Zhijia's first share, WeRide, sprints to IPO: a cumulative loss of more than 5.1 billion in three and a half years

Text: Ning Chengqian

Source: Bowang Finance

The first share of domestic general intelligent driving is coming.

Recently, WeRide, a star company in the field of autonomous driving, announced a major development, the company has officially submitted listing application documents to the United States Securities and Exchange Commission (SEC), planning to land on the NASDAQ exchange with the stock code "WRD", marking its sprint to the throne of "the first share of domestic general autonomous driving".

The lead underwriters of the IPO have a strong lineup, including top financial institutions such as Morgan Stanley, JPMorgan Chase and CICC, to escort WeRide's listing journey.

WeRide stands out with its unique market positioning and technical strength, becoming the only company in the industry that can provide commercial solutions for autonomous driving from L2 to L4 in all scenarios. This comprehensive coverage capability makes WeRide unique and eye-catching in the field of autonomous driving.

Since its last fundraising, the company's valuation has soared to US$5.1 billion (about 37 billion yuan). If WeRide is successfully listed on the NASDAQ, it is expected to be the largest IPO of a Chinese company in the United States since Didi went public in the United States in 2021.

With the increasing maturity of autonomous driving technology and the rapid growth of market demand, the listing tide of the autonomous driving industry is intensifying. In this context, whether WeRide's true value can support its sky-high valuation of up to $5.1 billion has become the focus of attention in the industry.

Under the halo of "the first share of GM autonomous driving", WeRide's technical strength, business model and market layout will be strictly tested by the market.

01

The chief scientist started his own business and achieved WeRide

The story of WeRide starts with the founder Han Xu.

Han Xu, a technology leader who served as the chief scientist of Baidu's autonomous driving division, resolutely left Baidu in 2017 and founded WeRide (originally known as JingChi Technology), officially starting the road to head-on competition with his old employer.

He holds a Ph.D. from the University of United States Illinois and is a tenured professor at the University of Missouri, where he has made significant contributions to the fields of computer vision and machine learning, both of which have been closely linked throughout his academic career.

As of June 30, 2024, 91% of its 2,227 employees are R&D personnel, bringing together top AI scientists and autonomous driving engineers. It is this kind of team composition that has created WeRide's strong technical strength.

In terms of products, WeRide has formed five product matrices, including self-driving taxis, self-driving minibuses, self-driving freight vehicles, self-driving sanitation vehicles, and high-end intelligent driving, and provides a variety of services such as online car-hailing, on-demand buses, intra-city freight intelligent sanitation, and high-end intelligent driving solutions.

In terms of commercialization, WeRide is on the right track, and its revenue mainly comes from two major segments: first, the sales of L4 autonomous vehicles, including various robotic vehicles and sensor kits; The second is to provide L4 autonomous driving and advanced driver assistance systems (ADAS) services, covering a full range of services such as operation, technical support and ADAS research and development.

WeRide said that the company's commercial revenue ranks first among similar autonomous driving companies. At present, WeRide's autonomous vehicles have been tested and commercially operated in 30 countries and seven cities in Asia, the Middle East and Europe, becoming one of the L4 autonomous driving companies with the largest number of operating countries, and holding autonomous driving licenses in China, United States, U.A.E. and Singapore.

In the capital market, WeRide is also highly favored, and has successfully completed 10 rounds of financing, attracting many well-known investment institutions including He Xiaopeng, GAC Group, NVIDIA, Bosch, IDG Capital, etc., with a cumulative financing amount of more than 1.09 billion US dollars. After the D+ round of financing in 2022, the company's valuation has reached 5.1 billion US dollars (about 36.977 billion yuan).

In particular, WeRide has made remarkable achievements in overseas markets, especially in the Middle East. In the U.A.E., its Robotaxi service has been in operation for nearly three years, and its service scope has been continuously expanded, with a total of more than 20,000 orders, which has won wide recognition from local citizens.

