"The first stock of autonomous driving" bets on Robotaxi

Author | Chai Xuchen

Editor | Zhou Zhiyu

After 8 years of establishment, WeRide Technologies has taken up the banner of "the first stock of smart driving" and is sprinting towards a US IPO.

On July 27th, WeRide Technologies officially submitted its prospectus, planning to list on the Nasdaq in the form of American Depositary Shares (ADS). Insiders say it will seek up to $500 million in IPO financing. According to the China Securities Regulatory Commission's overseas listing filing information, it plans to issue no more than 159 million shares.

Led by Wang Jing, the founder of Baidu's autonomous driving, this leading smart driving player with a valuation of nearly 40 billion yuan intends to accelerate its pace with the power of capital as the autonomous driving industry reaches a turning point.

As the only company in the industry that provides commercialization of full-scenario smart driving from L2 to L4 levels, WeRide Technologies has experienced the ups and downs of the autonomous driving industry, finally making it through the winter to the outbreak period.

The prospectus shows that from 2021 to 2023, WeRide Technologies' revenue is expected to be 138 million, 528 million, and 402 million yuan respectively. The revenue for the first half of this year is 150 million yuan, compared to 183 million yuan in the same period last year.

Its revenue mainly comes from two major business segments: hardware product sales (mainly including Robobus, Robotaxi, unmanned cleaning vehicles, and related sensor kits), and service sales (including revenue from L4 smart driving operation services and ADAS software solutions).

With technological advantages and cost control capabilities, WeRide Technologies' gross profit margin has increased from 37.4% in 2021 to 45.7% last year, making players in the automotive industry envious.

However, how to achieve profitability and realize a commercial closed loop in autonomous driving remains a difficult problem that the industry urgently needs to solve. Over the past three years, WeRide Technologies has accumulated losses of 4.2 billion yuan, largely due to its high-intensity research and development, with R&D expenses exceeding 2.2 billion yuan during the period.

Nevertheless, years of technological investment have finally brought about industry recovery and capital resurgence for WeRide Technologies.

As the global deployment of L3 advanced smart driving progresses, and with the accelerated support of domestic policies, the vast majority of smart driving companies have finally seen opportunities. Since last year, companies such as Pony.ai, Horizon Robotics, and Black Sesame Technologies have successively submitted or updated their prospectuses.

Capital, which was originally indifferent, has also shown renewed enthusiasm.

In May of this year, the UK startup Wayve announced that it had secured $1.05 billion in financing. In a situation where the global smart driving financing market has been in a downturn since the first half of 2021, this large sum of money is seen as a signal of investor confidence returning.

From autonomous driving rentals to trucks, from software platform services to hardware supply, WeRide Technologies, which has been involved in a wide range of fields and has struggled for many years, has decided to seize the current wave of Robotaxi to seek favor in the capital market.

In recent years, due to external environmental influences, WeRide Technologies' commercial performance has not been stable, and the focus has also shifted repeatedly.

By 2023, hardware product revenue will account for the majority, contributing to about 60-70% of revenue. After partnering with tier-1 giant Bosch in 2022, WeRide's service sales began to dominate revenue, and the gross profit margin also increased significantly However, with the decrease in Bosch's demand, Wenyuan's service revenue in the first half of this year fell by 21%, overall revenue declined, and gross margin also shrank to 36.5%. Wenyuan Zhixing candidly admitted in its prospectus that the company is still in the early stages of commercialization, and as the industry develops, the weight of revenue composition is bound to change.

Now, with end-to-end technology catalyzing, Baidu's Apollo has gained popularity, and Musk is also accelerating the launch of his own Robotaxi. Unmanned taxis have become the most promising area in the intelligent driving industry to achieve commercial success on a large scale.

Therefore, among Wenyuan Zhixing's five major products, Robotaxi, as the core business, is placed in the most prominent position. The company stated that with the support of policies for autonomous driving, it will start commercial production of Robotaxi this year and next year, and prepare for large-scale commercialization, leading to a further increase in the proportion of service revenue.

This bet on Robotaxi means that Wenyuan Zhixing is tilting towards profit direction in the consumer market, competing with Baidu Apollo and Pony.ai. In its prospectus, it also tries to tell investors that doubling down on Robotaxi will be a sexy story.

According to Zhuoshi Consulting's forecast, the Robotaxi market in China will increase from $2 billion in 2022 to $639 billion in 2030, while the global market will surge from $10 billion to $17.45 trillion.

In the Robotaxi field, by 2027, China's shared mobility platforms have at least a 43% margin improvement potential, while developed countries have a margin improvement potential of up to 70%.

The adjustment of Wenyuan Zhixing's commercial focus is not only to follow the market trend but also a concrete manifestation of anxiety among intelligent driving players as industry elimination intensifies.

In the first half of this year, the former leading intelligent driving stock, TuSimple, delisted in the U.S. IPO in less than three years, Motional announced the cessation of commercial operations, ArgoAI, and GhostAutonomy closed global operations.

The foam on the racetrack is gradually dissipating, making it increasingly difficult for players to stay at the table. Players who have not yet established core technological barriers can only exit the stage of history after the storm. Moreover, the elimination match is also launched in another way, as automakers intensify self-developed intelligent driving, making it difficult for suppliers to maintain ecosystem partnerships. For Wenyuan Zhixing, betting on Robotaxi is also a high-stakes gamble.

Therefore, Wenyuan Zhixing needs to quickly widen the gap with technology and friendly competitors to strive for a strong position in the industry chain.

The key issue is that the autonomous driving industry still has a long way to go before large-scale commercialization. Even though Wenyuan Zhixing has considerable gross profit and has started self-sufficiency, it is far behind the "burn rate" speed of high-intensity R&D.

Its prospectus clearly states that with the testing, experimentation, and commercialization of the company's intelligent driving technology, R&D expenses are expected to increase in the future. At the current burn rate, the available cash of 1.829 billion yuan will only be enough to support one to two years.

The imminent need for IPO financing is also Wenyuan Zhixing's preparation for the upcoming challenges.

In the use of funds raised in the IPO, Wenyuan Zhixing has planned four directions: 35% will be used for the research and development of intelligent driving technology, products, and services; 30% will be used for the commercialization and operation of the intelligent driving fleet, and to expand into more markets; 25% is used to support capital expenditures; the remaining 10% is used for general corporate purposes and working capital.

Perhaps, after the Wentu IPO, it will bring changes to the driverless taxi industry and pave the way for itself. However, it also needs to think about its competitive advantages to avoid overextending the confidence of the capital market