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Many people have never experienced autonomous driving, but autonomous driving companies are rushing to go public.

This year, more than ten companies related to autonomous driving have initiated the listing process. The latest to go public is the "first stock" of autonomous driving chips, Black Sesame Technologies, which landed on the Hong Kong Stock Exchange on August 8th, with a current market value of 11.4 billion Hong Kong dollars; the upcoming listing is the autonomous driving startup WeRide, which will be listed on NASDAQ after the completion of its share offering.

Behind them are star projects like Pony.ai and Momenta, the leading player in domestic autonomous driving chips, Horizon Robotics, and Zongmu Technology, which is transitioning from the A-share market to the Hong Kong stock market. In addition, the vehicle-road collaboration company, Mushroom Car Alliance, has also been preparing for an IPO for some time.

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This wave of listings is driven by the financing needs of companies, as well as the real pressure for investors to exit, taking advantage of the rising tide to go public quickly, so that companies have the opportunity to continue telling the story of autonomous driving.

However, there are too many companies working on autonomous driving, and the capital market may need to digest for a while.

A new round of listings is coming

Today's listing wave originates from the entrepreneurial wave of 8 years ago.

Around 2016, a large number of autonomous driving startups suddenly emerged in China.

For example, in the hottest field of Robotaxi (autonomous driving taxis), Pony.ai, Momenta, and AutoX were all founded in 2016, the predecessor of WeRide, Jingchi Technology, and Roadstar (co-founder Zhou Guang later started a new company called Yuanrong Qixing), were all established in 2017.In 2018, we had the experience of testing a self-driving car from Roadstar in a small town in the south. The car was modified and not as sophisticated as it is today. There was an employee in the back seat holding a laptop, with flickering code and driving visualization images on the screen. Although rudimentary, the vehicle was already capable of autonomous driving, lane changes, and unprotected left turns. This was very advanced at the time, but it was unexpected that Roadstar would go bankrupt shortly after.

In the field of autonomous driving chips, Horizon Robotics was established in 2015, and Black Sesame Technologies in 2016. In the second half of 2018, we had an in-depth interview with Dan Ji Zhang, the founder of Black Sesame Technologies. At that time, Black Sesame Technologies was still a startup, providing technical solutions to the outside world. The automotive-grade chip had just completed the design phase and had not yet started the tape-out process.

Zhi Xing Technology, a first-tier supplier of autonomous driving that went public on the Hong Kong Stock Exchange at the end of last year, was also founded in 2016. In 2017, He Duo Technology, which develops autonomous driving systems, and the representative project of vehicle-road-cloud integration, Mushroom Car Alliance, were also born.

A technology industry investor told "Focus" that the wave of autonomous driving startups around 2016 was due to two hot topics. One was artificial intelligence, also known as AI 1.0. That year, Google's robot AlphaGo defeated the Go master Lee Sedol, greatly stimulating people's interest in artificial intelligence, from which autonomous driving also benefited. The other was Google's autonomous driving division becoming Waymo, which saw its valuation increase nearly tenfold in two years, and by 2018, its valuation soared to $175 billion, attracting a large amount of capital into the autonomous driving industry.

The companies that have survived from the startup wave have now reached the point where they can go public, and the funds invested by investment institutions at that time also need to exit through listing.

He Yuhua, a founding partner of Harmony Capital, analyzed that many startups sign valuation adjustment agreements when financing, one of which is to complete the IPO filing, not limited to domestic or foreign markets. Therefore, Hong Kong is an expected and achievable path, and some agreements have expired in the past two years. In addition, the primary market is relatively quiet now, while the Hong Kong capital market is still quite active, so some companies are making a sprint.

In December last year, Zhi Xing Technology was listed on the main board of the Hong Kong Stock Exchange. Although it broke the issue price on the first day, its stock price increased fivefold in less than half a year, and its market value once exceeded 20 billion Hong Kong dollars. "Everyone sees the stock performance of Zhi Xing Technology, and they are more motivated to go public in Hong Kong," said He Yuhua.

Now, Black Sesame Technologies has been listed on the Hong Kong Stock Exchange. Zongmu Technology and Youjia Innovation, which previously planned to go public on the A-share market, have also turned to submit listing applications to the Hong Kong Stock Exchange. More than a month ago, Ruqi Travel, a ride-hailing platform invested by Pony.ai and WeRide, has already been listed on the Hong Kong Stock Exchange.

