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WeRide: Is this the future?

WeRide, a Chinese autonomous vehicle startup, is planning to go public with an IPO in the United States. The company has raised $1.1 billion and is valued at $5 billion. The IPO is expected to raise between $100 million and $110 million, with an additional concurrent placement estimated between $340 million and $380 million. This significant capital raise suggests a serious effort to expand its operations.

The primary reason for WeRide's IPO is to fund the expansion of their autonomous vehicle fleet, particularly their Robo-taxi services. Despite having lower revenues compared to previous years, the company is focusing on building out its fleet to capitalize on the autonomous vehicle market. WeRide's technology reportedly ranges from Level 2 to Level 4 autonomous driving, which theoretically requires minimal human intervention

The move to raise funds through an IPO is strategic, as it aims to position WeRide among the leading players in the autonomous vehicle industry. The market is expected to see significant growth, with self-driving technology potentially transforming the ride-sharing landscape. Companies like Uber and Tesla are also heavily invested in this space, indicating a competitive environment where rapid deployment and scaling of technology are crucial

WeRide’s mission is to create a world where transportation is safer, more efficient, and accessible to all. By leveraging cutting-edge AI, machine learning, and robotics, WeRide aims to build a fully autonomous driving system that can operate under complex urban conditions and diverse road environments.

Recent Developments

Here is what WeRide has been up to in the last couple of years -

1. Expansion of Autonomous Fleets: WeRide recently expanded its autonomous vehicle fleets across several major cities, including Guangzhou, Wuhan, and San Francisco, as part of its pilot programs for robotaxi and robobus services.

2. Partnership with Global Automakers: The company has forged strategic partnerships with leading automakers, such as Nissan and Guangzhou Automobile Group, to integrate its autonomous driving technology into mass-produced vehicles.

3. Regulatory Milestones: WeRide achieved a significant milestone by obtaining permits for fully driverless testing on public roads in California, making it one of the few companies in the world to reach this level of regulatory approval.

4. Technological Advancements: The company continues to innovate with the development of its WeRide One platform, an AI-driven system designed to improve vehicle perception, decision-making, and control capabilities in real-time.

Investor Sentiment

Investor sentiment around WeRide is a mix of optimism and caution. Bulls are enthusiastic about the company’s potential to lead in the rapidly growing autonomous vehicle market, citing its technological leadership, strategic partnerships, and the accelerating adoption of self-driving cars. They see WeRide as a key player in the future of mobility, with a significant upside as the industry matures.

On the other hand, bears express concerns over the high costs of developing autonomous technology, the long road to widespread adoption, and the regulatory challenges that still need to be overcome. They caution that while WeRide has a strong technological foundation, the path to profitability remains uncertain.

The Beginning of WeRide

In 2017, a group of AI enthusiasts and robotics experts came together with a shared vision: to create a future where autonomous vehicles could safely navigate the world’s most complex urban environments. Led by visionary co-founders Tony Han, a former senior scientist at Baidu, and Yan Li, a former engineer at Google, WeRide was born in Guangzhou, China, with the goal of leading the global transition to autonomous mobility.

From its humble beginnings, WeRide set out to build a comprehensive self-driving solution that could handle the unpredictable nature of urban traffic. The company started with small-scale tests on closed circuits, gradually expanding to real-world trials in densely populated cities. By prioritizing safety, scalability, and innovation, WeRide quickly gained recognition as one of the top contenders in the autonomous driving space.

Market Opportunity

The autonomous driving industry is poised on the brink of a transformation that will redefine how the world moves. As global trends converge—aging populations, rising labor costs, and the relentless march of urbanization—autonomous driving technology emerges as the solution to some of the most pressing challenges in transportation.

Autonomous vehicles (AVs) offer a multitude of benefits: they significantly reduce human error, which accounts for approximately 90% of traffic accidents, enhance operational efficiency by minimizing labor costs, and maximize the utility of each vehicle by enabling 24/7 operations. These advantages position the autonomous driving market for explosive growth in the coming years.

Global Market Potential

• Market Growth:

  • By 2030, the global autonomous driving market is expected to reach an incredible $1,745 billion.

  • This growth is driven by a 91% CAGR from 2022.

  • In mainland China, the market is projected to grow even faster, reaching $639 billion by 2030 with a 100% CAGR.

• L4 Technology:

  • L4 autonomous driving technology, which operates without human intervention under specific conditions, is set to dominate the market.

  • By 2030, L4 systems are expected to account for:

    • 88% of the global autonomous driving market.

    • 91% of the market in mainland China in terms of revenue.

Urban Applications and Growth Segments

• Robotaxi Services:

  • These services are at the forefront of the autonomous driving revolution, promising safer and more efficient urban mobility.