In addition, the company is also actively deploying in Singapore and Europe, and plans to further expand to more countries and regions such as East Asia, North Africa and South America to accelerate the implementation of the globalization strategy.

As a leader in the field of general intelligent driving in China, WeRide's IPO in the United States is not only an important milestone for its own development, but also sets a new benchmark for Chinese autonomous driving companies on the international stage, which has important symbolic significance.

02

The performance was unstable and "bleeding" to be listed

Although WeRide is expected to be the first to achieve a breakthrough in the field of autonomous driving, its future development path is still full of challenges and uncertainties.

From the perspective of financial performance, WeRide's revenue data has experienced sharp fluctuations in recent years. In 2021, Wenyuan's revenue was 138 million yuan, which surged to 528 million yuan in 2022, a year-on-year increase of 281.7%; In 2023, the revenue will fall to 400 million yuan, a year-on-year decrease of 24.2%.

WeRide's prospectus said that it was mainly affected by the macro environment, but also in 2023, Hesai Technology's revenue, which is also an autonomous driving track, increased by 56% year-on-year, Horizon increased by 71% year-on-year, and Suteng Juchuang increased by 111% year-on-year.

Entering the first half of 2024, although WeRide's revenue reached 150 million yuan, it still decreased from 183 million yuan in the same period last year.

In an in-depth analysis, WeRide attributed the fluctuation in revenue mainly to significant changes in service revenue. Service revenue in the first half of the year decreased by 21.3% year-on-year, mainly due to a decrease in customized R&D services to customers such as Bosch, as well as a decrease in the cost of technical support services for the operation of robotaxis and freight vehicles.

From the financial report data, in addition to the fluctuation of income, Bowang Finance also found that WeRide's development strategy is also changing. In 2021, WeRide's product revenue was RMB101 million, accounting for 73.5%, while its service revenue was RMB37 million, accounting for only 26.5%. However, in 2023, WeRide's product revenue will be 54 million yuan, accounting for 13.5%, and its service revenue will increase to 348 million yuan, accounting for 89.9%.

This change also reflects WeRide's strategic transformation from an "asset-heavy" to an "asset-light" model, from directly operating the Robotaxi fleet or selling vehicle hardware to providing technology solutions and follow-up services.

At the same time, WeRide's losses should not be underestimated. From 2021 to 2023, WeRide will have a net loss of 1,007.3 million yuan, 1,298.5 million yuan, and 1,949.1 million yuan respectively. In the first half of 2024, the company achieved revenue of 150.3 million yuan and a net loss of 882 million yuan, with a cumulative loss of more than 5.1 billion yuan in three and a half years.

High R&D expenses were the main reason for the loss. According to the prospectus, from 2021 to the first half of 2024, WeRide's R&D expenses were 443.2 million yuan, 758.6 million yuan, 1.0584 billion yuan, and 517.2 million yuan respectively, with a cumulative total of 2.778 billion yuan in three and a half years, accounting for 54% of the loss.

Despite this, WeRide's technical strength should not be underestimated. As the soul of the company, Dr. Li Yan, co-founder and CTO, has provided strong support for the company's technological innovation in the field of computer vision with his profound academic background and rich industry experience.

Facing the future, WeRide made it clear in the prospectus that it will continue to increase investment in the testing, testing and commercialization of autonomous driving technology, especially the Robotaxi project as a key development direction, and plans to start commercial production this year and next year to fully prepare for large-scale market application.

Of course, the nature of the autonomous driving industry means that this is a long and challenging journey. The high threshold, huge investment, and long R&D cycle all make losses a reality that startups must face.

But fortunately, in the face of financial pressure, WeRide's cash reserves are relatively stable. As of the end of 2023, the company had approximately RMB4.2 billion in cash, time deposits and wealth management investments, which is sufficient to support its normal R&D and daily operations for seven years based on the current loss ratio.