Pony.ai, WeRide, and Momenta are three star autonomous driving startups in China, and they have chosen to go public in the US stock market. Currently, WeRide is the fastest to progress, having already submitted the prospectus and is about to start the offering; Pony.ai and Momenta have passed the China Securities Regulatory Commission's record-filing for overseas listing in April and June, respectively, and are waiting to submit the prospectus.

After WeRide goes public, there will be listed companies in several major sub-tracks of China's autonomous driving industry - Robotaxi (WeRide), Robotaxi operation (Ruqi Travel), LiDAR (Hesai Technology), autonomous driving chips (Black Sesame Technologies), and autonomous driving domain controllers (Zhi Xing Technology).The money that can be lost is not much anymore.

All the autonomous driving companies we mentioned above are currently operating at a loss.

This is not surprising in the autonomous driving industry, as the research and development of autonomous driving technology requires significant investment, the prospects for commercialization are unclear, and the monetization cycle is very long. We can understand that these companies were generating electricity for love in their early stages.

From the data publicly disclosed by WeRide in its prospectus, we can get a glimpse of the financial situation of autonomous driving companies.

From 2021 to 2023, WeRide's revenue was 138 million yuan, 528 million yuan, and 402 million yuan, respectively, with 2022 being the peak year for the company's revenue. In the first half of 2024, the revenue was 150 million yuan, a year-on-year decrease of 17.8%. During the same period, WeRide's net losses were 1.007 billion yuan, 1.299 billion yuan, and 1.949 billion yuan, respectively, expanding year by year, with a net loss of 882 million yuan in the first half of 2024.

A major reason for the loss is the high R&D expenditure. From 2021 to 2023, WeRide's annual R&D expenditure was higher than the company's revenue—three years of cumulative R&D expenditure of 2.26 billion yuan, while the total revenue was only 1.068 billion yuan.

The development of autonomous driving technology requires continuous investment, while revenue is decreasing. Pony.ai and Momenta, which are preparing for listing, are likely to be in a similar situation.

Black Sesame Technologies, which makes autonomous driving chips, is not in a much better situation.From 2021 to 2023, Black Sesame Technologies' revenue was 60.504 million yuan, 165 million yuan, and 312 million yuan, respectively, showing a very clear upward trend. However, the growth in R&D expenses was even faster—amounting to 595 million yuan, 764 million yuan, and 1.362 billion yuan over the three years, which is five times the revenue. The net loss over these three years was as high as 5.87 billion yuan.

When expenses are several times the revenue, it implies that breaking even at the operational level is unrealistic for the company and can only rely on external financing.

Based on the information from Tianyancha, let's briefly sort out the financing situation of autonomous driving companies.

Before submitting its prospectus to the U.S. SEC, WeRide received a strategic investment of no more than 20 million U.S. dollars from GAC Group, which can be considered as a Pre-IPO round of financing. In the nearly three years prior to this, WeRide did not secure any financing.

Intensive financing for WeRide occurred in 2021, on the eve of the onset of the autonomous driving winter. In that year alone, WeRide successively secured three rounds of financing, from Series B to Series D, with the total amount exceeding 1 billion U.S. dollars. Horizon Robotics, on the other hand, went from Series C+ to Series C++++++ within just half a year—you're not mistaken, there are six "plus" signs here.

After that, the entire autonomous driving industry faced a capital winter. The global lidar pioneer ibeo and the autonomous driving company Argo.ai, which had raised a total of 2.6 billion U.S. dollars, both went bankrupt or closed down. The stock prices of autonomous driving companies listed on the U.S. stock market plummeted, with some falling by as much as 90%. Financing for Chinese autonomous driving companies became more difficult.

Momenta's most recent financing is still in 2021, AutoX is in 2020, Horizon Robotics received a strategic investment from Chery Automobile in 2022, and Pony.ai went to the Middle East last year to secure a U.S. dollar investment from Saudi Arabia.

