Commercialization of autonomous driving: Some people have ICU, some people have IPO

Since Baidu started research and development of autonomous vehicle projects in 2013, this year marks the tenth year that Chinese companies have deployed autonomous driving, and a number of companies have begun to gather for IPOs.

In February this year, after Hesai Technology won the “first lidar share”, IPO financing has become a hot word in the domestic autonomous driving industry recently. There have been at least 4 planned IPO events in the industry, including Momenta, Zhixing Technology, and WeRide Zhixing , Zhijia Technology.

Since 2021, many leading companies in the industry have experienced frequent changes, involving executive changes, layoffs, closures, etc.

In April 2021, former Waymo CEO John Krafcik resigned from Waymo. In March 2023, TuSimple founder and core technical figure Hou Xiaodi announced his resignation from TuSimple's board of directors and may leave TuSimple permanently.

The self-driving truck company Embark Trucks recently announced its closure, becoming the first self-driving listed company to go bankrupt. Earlier, Argo AI, a self-driving star company valued at more than $7 billion, was also shut down by Ford.

Waymo, the leader in autonomous driving, announced in early March that it would lay off 137 employees, most of whom were in technical positions. According to statistics, since 2023, Waymo's total number of employees has reached 209.

On the road to commercialization of autonomous driving, some people have IPOs and some have ICUs.

Who will be next?

01. Autonomous driving IPOs are gathering together, and mass production of pre-assembled vehicles is promoted?

The domestic autonomous driving industry has been deserted in the secondary capital market for a long time.

In April 2021, Tucson was listed on Nasdaq and won the "world's first autonomous driving stock"; in June of the same year, Didi triggered a regulatory storm due to data security issues, and Pony.ai and Zhijia Technology's plans to go public in the United States were shelved .

In October 2022, overseas media Startribune disclosed that WeRide's IPO in the United States was accelerated, but was later officially denied.

Until November last year, the industry's haze gradually lifted. Atour Hotel is listed on Nasdaq, and its listing in the United States has turned around.

In February this year, Hesai Technology won the largest IPO of a Chinese company listed in the United States in the past 18 months, becoming the "first domestic lidar stock" with a market value of over US$2.6 billion.

Since then, autonomous driving IPOs have emerged in March, with at least four IPOs reported this month.

On March 6, it was reported that Momenta may IPO in Hong Kong or the United States as early as this year, with a financing amount of up to US$1 billion.

On March 13, Bloomberg reported that WeRide was confidentially planning to launch an IPO in the United States and seek to raise up to US$500 million;

Previously, Zhixing Technology was rumored to be planning an IPO in Hong Kong, aiming to raise US$200 to US$300 million. In addition, there is also news that Zhijia Technology may restart the US stock IPO.

The random flowers are gradually charming the eyes. Incidents such as Waymo's first layoffs this year in more than 10 years since its establishment have made the view of "industry winter" rampant.

At the same time, why are autonomous driving IPOs appearing in a concentrated manner?

Taken together, behind the push for corporate IPOs is the intersection of autonomous driving companies in the L2+ "mass production" field.

Specifically, there are important changes at both ends:

At one end is the advanced assisted driving system ADAS moving towards L2+;

At the other end are autonomous driving L4 level companies moving towards L2+.

The catalyst for this two-way rush to L2+ for chemical reactions is the popularity of high-power computing chips and lidar.

Previously, there was no overlap between the two: ADAS is assisted driving and is less dependent on artificial intelligence than L4 level autonomous driving.

The L2+ front-mounted mass production solution has been quickly implemented and is becoming a life-saving straw for the commercialization of autonomous driving.

According to data from Zhiyan Consulting, it is expected that by 2025, the global penetration rate of L2-level assisted driving smart cars will reach 53.99%, but the penetration rate of L3~L5 autonomous driving cars will only reach 1.36%.

Behind this data, it has become a "decoder" to reveal the grand event of this IPO to a certain extent.

Due to bottlenecks in technology and commercialization, L4 autonomous driving companies that have long relied on financing to survive have moved towards L2+ autonomous driving pre-assembled mass production.

The purpose is, first, to drive revenue scale through mass production to achieve profitability; second, to drive revenue scale through mass production, and then use IPO financing.

