China robotaxi IPOs may struggle to find their way

Ride on. Chinese robotaxis may struggle to navigate Big Apple . WeRide is aiming for a valuation of as much as $5 billion for a New York IPO ; Pony AI, which is preparing its own market debut re, was valued at $8.5 billion in a private funding round last year, per IFR. But autonomous-vehicle companies have h a rough ride of late.

Toyota Motor-backed Pony, which runs a 250-strong fleet of driverless taxis and more than 190 trucks in China, says its technology leaves passengers “wide-eyed with wonder”. WeRide was first to provide a paid taxi service using a high degree of automation known as Level-4, according to its prospectus, and has developed commercial vehicles including buses and rosweepers. Pilot projects are underway in China, United Arab Emirates, Singapore and France.

But business model is as futuristic as cars. Fully autonomous technology is largely confined to test environments, regulations are still evolving, and data needs for digital maps are onerous. Pony’s sales increased by a modest 5% to $72 million in 2023, though its net loss decreased to $125 million, from $148 million. WeRide is also unprofitable, and its top line fell by a quarter last year.

Meanwhile, investors’ confidence in tech is flagging. Tesla ’s closely watched We Robot event this month was without a clear plan for commercialisation. Mobileye Global has shed around two thirds of its value in past 12 months, while New York-listed Chinese lidar-maker Hesai’s has more than halved. Peer Horizon Robotics' Hong Kong IPO on Thursday priced at top of range. That put its market worth at some $7 billion, roughly a fifth less than at its 2022 fundraising.

However, companies are seeking prices that imply eir breakneck growth or rich valuations. At $5 billion, WeRide's equity would be worth more than 100 times this year's sales, assuming full-year deliveries increase at a similar clip to first six months of 2024. Pony's market value, even if it has eroded as much as Mobileye’s in past year, would still be worth, at $3 billion, more than 20 times forward sales, using a similar calculation to estimate 2024's revenue. That compares with average of roughly 4 times for a basket of peers, per Visible Alpha data.

Unless top line accelerates dramatically, China’s new automotive upstarts may be asking investors to put robot before car.

Context News

On Oct. 24, Horizon Robotics, which makes software and hardware for driverless cars, debuted on Hong Kong Stock Exchange after raising $698 million, implying a valuation of $6.7 billion in its initial public offering. Shares rose 2.8% on first day of tring to close at HK$4.10. China-based autonomous driving startup WeRide has filed for a $119 million IPO on Nasdaq and a private placement of $320.5 million, according to a term sheet seen by Reuters on Oct. 23. Rival Pony AI filed for an IPO in U.S. on Oct. 17. Toyota-backed company was valued at $8.5 billion based on its Series D private round in October last year, IFR reported.