus stated that it was mainly affected by the macro environment, but in the same year of 2023, Hesai Technology, also in the autonomous driving field, saw its revenue increase by 56% year-on-year, Horizon Robotics saw a year-on-year increase of 71%, and RoboSense saw a year-on-year increase of 111%. WeRide was the only leading autonomous driving company whose revenue declined year-on-year.

In the first half of 2024, WeRide's revenue reached 150 million yuan, but it was still lower than 183 million yuan in the same period last year.

In-depth analysis shows that WeRide attributes the revenue fluctuations mainly to significant changes in service revenue. Service revenue fell 21.3% year-on-year in the first half of the year, mainly due to a reduction in customized R&D services provided to customers such as Bosch, as well as a decrease in technical support service fees for the operation of driverless taxis and freight vehicles.

From the financial report data, in addition to the fluctuation of revenue, Bowang Finance also found that WeRide's development strategy is also changing. In 2021, WeRide's product revenue was 101 million yuan, accounting for 73.5%, while service revenue was 37 million yuan, accounting for only 26.5%. But by 2023, WeRide's product revenue was 54 million yuan, accounting for 13.5%, while service revenue increased to 348 million yuan, accounting for 89.9%.

This change also reflects that WeRide is undergoing a strategic transformation from a "heavy asset" to a "light asset" model, that is, from directly operating Robotaxi fleets or selling vehicle hardware to providing technical solutions and follow-up services.

At the same time, WeRide's losses should not be underestimated. From 2021 to 2023, WeRide's net losses were 1.0073 billion yuan, 1.2985 billion yuan, and 1.9491 billion yuan, respectively. In the first half of 2024, the company achieved revenue of 150.3 million yuan and a net loss of 882 million yuan, with a cumulative loss of more than 5.1 billion yuan in three and a half years.

High R&D expenses are the main reason for the loss. The prospectus shows that from 2021 to the first half of 2024, WeRide's R&D expenses were 443.2 million yuan, 758.6 million yuan, 1.0584 billion yuan, and 517.2 million yuan, respectively, totaling 2.778 billion yuan in three and a half years, accounting for 54% of the loss.

Despite this, WeRide’s technical strength should not be underestimated. As the company’s soul, co-founder and CTO Dr. Li Yan, with his profound academic background and rich industry experience, has provided strong support for the company’s technological innovation in the field of computer vision.

Looking to the future, WeRide clearly stated in its prospectus that it will continue to increase its investment in testing, experimentation and commercialization of autonomous driving technology, especially taking the Robotaxi project as a key development direction. It plans to start commercial production this year and next year to be fully prepared for large-scale market applications.

Of course, the characteristics of the autonomous driving industry determine that this is a long and challenging journey. The high threshold, huge investment, and long R&D cycle all make losses a reality that startups must face.

Fortunately, in the face of funding pressure, WeRide's cash reserves are relatively stable. By the end of 2023, the company has about 4.2 billion yuan in cash, time deposits and financial investments, which is enough to support its normal research and development and daily operations for seven years based on the current loss rate.

03 With so many competitors vying for supremacy, how far can WeRide go?

The field of autonomous driving has become a hot topic again recently, the market is full of vitality and the competition is becoming increasingly fierce.

Baidu Apollo's "LuoBoKuaiPao" autonomous driving travel service platform has seen a surge in driverless orders thanks to its strong performance in the Wuhan market, with the daily peak exceeding 20 orders per vehicle. This series of impressive results has not only attracted the public's attention, but is also seen as an important signal of the accelerated commercialization of autonomous driving.

In this "marathon" competition of autonomous driving technology, WeRide is not fighting alone. Many unicorn companies have joined the battle and are competing for IPO in order to seize the initiative under the dual challenges of capital and technology.

Companies such as Zongmu Technology and Youjia Innovation have submitted listing applications to the Hong Kong Stock Exchange, while Pony.ai and Momenta have set their sights on broader overseas markets and submitted overseas issuance and listing registration materials to the Nasdaq or New York Stock Exchange in the United States. These moves all highlight the urgent desire for financial support within and outside the industry.

Faced with high R&D costs and future uncertainties, autonomous driving companies are well aware of the importance of financing, which is the key to their survival and development. Therefore, accelerating the commercialization process and achieving self-sustaining capabilities have become the common goals of these companies.

In the autonomous driving industry, the choice of technology route is also crucial. The "leapfrog" development route represented by Waymo and LoBo is on par with the "gradual" route led by Tesla, and the competition between the two is becoming increasingly fierce. The latest progress of Tesla FSD has undoubtedly brought considerable pressure to companies including WeRide.

However, even as it strives to move forward on the road of commercialization and technological innovation, the autonomous driving industry still faces many challenges. Industry leaders such as He Xiaopeng, founder of Xpeng Motors, and Li Bin, founder of NIO, have publicly pointed out the shortcomings of Robotaxi in terms of capabilities, regulations, and business closed loops, indicating that it will take some time for the industry to mature.

At the same time, the capital bubble problem in the autonomous driving industry has gradually emerged. With the lifting of the ban on the shares of cornerstone investors of several listed autonomous driving supply chain companies, the stock prices have generally experienced a cliff-like decline, and the authenticity of the industry's valuation has begun to be re-examined by the market.

For example, Zhixing Technology's share price has fallen sharply from its peak of HK$115.6 per share to only HK$21.40 per share, and its market value has shrunk to HK$4.843 billion, almost halving. Similarly, RoboSense was not spared, with its share price plummeting from its peak of HK$137.5 per share to HK$16.64 per share, and its market value is only HK$7.451 billion, almost halving.

This trend is also reflected in the US stock market. Take Hesai Technology as an example. This company, which was listed earlier, also experienced a sharp decline in its stock price. The latest share price of Hesai Technology is only US$4.61 per share, and its market value has shrunk to US$588 million. Its highest valuation before listing was US$3 billion, and its market value has almost doubled.

This trend has undoubtedly sounded the alarm for WeRide, which is about to go public, indicating that although its road to listing seems to be imminent, it is full of challenges.

However, challenges and opportunities coexist. The potential of the autonomous driving market is still huge. According to the prospectus data, the scale of the global and mainland China autonomous driving market will usher in explosive growth in the next few years, and the autonomous driving taxi and truck market is even more promising.

In terms of the planning of the funds raised from the IPO, WeRide has identified four major directions: first, to increase investment in the research and development of autonomous driving technology, products and services; second, to promote the commercialization and operation of autonomous driving fleets, and expand marketing activities in more markets; third, to support the company's capital expenditures; and fourth, to use it for general corporate purposes and working capital.

In summary, the autonomous driving industry is at a crossroads full of variables and opportunities. While accelerating the commercialization process and improving technical strength, companies such as WeRide must also be wary of the risk of market bubbles and move towards a broader future with steady steps.