Hesai Technology is a typical case of achieving a profit model through mass production and IPO, but it can also reflect the current dilemma of the autonomous driving industry.

According to the latest prospectus submitted by Hesai Technology, from 2019 to the first nine months of 2022, its net losses reached 120 million yuan, 107 million yuan, 245 million yuan and 165 million yuan respectively.

From 2017 to the end of 2022, Hesai shipped more than 103,000 lidar units, accounting for 80,400 units last year alone. However, Hesai's gross profit margin dropped from 70.3% in 2019 to 10% in the first three quarters of last year. 44%.

Why does the gross profit decrease the more lidar is purchased?

"As product shipments in the assisted driving market increase and export shipments increase, the average selling price of lidar units will decrease. In addition, the selling price of products in the autonomous driving market will decrease by approximately 10% to 20% annually." He Sai wrote in the prospectus.

It can be seen that in the field of lidar, as the selling price enters the downward channel, ultra-low gross profit has become increasingly normal.

For autonomous driving companies that have not yet formed a closed business loop, once external blood transfusion is interrupted, there is a risk that the company's capital chain will be broken.

After several years of still no returns on investment, the money-burning hole can no longer be plugged, and more investment institutions in the primary capital market have chosen to "stand on the sidelines."

When it is difficult to find funds in the primary market, autonomous driving companies that are on the front line of life and death will end up in the ICU in an instant if they do not raise money through IPOs.

At this point, the IPO’s priority is amplified. Under the wave of mass production of L2+ pre-assembled equipment, some companies with basically successful business models are gradually gaining confidence to enter the secondary capital market.

Therefore, there are two aspects on the road to commercialization of autonomous driving: some are doing IPO, and some are doing ICU.

02. Behind the industry reshuffle, the road to commercialization is "ice and fire"

While a number of domestic autonomous driving companies have taken an important step towards commercialization due to L2+ mass production pre-installation, some leading foreign companies are experiencing a "cold winter".

The first to be affected by the capital winter are L4 autonomous driving companies.

Around 2017, Waymo, owned by Google, and Cruise, owned by General Motors, launched Robotaxi services in some areas of the United States. The commercialization of L4 autonomous driving appeared on the horizon, which to a certain extent promoted the domestic autonomous driving entrepreneurial boom.

Today, industry leaders are struggling to survive.

The U.S. self-driving duo - Waymo has laid off more than 8% of its staff this year. This round of layoffs is also the first in Waymo's more than 10 years of existence; Cruise recently announced that it will focus on cost reduction this year after burning through nearly $2 billion. .

In addition, Aurora, a listed company that has acquired Uber's self-driving business, is considering selling itself to an OEM or a technology giant.

Argo AI, which is backed by Ford and Volkswagen, announced its closure at the end of 2022 after burning through US$3.7 billion. The two founders of Argo AI recently revealed that they will start a new business or turn to self-driving freight.

The field of self-driving freight, which was once considered to be the first to commercialize, is not having an easy time.

Embark Trucks, a self-driving truck company and former capital darling, recently announced its closure, becoming the first self-driving listed company to go bankrupt. The reason for the closure was that it had not been able to carry out substantial business after seven years of operation.

Compared with the IPO boom triggered by the listing of domestic Hesai on the US stock market, in the field of lidar, Velodyne, Quanergy, and Ibeo, including the originator of lidar, have fallen one after another since 2022, encountering the fate of mergers, delisting, and shutdowns.

The capital market's willingness to give companies high valuations lies in its expectations for the realization of its technology. After several years of exploration, commercialization was difficult to achieve. When capital could no longer wait, the autonomous driving industry plummeted.

Surviving through the commercialization of L2+ autonomous driving is becoming the main narrative of the autonomous driving industry.

After Ford and Volkswagen shut down Argo AI, they declared that they "will focus on driver assistance technologies that provide more direct returns." On March 2, Ford announced the formation of a new company, Lattitdue.ai, bringing in 550 people from the Argo AI team.

It is the same at home and abroad.

Focusing on L2+ commercialization, autonomous driving has become the "hope of the whole village" overnight.

As early as last year, WeRide, Pony.ai, and Qingzhou.com all invested in L2+ autonomous driving: