Pony.ai Lists in the US, Accelerating the Shuffle of Autonomous Driving

12/04 2024 393

With the rapid development of new energy, autonomous driving, artificial intelligence, and chip technology, the automotive industry is undergoing unprecedented transformation.

Staying updated on the latest developments in the automotive industry and analyzing market trends, LingTai LT presents the "Auto Circle" column. With a professional perspective, we focus on the latest news in the global automotive industry, new product launches, technological innovations, and market performance of major automakers. By providing in-depth analysis of the automotive industry, we reveal the underlying business logic and market rules, as well as how these factors are changing the landscape of the automotive industry and impacting human mobility.

This article is the 10th in this series, focusing on Pony.ai, once the most highly valued autonomous driving company in China, and exploring the impact of its listing on the industry.

Author|Zhang Yao

Editor|Zhang Wenqin

Operations|Chen Jiahui

Cover Image|Pony.ai Official Weibo

Produced by|LingTai LT (ID: LingTai_LT)

After eight years, Pony.ai, once the most highly valued autonomous driving company in China, has finally gone public. Its share price rose 13% on the first day of trading and closed down over 7%, with a current market value of $4.2 billion.

The capital market has been buzzing with activity in the autonomous driving industry this year. According to incomplete statistics, nine autonomous driving companies have initiated IPO procedures since the beginning of the year, with five successfully listing.

However, as autonomous driving companies rush to go public, issues related to immature commercialization models are gradually emerging. High R&D and hardware costs have become pain points for the commercialization of autonomous driving.

Many autonomous driving companies have struggled to withstand the pressure during this prolonged period. For example, Zongmu Technology is now unable to pay salaries, and HAOMO.AI, supported by Great Wall Motors, has recently resorted to layoffs to reduce costs and increase efficiency. Where will the autonomous driving industry head next? Which company will emerge victorious?

Adhering to High-Level L4, Pony.ai Becomes the First Robotaxi IPO

Regarding the "route debate" in the autonomous driving industry, some companies choose the "low-level route" of first implementing L2 and L3 to bring products and solutions to market, while others focus on the "high-level route" of achieving L4 autonomous driving Robotaxi.

Over the past eight years, Pony.ai has started with the most challenging urban Robotaxi service and launched an autonomous freight business in 2019, with 80% technology reuse between the two. With industry development, Pony.ai's passenger vehicle intelligent driving business was established, reusing 70% of its L4 autonomous driving algorithms.

According to the prospectus, as of the end of June this year, Pony.ai had a total of $473 million in cash and cash equivalents, short-term investments, and restricted cash, sufficient to ensure the company's safe and stable operation for about five years. Pony.ai expects to achieve break-even on a per-vehicle basis by 2025 (with positive gross margin).

Pony.ai's persistence may not seem remarkable on its own, but when considered in the context of the entire industry, it becomes clear that Pony.ai's commitment is wise.

▲Image: Pony.ai Official Weibo

In recent years, under immense competitive pressure, some autonomous driving startups have vacillated between L4 and L2 technologies, while others have swung between the C-end and B-end markets. This vacillation has not only wasted funds and energy but also slowed down their strategic pace.

For Pony.ai, a firm strategic approach has avoided unnecessary resource waste, leading to better R&D efficiency and cost-effectiveness, which has reassured investors about Pony.ai's prospects.

Fu Xin, a partner at Sequoia China, stated that Pony.ai has consistently focused on the development of L4 high-level autonomous driving solutions, establishing a deep technological moat and promoting the mass production and commercialization of Robotaxi through extensive and in-depth industrial cooperation. It can be said that Pony.ai has crossed the "critical point" for healthy technological and business model development.

Clearly, with limited resources, Pony.ai's choices and persistence have made it one of the few startups globally that focuses on L4 and has survived to this day. This long-term strategy is worthy of recognition.

Autonomous Driving Must Move Beyond Theories and Into Reality

Around 2022, the autonomous driving industry entered a winter period. The number of financing rounds and total financing in the domestic autonomous driving sector declined by 32% and 61% year-on-year, respectively. Capital was no longer willing to invest in industries that did not offer short-term returns. Many companies began to transform or were even eliminated.

Even after successful listings, profitability remains a common challenge for autonomous driving companies. According to Pony.ai's prospectus, the company has accumulated losses of $325 million (approximately RMB 2.307 billion) over the past two and a half years. Wang Xiaogang, CEO of SenseTime's Autonomous Driving Business Unit and co-founder/chief scientist of SenseTime, told The Paper that he believes it will take another three years or so for autonomous driving-related businesses to become profitable.

This year, many autonomous driving companies have announced layoffs and the suspension of year-end bonuses. For example, HAOMO.AI has initiated layoffs in its functional departments, and several senior executives have left Hodo Auto, indicating that the passenger vehicle autonomous driving industry has entered a reshuffling period.

However, with the realization of driverless Robotaxi operations in 2023, the industry is willing to believe in the feasibility of autonomous driving commercialization. Pony.ai's successful listing also signals that the industry and capital see the potential for Robotaxi to become a reality.

