Multiple unicorns in Guangdong's autonomous driving field are collectively sprinting towards capitalization
2024-08-18
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Guangdong "players" such as Qiqi Travel, WeRide, and Pony.ai are rushing to Hong Kong and US stocks
Yangcheng Evening News Omnimedia Reporter Mo Jinrong
As we enter 2024, many unicorns in Guangdong's autonomous driving field are collectively rushing into the capitalization track.
On July 10, Ruqi Travel, backed by two major shareholders, GAC Group and Tencent Holdings, successfully listed on the Hong Kong Stock Exchange with the concept of Robotaxi (driverless taxi), becoming the "first stock of autonomous driving operation" in China. Recently, two other autonomous driving unicorns in Guangzhou have reportedly rushed for IPO. WeRide, located in Huangpu District, Guangzhou, publicly disclosed its prospectus to the U.S. Securities and Exchange Commission (SEC), seeking to be listed on the Nasdaq in the United States. At the same time, the China Securities Regulatory Commission issued a notice on the filing of Pony.ai's overseas issuance and listing, with the target listing location being the Nasdaq Stock Exchange or the New York Stock Exchange in the United States.
Since the listing requirements for start-ups in Hong Kong and US stocks are relatively loose, autonomous driving companies are currently facing the "curse" of losses and insufficient "blood-making" capabilities. Therefore, the urgent need for funds has prompted them to turn their attention to Hong Kong and US stocks. However, the autonomous driving industry still faces many challenges in terms of technological breakthroughs and commercialization. Whether IPO can truly become the key for these companies to solve problems and achieve breakthroughs remains to be verified.
WeRide is one step closer to listing in the U.S.
On August 25, 2023, the China Securities Regulatory Commission's official website disclosed WeRide Inc.'s overseas offering and listing registration notice, and WeRide's plan to seek an IPO in the U.S. surfaced. As the 12-month deadline given by the China Securities Regulatory Commission's filing notice is about to expire, on July 26, 2024, WeRide submitted a prospectus to the U.S. Securities and Exchange Commission, taking another big step towards its initial public offering.
A prospectus unveiled the mystery of Guangzhou's autonomous driving unicorn. According to the information, WeRide was founded in 2017 and claims to be "the world's first autonomous driving company". Its products are tested in 30 cities in 7 countries. It is also the only autonomous driving company in the world that has obtained autonomous driving car testing licenses in 4 countries. It provides autonomous driving products and services from L2 to L4 to meet the needs of the transportation, logistics and sanitation industries.
In this IPO, WeRide initially plans to sell 6.45 million American Depositary Shares (ADS) at a price range of US$15.50 to US$18.50. Based on the upper limit of the offering price range, WeRide's market value is approximately US$5 billion.
It is worth noting that WeRide's revenue increased significantly in 2022, increasing by 281.7% from RMB 138.2 million in 2021 to RMB 527.5 million in 2022, but slightly decreased to RMB 401.8 million in 2023. In the first half of this year, revenue continued to decline slightly, from RMB 182.9 million in the first half of 2023 to RMB 150.3 million.
What is even more concerning to investors is that WeRide has not been profitable since its establishment, and its losses are still expanding, which is expected to continue for some time. According to the prospectus, its net profit attributable to the parent company's shareholders from 2021 to 2023 was a loss of 1.007 billion yuan, 1.298 billion yuan, and 1.982 billion yuan, respectively. It still lost 881 million yuan in the first half of this year, and its losses so far in 2021 have exceeded 5.1 billion yuan.
The autonomous driving industry has high technological content, high barriers to entry, large investments, and long profit cycles. Shortage of funds and losses are almost inevitable problems for such startups, and seeking capitalization is one of the most direct solutions. WeRide analyzed in its prospectus that its main source of revenue is the sales of L4 autonomous driving vehicles, mainly including robot buses, robot taxis, and robot sweepers and related sensor kits, as well as the provision of L4 autonomous driving and ADAS services (advanced driver assistance systems). "Compared with globally listed L4 autonomous driving companies, we have the smallest net losses in 2021, 2022, and 2023," said WeRide's management.
The autonomous driving industry is characterized by a large number of technical and commercial challenges. Continuous large-scale R&D investment and large-scale commercialization progress have become key factors affecting the autonomous driving industry. Data shows that in 2021, 2022 and 2023, WeRide's R&D expenses were RMB 443.2 million, RMB 758.6 million and RMB 1.0584 billion, respectively. Although the above R&D investment amount is not outstanding among global autonomous driving companies, it has accounted for 320.7%, 143.8% and 285.5% of its annual revenue. In the first half of 2024, R&D expenses were 517.2 million yuan, and management expects to invest a lot of resources and expenses in technology research and development.
The large-scale commercialization of the autonomous driving industry is still in the testing phase. In addition to core technologies, factors such as market recognition and regulatory policies will greatly affect the commercialization process. "Autonomous driving technology is an emerging technology, and we face major challenges in development, commercialization, and technology. Our technology may not be as good as we expect, or it may take us longer than currently expected to achieve commercialization." WeRide's management team frankly admitted the risks of the current company in the prospectus. Various factors show that profitability will still be a problem for WeRide in the future, and after successfully listing on the US stock market, it is still unknown whether WeRide can win the favor of investors and obtain funding as soon as possible.
The first Robotaxi stock faces a test
Whether the capital market will bring opportunities or challenges to the autonomous driving industry can be seen from the performance of companies that have already been listed.
On July 10, Ruqi Travel was officially listed on the Hong Kong Stock Exchange, focusing on the Robotaxi concept, and plans to use 40% of the funds raised from the listing for research and development activities of autonomous driving and Robotaxi operation services. The prospectus shows that Ruqi Travel is the world's first travel platform to launch a commercial hybrid operation of manned online car-hailing and Robotaxi, and is also the first travel service platform in China to have its own commercial Robotaxi fleet.