03

How far can Wenyuan know how far can he go?

The field of autonomous driving has recently become a hot topic again, and the market is full of vitality and competition is becoming more and more fierce.

Baidu Apollo's "Carrot Run" autonomous driving travel service platform, with its strong performance in the Wuhan market, has seen a surge in unmanned orders, and the peak number of single-day bicycles has exceeded 20, which has not only attracted the public's attention, but is also regarded as an important signal for the acceleration of the commercialization process of autonomous driving.

In this "marathon" race of autonomous driving technology, WeRide is not alone, and many unicorn companies have joined the battle and competed to sprint for IPO, in order to seize the opportunity under the dual test of capital and technology.

Companies such as Zongmu Technology and Youjia Innovation have submitted listing applications to the Hong Kong Stock Exchange, while Pony.ai and Momenta have targeted the broader overseas market and submitted overseas listing filing materials to the United States NASDAQ or the New York Stock Exchange, all of which highlight the urgent desire for financial support inside and outside the industry.

In the face of high R&D costs and uncertainty in the future, autonomous driving companies are well aware of the importance of financing, which is the key to their survival and development. Therefore, accelerating the commercialization process and realizing self-hematopoietic ability has become the common goal of these enterprises.

In the autonomous driving industry, the choice of technical route is also crucial, and the "leapfrog" development route represented by Waymo and Radish Express is neck and neck with the "progressive" route led by Tesla, and the competition between the two is becoming increasingly fierce. The latest progress of Tesla's FSD has undoubtedly brought a lot of pressure to enterprises, including WeRide.

However, even as it struggles on the road to commercialization and technological innovation, the autonomous driving industry still faces many challenges. Industry bigwigs such as He Xiaopeng, the founder of Xpeng Motors, and Li Bin, the founder of NIO, pointed out the shortcomings of Robotaxi in terms of capabilities, regulations and business closed loops in public, indicating that it will take time for the industry to mature.

At the same time, the problem of capital bubbles in the autonomous driving industry is gradually emerging. With the lifting of the ban on the shares of cornerstone investors of a number of listed autonomous driving supply chain companies, the stock prices have generally fallen off a cliff, and the authenticity of the industry's valuation has begun to be re-examined by the market.

For example, Zhixing Technology's share price has fallen sharply from HK$115.6 per share at its peak to only HK$21.40 per share at present, and its market value has shrunk to HK$4.843 billion, almost halved. Similarly, Suteng Juchuang was not spared, its share price plummeted from the peak of HK$137.5 per share to HK$16.64 per share, and the market value was only HK$7.451 billion, almost chopped off the ankle.

This trend is also reflected in the U.S. stock market, with Hesai Technology, an earlier listed company, also experiencing a sharp decline in its share price. Hesai Technology's latest stock price is just $4.61 per share, and its market value has shrunk to $588 million, while its highest valuation before the IPO reached $3 billion, and its market value has almost doubled.

This trend has undoubtedly sounded the alarm bell for WeRide, which is about to go public, indicating that although its road to listing seems to be on the line, it is full of challenges.

However, there are challenges and opportunities. The potential of the autonomous driving market is still huge. According to the prospectus data, the global and Chinese mainland autonomous driving market will usher in explosive growth in the next few years, and the self-driving taxi and truck market is even more hopeful.

In terms of the planning of the funds raised by the IPO, WeRide has clarified four major directions: first, increase investment in R&D of autonomous driving technology, products and services; The second is to promote the commercialization and operation of autonomous vehicle fleets and expand marketing activities in more markets; the third is to support the company's capital expenditure; Fourth, it is used for general corporate purposes and working capital.

In summary, the autonomous driving industry is at a crossroads full of uncertainties and opportunities. While accelerating the commercialization process and improving technical strength, companies such as WeRide need to be vigilant against the risk of market bubbles and move towards a broader future at a steady pace.