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Yangtze Business Daily News ● Changjiang Business Daily reporter Zhang Lu

Another unicorn is making big moves in the autonomous driving circle.

Recently, WeRide officially submitted its prospectus and plans to list on the Nasdaq in the form of American Depositary Shares (ADS). If the listing is successful, it is expected to become the largest IPO of a Chinese company in the United States in the past three years.

Founded in 2017, WeRide, headquartered in Guangzhou, is an autonomous driving technology company that focuses on the research and development of autonomous driving systems. So far, WeRide has carried out autonomous driving research and development, testing and operations in 30 cities in 7 countries around the world, and has autonomous driving licenses in China, the United States, the United Arab Emirates and Singapore.

WeRide is in the early stages of commercialization, and its business model is facing challenges. At present, its revenue structure is shifting from the sales of autonomous vehicles to service revenue, including autonomous driving solutions. From 2021 to 2023, the company's sales of autonomous taxis (Robotaxi) totaled only 19. In the past three and a half years, the company has invested a total of 2.777 billion yuan in R&D expenses, and has accumulated losses of more than 5.1 billion yuan.

The autonomous driving industry is also facing multiple challenges such as laws and regulations, technology maturity, and public acceptance. How to quickly promote technology iteration and large-scale application while ensuring safety will be a key issue that WeRide and the entire industry need to solve urgently.

Revenue declines and losses widen

It is reported that WeRide's first IPO in the United States will be managed by Morgan Stanley and Morgan Stanley.Chaseand CICC, the stock code is tentatively set as "WRD" and it is planned to be listed on the Nasdaq Stock Exchange.

The prospectus shows that since its establishment in 2017, WeRide has completed 10 rounds of financing, with investors including Qiming Venture Partners, IDG Capital,GAC Group、NVIDIA、Bosch、Xpeng MotorsFounder He Xiaopeng and others disclosed that the amount of financing exceeded US$1.09 billion. After the latest round of financing, WeRide's valuation reached US$5.1 billion, equivalent to about RMB 37 billion.

Despite the smooth financing, WeRide's commercialization performance is still full of challenges. From the operating data, the company's operating income in 2022 was 528 million yuan, a huge increase of 282.61% from 138 million yuan in 2021, but it has declined since then, with operating income of 402 million yuan in 2023, a year-on-year decrease of 23.86%. In the first half of 2024, the company achieved revenue of 150 million yuan, a year-on-year decrease of 18.03%.

At present, WeRide's losses are continuing to expand. According to the prospectus, from 2021 to 2023, WeRide will realize net losses of 1.007 billion yuan, 1.299 billion yuan, and 1.949 billion yuan respectively. In the first half of 2024, the company's net loss was 882 million yuan, and the cumulative loss in the past three and a half years was 5.137 billion yuan.

High R&D expenditure is the main reason for the loss. The prospectus shows that WeRide's R&D expenditure even far exceeds the scale of revenue. The company's R&D expenses from 2021 to the first half of 2024 were 443 million yuan, 759 million yuan, 1.058 billion yuan and 517 million yuan respectively, accumulating to 2.777 billion yuan in three and a half years, accounting for 54% of the total loss in the same period.

In the prospectus, WeRide listed some risk factors, such as "the business model has not been verified." WeRide said, "The company is in the early stages of commercialization and plans to start commercial production of Robotaxi in 2024 and 2025 respectively and prepare for large-scale commercialization. It is expected that after achieving these commercialization milestones, the revenue from the Robotaxi business will increase."

It can also be seen from the above content that WeRide has positive expectations for the future revenue growth of the Robotaxi business, which also reflects that it still maintains a cautious attitude in promoting the commercialization process.

At the same time, its book funding situation is not optimistic. The prospectus shows that as of June 30, 2024, WeRide's book cash and cash equivalents are only 1.892 billion yuan.

Faced with the financial situation of continuous losses and the market's doubts about the profit model of the autonomous driving industry, WeRide urgently needs to seek support from the capital market through an IPO. An industry insider analyzed that "internally, it needs a large amount of financial support to cope with the funding needs of continuous R&D investment and market expansion. Externally, it can use the funds raised from the listing and expand financing channels to alleviate the company's financial pressure."

Dependence on major customers

As one of the earliest companies in China to deploy autonomous driving, WeRide has great ambitions. Its layout includes five major product matrices, including autonomous taxis (Robotaxi), autonomous minibuses (Robobus), autonomous freight trucks (Robovan), autonomous sanitation vehicles (Robosweeper), and advanced intelligent driving (Advanced Driving Solution). It provides a variety of services such as online car-hailing, on-demand public transportation, same-city freight, intelligent sanitation, and advanced intelligent driving solutions.

In terms of revenue, WeRide's main sources are divided into two parts: one is the sale of L4 autonomous driving vehicles, mainly including Robobus, Robotaxi and Robosweeper and related sensor kits; the other is the provision of L4 autonomous driving and ADAS services, including L4 autonomous driving operation and technical support services and ADAS R&D services. The above two parts are referred to as products and services.

Among them, from 2021 to 2023, WeRide's product revenues will be RMB 102 million, RMB 338 million, and RMB 54 million, respectively; and service revenues will be RMB 37 million, RMB 190 million, and RMB 348 million, respectively. In the first half of 2024, the company's product and service revenues will be RMB 21 million and RMB 129 million, respectively.

It can be seen that WeRide's revenue structure is reversing and is in a period of transformation in business development. The proportion of its service revenue has increased from 26.81% in 2021 to 86% in the first half of 2024, while product revenue has shrunk, with the proportion decreasing from 73.91% in 2021 to 14% in the first half of 2024.

It is worth noting that ADAS services are the main source of revenue for WeRide's service business. The prospectus shows that in 2023, WeRide's revenue growth mainly came from Bosch, a leading automotive supplier. The customized R&D services provided to Bosch increased ADAS R&D service revenue by 105.2 million yuan.

However, in a market where revenue depends on the sales of applied models, orders from Bosch are not stable. In the first half of 2024, WeRide's ADAS R&D service revenue decreased by 43.9 million yuan compared with the same period last year.

In terms of product sales, from 2021 to 2023, WeRide's sales of self-driving buses were 38, 90, and 19 respectively; and the sales of self-driving taxis (Robotaxi) were 5, 11, and 3 respectively. This also indirectly shows that WeRide's self-driving products are not selling well.

In addition, WeRide is currently in the stage of exploring how to survive and develop in an uncertain environment, and is therefore highly dependent on a limited number of customers.

According to the prospectus, in 2022 and 2023, WeRide's revenue from the top five customers accounted for 72% and 77.5% of their respective annual total revenues. WeRide reminded in the prospectus that "we rely on a small number of customers. In the first half of 2024, the two customers with the largest revenue contributed 52.4% of the revenue." It can be seen that the company's dependence on large customers is very significant.

At the same time, the autonomous driving industry still faces many challenges.NIOFounder Li Bin and other industry leaders 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.

In the fiercely competitive intelligent driving red ocean track, whoever can get more orders and receive more capital transfusions will have a greater chance of maintaining long-term operations. For WeRide, there is still a long way to go in the future.