However, judging from the stock price performance after listing, Ruqi Travel has not been warmly sought after. On the day of listing, Ruqi Travel's issue price was HK$35.00 per share, which fell below the issue price at the opening, closing at HK$30.00, and closed at HK$33.90 that day, down 3.14%. On July 19, eight trading days later, the stock price closed at HK$18, nearly half of the issue price. As of August 14, the Hong Kong stock closed at HK$25.70, with a market value of HK$5.246 billion, still below the issue price.
What affects investors' expectations for Ruqi Travel is first of all the performance of the industry and the company itself. Although the main focus is on the emerging concept of Robotaxi, from the perspective of business composition, the main source of business is still online car-hailing services. The prospectus shows that from 2021 to the end of 2023, the operating income will be 1.014 billion yuan, 1.368 billion yuan, and 2.161 billion yuan, respectively, of which online car-hailing revenue accounted for 99%, 91%, and 84%. The company has not yet achieved profitability at the gross profit level, and the gross loss in 2023 was 150 million yuan. The online car-hailing service industry is highly competitive and the trend of turning losses into profits is still unclear. Ruqi expects that it will continue to incur net losses and operating net cash outflows from 2024 to 2027.
At the same time, investors still have doubts about the prospects for large-scale commercialization of Robotaxi, which is also an important factor affecting stock prices. Ruqi Travel expects large-scale commercialization of Robotaxi to be realized in 2026, but the large-scale application of unmanned driving technology in online car-hailing is not only restricted by technology and safety, but also by regulatory rules. Therefore, it may still be difficult to achieve large-scale application after the technology matures. A brokerage research report analyzed that it will take a long time for Robotaxi to be commercialized, which is one of the reasons for the weak investor sentiment.
The industry has reached a critical crossroads of commercialization
After nearly 10 years of incubation, the autonomous driving industry has grown from its infancy to entering the fast lane of development, and has now reached a critical juncture of commercialization and capitalization.
Since the beginning of this year, more and more autonomous driving unicorns are rushing to IPO. In addition to WeRide and Pony.ai from Guangzhou, Guangdong, Black Sesame Intelligent, an autonomous driving computing chip and platform R&D company, was listed on the Hong Kong Stock Exchange on August 8; ADAS (domestic advanced driver assistance system) solution provider Zongmu Technology turned its attention to the Hong Kong Stock Exchange in March this year after failing to be listed on the Science and Technology Innovation Board; on August 9, smart driving technology company Horizon Robotics passed the IPO filing of the China Securities Regulatory Commission, which means that Horizon Robotics has obtained the pass for listing in Hong Kong; autonomous driving company Momenta has also passed the overseas listing filing procedures...
The autonomous driving industry has also attracted the attention of primary market investors, and related investment and financing in this field has begun to pick up. In May this year, Wayve, a British artificial intelligence startup that studies autonomous driving systems, received a C round of financing from Nvidia, Microsoft and SoftBank, with a financing amount of US$1.05 billion, which is the largest financing in the autonomous driving industry this year. In the past year, the global autonomous driving investment and financing market has been relatively sluggish, and this huge amount of funds is seen as a sign of investor confidence.
Although different investors have different views, it is almost a consensus that the prospects of the autonomous driving industry are very broad. According to iMedia Research, the scale of China's driverless car market will reach 11.85 billion yuan in 2023, maintaining a stable growth trend overall. It is expected that the scale of China's driverless car market will reach 120.68 billion yuan by 2029. According to Essence International Research Report, it is expected that Robotaxi transaction volume will start to increase on a large scale in 2026, and the transaction volume is expected to reach 1.5 billion yuan/22.1 billion yuan in 2026/2027, and it is expected to increase to 489 billion yuan by 2030.
CICC believes that Robotaxi directly explores L4-level advanced autonomous driving. In the past 10 years, the industry's investment and financing performance has been up and down, reflecting the market's concerns about its commercialization. Thanks to the joint catalysis of local policies and the industry, Robotaxi has received widespread attention recently. "In the short term, the exploration of policies and cost reduction paths is expected to catalyze the expansion effect of the industry; in the long term, the commercialization of Robotaxi requires the promotion of technology, cost, ecology, and supervision."
Good winds help good things. As the policy side continues to mature and the industry continues to standardize, autonomous driving is expected to enter a flourishing situation. In November 2023, four ministries and commissions jointly issued the "Notice on the Pilot Work of Access and Road Traffic of Intelligent Connected Vehicles"; in December 2023, the Ministry of Transport issued the "Guidelines for Autonomous Driving Vehicle Transportation Safety Services (Trial)", which clearly defined the industry norms for the use of autonomous driving vehicles to engage in urban public transportation and taxi passenger services on various types of roads accessible to motor vehicles. In addition, Beijing, Shanghai, Guangzhou, Shenzhen, Wuhan, Chongqing and other places have issued policies related to the implementation of autonomous driving. "We believe that Robotaxi is still in its early stages of development. With the continuous optimization of policies and the continued investment of related companies, the industry still has a lot of room for development." Debon Securities Research Report analyzed.
Orient Securities is also optimistic about the commercialization of Robotaxi. It is expected that Robotaxi will gradually be commercialized and will partially replace B-end taxis and online ride-hailing vehicles. It will also accelerate the process of automotive intelligence. The midstream and downstream of the unmanned driving industry chain, such as autonomous driving solution suppliers and vehicle manufacturers, are expected to benefit. Upstream companies that provide intelligent hardware and software are also expected to benefit.