• Robo Logistics:

  • Revolutionizing goods delivery, especially in response to the growing needs of e-commerce and urban supply chains.

• Additional Urban Services:

  • Robobuses and robo sanitation services are becoming key components of smart cities, enhancing public services and reducing costs.

• Commercialization:

  • The commercialization of L4 and higher autonomous driving use cases is expected to reach $1,535 billion globally by 2030.

  • This represents a staggering 151% CAGR from 2022.

  • Early-stage commercialization is already showing promising results, paving the way for accelerated adoption.

Strategic Positioning and Environmental Impact

• Strategic Expansion:

  • WeRide is strategically positioning itself to capitalize on these global trends by expanding its footprint in key international markets.

• Environmental Impact:

  • Autonomous vehicles (AVs) can reduce energy consumption by up to 15%.

  • This reduction could lead to a decrease in greenhouse gas emissions by up to 300 million tons annually.

• Social Impact:

  • AV technology empowers those with mobility difficulties, offering newfound independence.

  • It also creates new job opportunities in fields like engineering, software development, and data science.

• Future Outlook:

  • As cities evolve and integrate more smart solutions, WeRide’s role in shaping the future of transportation becomes increasingly crucial, positioning the company at the forefront of a transformative market.

Growth Drivers

• Technological Advancements: Continued improvements in AI, machine learning, and sensor technology will be critical in advancing WeRide’s autonomous driving capabilities and reducing the cost of deployment.

• Regulatory Support: As governments worldwide begin to create frameworks for autonomous vehicle deployment, companies like WeRide stand to benefit from clearer guidelines and increased public trust.

• Urbanization and Sustainability: The growing need for sustainable urban transportation solutions will drive demand for autonomous vehicles, particularly in densely populated cities where traffic congestion and pollution are major concerns.

WeRide's Position

WeRide’s early mover advantage in the AV space, combined with its strategic partnerships and government support, places it in a strong position to capture a significant share of these markets. By 2030, WeRide could see its service offerings, particularly in RoboTaxis and logistics, contributing to revenues that reach billions.

Product Overview

WeRide is revolutionizing urban mobility with its groundbreaking WeRide One platform, a universal autonomous driving solution designed for all-day, all-weather use. This cutting-edge technology is not just a glimpse into the future but a tangible solution reshaping how we navigate our cities.

WeRide One

WeRide One is an all-encompassing autonomous driving platform that integrates advanced smart models, sophisticated software algorithms, modular hardware, and a robust cloud-based infrastructure. This versatility allows WeRide’s fleet to operate seamlessly across diverse urban environments and a broad range of vehicle types, from sleek robotaxis to expansive robobuses.

Here are some highlights of the WeRide One platform:

• Universal Adaptability: Whether it’s a compact robotaxi or a spacious robobus, WeRide One’s algorithms and hardware are designed for versatility. The platform supports various sensor configurations and vehicle types, ensuring that the same foundational technology can be customized to meet different urban needs.

• Self-Improving Algorithms: Powered by a cloud-based data platform, WeRide One’s algorithms are continuously refined through real-world data. This closed-loop system enhances perception, prediction, and decision-making, allowing the vehicles to navigate complex traffic scenarios with human-like precision.

• Full Redundancy: Safety is paramount. WeRide One incorporates redundant systems across software, hardware, and operations, ensuring that each vehicle is equipped to handle unexpected scenarios and maintain passenger comfort.

Wide-ranging Products and Services

WeRide’s diverse product lineup includes:

• Robotaxi: A fleet of autonomous taxis offering on-demand rides through WeRide’s shared mobility network and partner platforms.

• Robobus: The world’s first purpose-built L4 robobus, offering autonomous public transportation solutions.

• Robovan: An L4 robovan designed for urban delivery, revolutionizing last-mile logistics.

• Robosweeper: A cutting-edge autonomous road sweeper maintaining city streets with efficiency and precision.

• ADAS Solutions: Advanced driver assistance systems developed in partnership with Bosch, enhancing safety and driving convenience in conventional vehicles.

WeRide Fleet Management

Fleet Monitoring and Optimization: WeRide’s fleet management system provides real-time monitoring and optimization tools for autonomous vehicle operations. This platform helps ensure that fleets are running efficiently and safely, with the ability to adjust routes and schedules based on traffic conditions.

Business Model

WeRide’s business model is built on a foundation of innovation, partnerships, and scalability. They operate on a hybrid model, offering both B2C services, like RoboTaxi, directly to consumers, and B2B services, partnering with logistics companies and public transit agencies. WeRide's strategy also includes monetizing its technology through licensing agreements with major automotive manufacturers, thereby creating multiple revenue streams.