In the first half of the year, Tesla's "Cybercab" Robotaxi made its debut, with Elon Musk, the world's richest man, willing to bet big on autonomous driving. He believes that Robotaxi represents personalized public transportation that can significantly reduce average travel costs.

▲Image: Tesla Robotaxi

In July this year, Baidu Apollo's autonomous ride-hailing platform "Luobo Kuaipao" experienced explosive growth in fully driverless orders in Wuhan, attracting significant attention. He Xiaopeng also stated that the trend towards Robotaxi is becoming increasingly clear, especially with the acceleration of Xiaopeng's intelligent driving iterations due to end-to-end technology support. Xiaopeng Motors will officially launch Robotaxi services in 2026.

Currently, the massive scale of the Robotaxi market is sufficient to fully unleash the commercial potential of L4 autonomous driving.

According to global consulting firm Frost & Sullivan, driven by technological advancements, supportive policies, and declining hardware costs, Robotaxi services are expected to become commercialized around 2026, with a global market size projected to reach $66.6 billion by 2030 and $352.6 billion by 2035, based on GTV (Gross Transaction Value).

Currently, Pony.ai's business and revenue primarily consist of three components: Robotaxi services, Robotruck services, and technology licensing and applications.

Robotruck services primarily involve collaborations with Sany Heavy Industry and Sinotrans. Pony.ai currently operates a fleet of 190 autonomous trucks with a cumulative operating mileage of 767 million tons-kilometers. Among various autonomous driving segments, Robotruck operations are considered relatively easy to commercialize due to their simpler operating scenarios. Regarding overall industry losses, Wei Junqing, CEO of CARL Power, stated, "To make money, we must first achieve a positive cycle."

He explained that autonomous trucking companies have overlooked commodity transportation. Wei calculated on-site that the lifecycle cost of a truck, considering driver salaries (assuming two shifts per truck and current driver income levels), could reach nearly RMB 2 million. However, by employing a hybrid smart convoy approach that assigns unmanned technology to following trucks, costs can be reduced by 50% to 80%. Although full commercialization of autonomous trucks involves various factors such as technology, regulations, and market demand, it is already a project close to commercial viability.

Robotaxi revenue is generated primarily through providing complete autonomous driving engineering solutions to OEMs or mobility platforms and charging passengers for autonomous taxi rides.

According to official disclosure from Pony.ai, the company currently operates 250 Robotaxis in cities like Beijing, Shanghai, Guangzhou, and Shenzhen. As of the first half of 2024, the number of registered users of the PonyPilot mobile app exceeded 220,000. At the end of August this year, approximately 70% of users reused the service, with an average of over 15 orders per vehicle per day.

Meanwhile, Pony.ai has collaborated with Toyota to launch the next-generation L4 autonomous vehicle, the Bozhi 4X Robotaxi, which was jointly defined from scratch. The vehicle's chassis and steering are specifically designed for autonomous driving needs. Pony.ai and Toyota announced plans to deploy 1,000 Bozhi 4X Robotaxis in first-tier cities in China between 2025 and 2026.

Peng Jun, CEO of Pony.ai, stated that reducing costs is the company's primary goal over the next two years, aiming to at least break even on a per-vehicle basis to facilitate further expansion.

A Major Reshuffle in Autonomous Driving is Underway

As time passes and capital enthusiasm wanes, the autonomous driving industry faces unprecedented challenges.

On the one hand, giants like Huawei and Baidu have entered the market, automakers have increased investment in in-house R&D, and Tier 1 suppliers are accelerating their transformation, putting tremendous competitive pressure on autonomous driving startups. The era when funding was easily secured based on the founder's background is gone, and strong commercialization capabilities have become crucial for survival.

On the other hand, autonomous driving companies generally struggle with insufficient cash flow generation. Long-term high R&D investment has led to financial strain, and without new capital injections, companies find it difficult to sustain operations. Many companies have been in a state of long-term losses, such as WeRide, which, even after a successful listing, still faces profitability challenges.

Pony.ai's listing underscores the immense difficulties faced by the autonomous driving industry. For example, Pony.ai has adhered to high-level L4 for eight years, chosen the more easily commercializable Robotaxi route, and achieved mass production collaborations with automakers. Only now has it been able to list on Nasdaq as the first Robotaxi IPO, a testament to its arduous journey. In the future, Pony.ai must continue to demonstrate its profitability to investors.

Despite these challenges, Pony.ai has glimpsed the light at the end of the tunnel and is far ahead of other domestic autonomous driving companies. The industry believes that next year may mark a turning point for autonomous driving companies, moving from losses to profitability. It seems that a major reshuffle is indeed underway in the autonomous driving sector.

Solemnly declare: the copyright of this article belongs to the original author. The reprinted article is only for the purpose of spreading more information. If the author's information is marked incorrectly, please contact us immediately to modify or delete it. Thank you.