Now, the awkward situation for these autonomous driving companies in financing is that during the previous years when capital was pursuing them, the valuations were raised too high, making it difficult to continue financing at the previous valuations. Additionally, there are fewer active market-oriented funds in the primary market, with many U.S. dollar funds significantly contracting. State-owned capital and local government-led funds are relatively strong, but taking money from state-owned capital often comes with many restrictions, the most common being the requirement to reinvest.

An investor said that some companies working on autonomous driving systems are essentially code companies, selling software and solutions. These companies do not have physical assets such as factories, equipment, and hardware, nor can they solve a lot of employment issues, which local funds consider when looking at projects.

Overall, going public has almost become an inevitable path for autonomous driving companies.Unmanned Driving Capital No Longer in Love

When a company goes public on the secondary market, transitioning from a private to a public entity, it significantly broadens its financing scope. Allowing new investors to participate with their capital is the most direct significance of going public.

Therefore, to gauge a company's popularity and market pursuit, one should look at how many new investors it can attract during its IPO, the enthusiasm of these investors' subscriptions, and ultimately, how much capital it can raise.

WeRide's updated prospectus indicates that the company plans to raise $440 million in its U.S. stock market listing. If this amount is secured, it would be a substantial Chinese concept stock IPO of the year, considering that most Chinese concept stocks that went public this year only raised a few million dollars, with those raising over a hundred million being a rarity.

However, $320 million of the $440 million is earmarked for a private placement, which is similar in nature to a Series A financing round. The remaining $120 million sees Bosch expressing interest in subscribing to $100 million, and Bosch is both an investor and partner from WeRide's Series D round.

Upon calculation, WeRide actually raises very little capital from the public secondary market, essentially relying on old shareholders and friends to support the scene.

Based on the issue price and number of shares, WeRide's current valuation is approximately $5 billion. In the last round of financing in December 2021, WeRide's post-investment valuation was $4.4 billion. This means that over two and a half years have passed, and WeRide's valuation has only increased by $600 million, and this latest valuation still needs to be tested at the time of the IPO.

Looking at the current market conditions, the secondary market's enthusiasm for newly listed autonomous driving companies is not high, and companies should be prepared for a potential stock price drop upon listing.

Black Sesame Technologies went public on the Hong Kong stock market in August as an unprofitable "specialized technology" company, the second of its kind introduced by the Hong Kong stock market. However, its stock price dropped at the opening, falling by 27% on the day. As of August 15, Black Sesame Technologies' market value was 11.4 billion Hong Kong dollars, already below the valuation of over 17 billion Hong Kong dollars during its previous C+ round of financing.Certainly, the decline in the stock price of Black Sesame Technologies is also related to the overall trend of the Hong Kong stock market.

Regardless, for autonomous driving companies, having technology alone is not enough; they must prove their ability to commercialize. Before the advent of large-scale commercial applications, they must first sustain themselves.

He Yuhua said that, in terms of income generated, many autonomous driving companies currently cannot support their valuations. In contrast, the market is more willing to believe in companies that have closed scenarios, are down-to-earth, and have mature business models.

During the entrepreneurial wave eight years ago, many autonomous driving companies established very grand visions. The stories they told were about achieving full autonomy, focusing on Level 4 autonomous driving from the start. Star projects like WeRide and Pony.ai entered the market through Robotaxi, conducting various fully autonomous driving tests at that time.

To this day, there is still no consensus on when full autonomous driving will be commercially implemented. Autonomous driving companies can only first find scenarios to land, such as collaborating with car manufacturers and focusing on passenger cars with higher-level assisted driving, which is relatively less technically challenging.

Taking Pony.ai as an example, it established a Robotruck (autonomous truck) business unit in 2020. Compared to passenger cars, commercial vehicles have simpler operating scenarios and are easier to implement. In 2022, Pony.ai newly established an assisted autonomous driving business unit to collaborate with passenger car manufacturers. Now, Pony.ai is walking on multiple legs, developing on one side and making money on the other.

Among the various entrepreneurial tracks, autonomous driving is one of the industries with extremely high talent density, extremely high technical difficulty, and an extremely long monetization cycle. This is an industry that requires dreams and visions, and even more so, it requires patient capital.

This wave of going public may bring a reshuffling to the industry. Only when the tide recedes can we know who the ultimate winners are.