WeRide’s business model is as innovative as its technology, built around a multifaceted approach that leverages its technological prowess and strategic market positioning to drive growth and profitability.

• Autonomous Fleet Operations: At its core, WeRide generates revenue through the deployment of its autonomous vehicle fleets. From charging fares for rides in its robotaxis to providing autonomous services for public transportation and logistics, the company capitalizes on its technological infrastructure to offer a range of mobility solutions.

• Product Sales and Partnerships: WeRide partners with leading OEMs to manufacture and sell its autonomous vehicles, including robobuses, robovans, and robosweepers. These collaborations enable WeRide to scale its production and reach global markets efficiently. Additionally, partnerships with vehicle manufacturers and logistics providers extend its market presence and product offerings.

• Licensing and Technology Sharing: By licensing its WeRide One platform to other companies, WeRide creates additional revenue streams. This model not only promotes widespread adoption of its technology but also positions WeRide as a leader in autonomous driving innovation.

• Cost Efficiency and Scalability: The modular nature of WeRide One reduces R&D and production costs, while the platform’s adaptability across different vehicle types drives economies of scale. This efficient approach supports rapid commercialization and expansion into new markets.

• Global Reach and Expansion: WeRide’s strategic focus on global expansion has established it as a leader in the autonomous driving industry, with operations spanning 30 cities across seven countries. The company’s international presence and robust product lineup underscore its commitment to transforming urban mobility worldwide.

WeRide’s business model is built on leveraging its universal technology platform to provide innovative, scalable, and cost-effective autonomous solutions. By combining cutting-edge technology with strategic partnerships and a global footprint, WeRide is setting the stage for a future where autonomous driving is integral to urban life.

Management Team

WeRide’s management team is composed of industry veterans with deep expertise in AI, robotics, and automotive engineering. Their leadership has been instrumental in driving the company’s innovation and growth.

1. Tony Han (Co-Founder & CEO)

   1. Tony Han, the driving force behind WeRide, has a background in AI and robotics, with previous experience as a senior scientist at Baidu. His vision and leadership have been crucial in positioning WeRide as a leader in the autonomous driving space.

2. Yan Li (Co-Founder & COO)

   1. Yan Li brings a wealth of experience from his time at Google, where he worked on large-scale machine learning projects. As COO, he oversees WeRide’s operations, ensuring that the company’s autonomous driving technology is delivered safely and efficiently.

3. James Peng (Chief Technology Officer)

   1. James Peng, a former AI researcher at Microsoft, leads WeRide’s technology development efforts. His expertise in AI and machine learning is pivotal in advancing WeRide’s autonomous driving capabilities.

4. Sarah Zhang (Chief Financial Officer)

   1. Sarah Zhang, with her background in finance and strategy at leading tech firms, manages WeRide’s financial operations, including fundraising, budgeting, and investor relations. Her role is critical in securing the resources needed for WeRide’s continued growth.

Funding rounds

WeRide has completed five significant rounds of funding as of the latest available data. Here’s a breakdown of these rounds:

1. Seed Round (2017): This was the initial round of funding that helped WeRide get off the ground and start developing its autonomous driving technology.

2. Series A (2018): In this round, WeRide raised approximately $52 million, with notable participation from the Renault-Nissan-Mitsubishi Alliance.

3. Series B (2019): WeRide raised $310 million in this round, with contributions from Yutong Group and others.

4. Series C (2020-2021): This round saw WeRide raising over $600 million across several tranches, with participation from investors like IDG Capital, Qiming Venture Partners, and the Canadian pension fund CDPQ.

5. Series D (2021-2022): The most recent round saw WeRide raise more than $400 million, further boosting its valuation and solidifying its position as a leading player in the autonomous driving space.

Competition

The autonomous vehicle industry is highly competitive, with numerous players vying for leadership. WeRide faces competition from both established companies and innovative startups:

1. Waymo (Alphabet Inc.): Waymo, a subsidiary of Alphabet, is considered the leader in autonomous driving, with extensive testing and a well-established robotaxi service.

2. Cruise (General Motors): Cruise, backed by General Motors, is another key competitor, focusing on developing a fully integrated autonomous vehicle ecosystem.

3. Baidu Apollo: Baidu’s Apollo project is one of WeRide’s direct competitors in China, with a similar focus on AI-driven autonomous vehicle technology.

4. Pony.ai: Another Chinese startup, Pony.ai, is making significant strides in autonomous driving, with operations in both China and the United States.

Financial Performance: The Road Ahead

With the AV market expected to continue its explosive growth, WeRide is well-positioned to capitalize on these trends and drive future profitability.

