As funding for China’s electric vehicle (EV) and self-driving technology startups dries up, several companies are turning to the stock market to raise much-needed capital.
Facing fierce competition and an economic slowdown, these startups are launching initial public offerings (IPOs) at the risk of lower valuations in both domestic and international markets.
Horizon Robotics, a Beijing-based self-driving chipmaker backed by major investors such as Alibaba, Baidu, and Volkswagen, is leading the charge with Hong Kong’s largest IPO of the year. The company is raising HK$5.4 billion ($696 million) by selling 1.36 billion shares at HK$3.99 each, valuing the company at $6.7 billion. This marks a 23% drop in valuation compared to its last funding round in December 2022. Despite the lower valuation, Horizon Robotics hopes to attract investor interest with its strategic partnerships and advanced technology for autonomous driving.
The challenges facing Chinese EV and autonomous driving startups are significant. Horizon Robotics’ competitor, Black Sesame, experienced a 27% drop in its share price during its Hong Kong IPO debut in August, reflecting the broader uncertainty surrounding the sector. The shrinking availability of private funding, which fell by more than half from RMB 100 billion ($14.1 billion) in 2021 to RMB 45 billion ($6.3 billion) in 2023, has increased pressure on startups to pursue public listings to survive.
In addition to Horizon Robotics, other self-driving startups, such as Zongmu, Minieye, and EV maker Hozon, have also filed for IPOs in Hong Kong. Meanwhile, companies like Pony.ai and WeRide are seeking listings in the US, highlighting the need for cash injections in a cutthroat market. Despite the risks associated with lower valuations, public listings are seen as essential for these cash-strapped companies to continue operations.
China’s regulatory environment remains supportive of the self-driving sector, with the government aiming for mass production of Level 3 autonomous vehicles by 2025. However, the international market presents challenges, as Chinese EV companies face political opposition in the US and Europe. The Biden administration recently proposed banning Chinese software and hardware in internet-connected vehicles, and the European Union is considering tariffs of up to 45% on Chinese EV imports.
Despite these headwinds, Horizon Robotics saw a positive debut on the Hong Kong stock exchange, with its shares rising 2.8% to HK$4.1, boosting the company’s market capitalization to $6.9 billion. The company plans to use the proceeds from its IPO to fund research and development efforts over the next five years, aiming to expand into international markets.
The Financial Times, Forbes, and Market Watch contributed to this report.
