Chinese self-driving start-ups pursue IPOs in Hong Kong as commercial roll-out gathers pace

Chinese self-driving start-ups are rushing to float shares in Hong Kong and other markets, seeking capital to fund development and giving backers an exit path, as the technology appears to be closer to the holy grail of commercial deployment.

In major cities like Beijing, Shanghai, Shenzhen, Guangzhou and Wuhan, driverless cars are already on public roads, as city regulators push for wider roll-out and commercialisation of autonomous driving technology in spite of regulatory, security, and social concerns.

Domestic electric carmakers - including Xpeng, Nio, Li Auto, and Huawei Technologies-powered Aito - are touting intelligent driving capabilities as key selling points.

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Meanwhile, auto chip designers Horizon Robotics and Black Sesame Technology, along with software solution providers Zongmu Technology and Minieye Technology, have applied to go public in Hong Kong. Autonomous driving tech unicorns WeRide, Pony.ai, and Momenta have received the green light from China's securities regulators for their initial public offering (IPO) plans in the US.

Exterior of the Hong Kong stock exchange in Central, July 19, 2024. Photo: Jonathan Wong alt=Exterior of the Hong Kong stock exchange in Central, July 19, 2024. Photo: Jonathan Wong>

Previously, lidar sensor manufacturers Hesai Group and RoboSense listed on Nasdaq and in Hong Kong, respectively. Suzhou-based iMotion Automotive Technology and Ruqi Mobility, a GAC Group-backed ride-hailing platform operating robotaxi fleets, have gone public in Hong Kong.

At the same time, the financial struggles of these start-ups have been laid bare with the disclosures in their prospectuses, as few have yet to turn a profit.

China's Nvidia challenger Horizon Robotics, which secured US$2.36 billion from big-name investors such as Hongshan, Hillhouse Capital, and the investment arms of industry giants SAIC Group, Volkswagen Group, and BYD, increased its revenue from 466.7 million yuan (US$64.2 million) in 2021 to 1.6 billion yuan in 2023, representing a compound annual growth rate of 82.3 per cent. However, net losses remain huge at 6.8 billion yuan in 2023, though down from 8.7 billion yuan in 2022, according to filings with the Hong Kong stock exchange.

"This is a capital-intensive, hi-tech industry," said Liu Ceyuan, an analyst at research firm Canalys, adding that domestic electric vehicle system-on-a-chip manufacturers lack strong bargaining power. "Due to limited product offerings and a market confined to China, domestic companies' profitability is still very weak compared to global chip giants like Nvidia," Liu said.

Shenzhen-based Minieye Technology, which filed for a Hong Kong IPO last month, has also struggled to earn money. It reported a narrower loss of 139 million yuan last year, compared with losses of 221 million yuan and 207 million yuan in 2022 and 2021, respectively.

Even listed companies with strong backers have failed to staunch the bleeding. Ruqi Mobility, operated by Chenqi Technology and backed by state-owned GAC Group, Didi Chuxing and Tencent Holdings - which achieved its high valuation partly due to its robotaxi ride-hailing services - reported more than 2 billion yuan in losses in the past three years. Since it was listed on July 10, its shares have lost 49 per cent of their value, closing at HK$17.90 on Tuesday.

"A cluster of Chinese autonomous driving start-ups were founded around 2016 and were once the darlings of capital markets. Their investors are now expecting returns." Liu said.

Since last year, Beijing's green light for Chinese companies to go public overseas, combined with Hong Kong's supportive Chapter 18C listing regime, have prompted more mainland tech companies to choose Hong Kong for their IPO.

Chapter 18C, which took effect in March 2023, allows specialist tech companies worth at least HK$10 billion to sell shares even if they have yet to generate any sales revenue. Black Sesame Technology is a potential candidate under these rules.

An XPeng X9 electric vehicle during the company's showcase event in Hong Kong, May 17, 2024. Photo: Bloomberg alt=An XPeng X9 electric vehicle during the company's showcase event in Hong Kong, May 17, 2024. Photo: Bloomberg>

Although generous backing and big valuations were once the norm for the hot sector, converting the hype into profits is the top task now.

"We aim to develop the most cost-effective solutions for various market niches, powered by our self-developed automated driving technology that can be broadly adopted across different scenarios," said Xu Lei, founder of self-driving start-up Nullmax, in a recent interview.

Xu, who founded Nullmax in Silicon Valley in 2016 after stints at Qualcomm and Tesla, claimed that the company's latest innovation - Nullmax Intelligence - can navigate vehicles without relying on maps or lidar, similar to Tesla's Full-Self-Driving system, but at a lower cost.

According to Xu, this technology requires less customisation. Nullmax has formed partnerships with global original equipment manufacturers and leading suppliers, including SAIC Motor, Chery Automobile, Texas Instruments, and Renesas Electronics. Nullmax forecasts achieving positive cash flow in its advanced driver assistance systems business unit within two years and is eyeing global expansion.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.

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