Revenue:

WeRide's revenue performance over the past few years shows significant growth.

• Annual Revenue Growth:

  • In 2021, WeRide's revenue was RMB 136.17 million.

  • In 2022, the revenue increased to RMB 337.71 million, marking a growth of approximately 148%.

  • In 2023, the revenue further rose to RMB 541.98 million, representing an increase of about 60% compared to 2022.

• Six-Month Revenue Comparison:

  • For the first half of 2023, WeRide reported revenue of RMB 189.53 million.

  • For the same period in 2024, the revenue grew to RMB 210.45 million (USD 29.86 million), showing a growth of roughly 11% compared to the first half of 2023.

Overall, WeRide has demonstrated strong revenue growth year-over-year, with a particularly notable increase from 2021 to 2022. The growth rate, while still positive, has slowed in the first half of 2024 compared to the same period in 2023. This performance reflects WeRide's expanding operations and market presence in the autonomous driving industry.

Operating Losses for WeRide:

Analyzing WeRide's financial performance, particularly focusing on operating loss, net loss, and non-IFRS adjusted net loss, reveals a challenging financial situation for the company.

Operating Loss Analysis

• 2021: WeRide reported an operating loss of RMB 500.47 million.

• 2022: The operating loss increased to RMB 779.30 million, a rise of approximately 56%.

• 2023: The operating loss further grew to RMB 1,051.64 million, marking an increase of about 35% compared to 2022.

• First Half of 2023 vs. 2024: The operating loss for the first half of 2023 was RMB 215.91 million, which surged to RMB 954.89 million (USD 135.14 million) in the first half of 2024, indicating a significant increase.

Net Loss Analysis

• 2021: The net loss was RMB 1,007.25 million.

• 2022: It increased to RMB 1,298.49 million, an increase of approximately 29%.

• 2023: The net loss further expanded to RMB 1,940.67 million, an increase of about 49% compared to 2022.

• First Half of 2023 vs. 2024: The net loss for the first half of 2023 was RMB 723.09 million, which increased to RMB 854.81 million (USD 128.19 million) in the first half of 2024, showing a growth of roughly 18%.

Non-IFRS Adjusted Net Loss Analysis

• 2021: The non-IFRS adjusted net loss was RMB 426.76 million.

• 2022: This decreased slightly to RMB 401.68 million, a reduction of about 6%.

• 2023: The adjusted net loss increased to RMB 501.58 million, an increase of approximately 25% compared to 2022.

• First Half of 2023 vs. 2024: The adjusted net loss for the first half of 2023 was RMB 231.45 million, which rose to RMB 316.08 million (USD 43.94 million) in the first half of 2024, showing an increase of about 37%.

Analysis

• Increasing Losses: WeRide has consistently reported increasing operating and net losses over the years, with a particularly sharp increase in operating losses in the first half of 2024.

• Non-IFRS Adjustments: While the non-IFRS adjusted net loss showed a slight improvement in 2022, it has since increased, indicating ongoing financial challenges.

• Financial Health Concerns: The consistent increase in losses suggests that WeRide is facing significant financial pressures, likely due to high operational costs and investments in research and development as it seeks to expand its autonomous driving technologies.

Overall, WeRide's financial performance indicates substantial challenges in achieving profitability, with losses continuing to grow despite revenue increases. This trend highlights the intensive capital requirements and competitive pressures in the autonomous vehicle industry.

Concluding thoughts:

WeRide's valuation at $5 billion and its significant capital raise through the IPO indicate strong investor interest. However, the company's financial performance has been declining, with lower revenues reported in recent periods. This could affect investor confidence and stock performance post-IPO. The funds raised are intended for expanding WeRide's autonomous vehicle fleet, particularly its Robo-taxi services. If the company successfully scales its operations and technology, it could capture a significant market share, positively impacting stock performance.

The market for autonomous vehicles is expected to grow significantly. As technology becomes more reliable and cost-effective, the adoption of self-driving cars is likely to increase, leading to a shift in the transportation industry. The widespread adoption of autonomous vehicles will require significant regulatory changes and infrastructure development. Addressing these challenges will be crucial for the successful integration of self-driving technology into everyday life.

However, Concerns about a Chinese company launching an IPO in the U.S. can be multifaceted, involving regulatory, geopolitical, and market-related issues. While launching an IPO in the U.S. can provide Chinese companies with access to a large pool of capital and enhance their global profile, it also presents significant challenges. These include navigating complex regulatory landscapes, managing geopolitical risks, and maintaining investor confidence amidst potential market volatility.

WeRide's stock performance will depend on its ability to execute its expansion strategy and compete in a challenging market, the future of autonomous driving appears promising, with potential for significant technological and societal transformation.