WeRide Merges Into Crowded Field Of Autonomous Driving IPOs

Key Takeaways:

• WeRide has filed for a U.S. listing, boasting a market value of more than $10 billion, even as it reports falling revenue and widening losses
• The company’s R&D expenses were more than triple its revenue in the first half of this year

By Edith Terry

When driverless vehicle maker WeRide Inc. filed for a Nasdaq IPO last week, it looked potentially big. Bloomberg estimated in March last year such a listing might raise as much as $500 million, making it one of the largest by a Chinese company in New York since the $4.4 billion IPO by ride sharing giant DiDi Global in 2021 that later unraveled.

But much has changed in the last year, including a flood of similar Chinese autonomous driving IPOs into the market. And performance by the handful that have listed has hardly been impressive. That said, the WeRide IPO is notable for its very star-studded cast.

Chairman and CEO Han Xu was formerly chief scientist at the autonomous driving unit of Baidu BIDU, a leader in China’s autonomous driving sector. Before that he was a professor of electrical and computer engineering at the University of Missouri after getting his PhD from the University of Illinois.

Chief Technology Officer Li Yan worked at Microsoft, Meta, and NEV company U Power Ltd. before founding WeRide in 2017 with Han. The company’s board includes Mohamed Albadr, head of the Beijing office of Mubadala Disruptive Investments, as well as Kuang Ziping, founder of Qiming Investment Partners.

Alliance Ventures, an offshoot of the Renault-Nissan-Mitsubishi alliance and a WeRide client, has committed to buying $97 million of the IPO shares as a cornerstone investor. The company has raised over $1 billion in 11 funding rounds, including one as recent as June this year, with participants including Alliance Ventures, the Mubudala Investment Authority, Carlyle, Qiming, Bosch and even chip superstar Nvidia.

A 2022 funding valued WeRide at $5.1 billion, and that figure had more than doubled to $12.1 billion at the latest funding in June. The listing also boasts a star-studded list of underwriters in Morgan Stanley, JPMorgan and leading Chinese investment bank CICC.

Another selling point is WeRide’s international footprint. It has autonomous driving permits for its fleet of robotaxis in China, Singapore, the United Arab Emirates and the U.S., and operates in 30 cities in seven countries across Asia, the Middle East and Europe. The prospectus says the company has completed 1,700 days of accident-free commercial operations in China and the Middle East since 2019.

But not everyone is convinced the listing will break new ground, at least in terms of fundraising size. China Renaissance estimated the IPO might raise just $100 million, though that number seems low considering the company’s multibillion-dollar market value and the Renault-Nissan-Mitsubishi commitment that is already roughly that amount.

Despite WeRide’s claims of several world firsts in autonomous driving, its financials are distinctly in line with its peers in the crowded driverless vehicle ecosystem where everyone is spending big on R&D and losing money. It calls itself an “asset light” company, which in this case translates to minimal revenues. It is also highly dependent on its largest customer, which accounted for 55% of its revenue last year.

Shrinking Revenue

The company was relatively cash rich, with 1.8 billion yuan in its coffers at the end of June. But its revenue for the first half of the year was just 150 million yuan, down nearly 20% from 183 million yuan a year earlier. Its 2023 revenue of 402 million yuan was also down more than 20% from 528 million yuan in 2022. While the revenue figures are still relatively small, the year-on-year declines hardly look promising for company trying to sell investors on its growth potential.

The dip in 2023 came after one of WeRide’s major clients, Yutong Bus Co., stopped buying robobuses that year due to overcapacity. As a result, WeRide’s robobus sales dropped to just 19 last year from 90 in 2022. Between 2021 and 2023, WeRide sold a total of 147 robobuses and 19 robotaxis. It also produces robovans and robosweepers.

Things look a little better for WeRide’s service offerings, mostly advanced driver assistance systems (ADAS). In the first half of 2024, its revenue from services totaled 129 million yuan, outweighing the 21 million yuan in product sales by more than six times. Its major costs are for R&D, which consumed 517 million yuan in the first six months, up 37% year-on-year and more than triple its revenue for the period.

Its loss for the six months widened to 882 million yuan from 723 million yuan a year earlier.

WeRide expects its situation to improve once it begins scale production of its robotaxis this year and robobuses in 2025. According to commissioned research in the prospectus, the global market for driverless vehicles will be worth $1.7 trillion by 2030, mostly for fully autonomous vehicles, while Mainland China’s market will be worth $639 billion, or more than one-third of the global total. According to Chinese media reports, WeRide has received intended orders for 2,000 robobuses and 10,000 orders for its robovans. Its robosweeper is being tested in nine cities.

WeRide may be one of the highest-profile autonomous vehicle companies headed to market, but it’s far from the only one. Toyota-backed robotaxi startup Pony.ai and BYD-backed autonomous driving software company Momenta have both been green-lighted by the Chinese securities regulator to make U.S. IPOs.

Auto chip designers Horizon Robotics and Black Sesame Technology, as well as driverless software providers Zongmu Technology have applied to go public in Hong Kong. iMotion Automotive (1274.HK) and Hesai HSAI have already gone public in the last year in Hong Kong and the U.S., respectively.

In such a crowded field, how can WeRide stand out? It says it’s the only company that offers a full range of commercialized driverless products and services, from partially to fully autonomous. It says its app, WeRide Go, also partners “with other shared mobility platforms to reach local markets.”

In addition to the Renault-Nissan-Mitsubishi alliance, Yutong Bus and Bosch, WeRide’s other partners include Xiamen Golden Dragon Bus, China’s largest bus manufacturer; JMC-Ford Motors, a joint venture between Ford and Jiangling Motors; and Hyundai.

Investors seem a little tuckered out already by the flood of new listings. Among the handful of companies that have already listed, iMotion’s shares, while only about 8% below their IPO price from December 2023, are 75% below their peak in April. And Hesai has lost 81% of its market value since its February 2023 listing.

This article is from an unpaid external contributor. It does not represent Benzinga's reporting and has not been edited for content or accuracy.