Pony AI, a Toyota-backed self-driving car company, has joined a growing list of Chinese companies listing on U.S. stock markets after China banned foreign capital raising for years.
Zeekr, a Chinese luxury electric vehicle startup, was listed on the New York Stock Exchange in May, and WeRide, another AV startup, is also hoping to launch an IPO worth $5 billion in the U.S. this year, but has no plans to do so. This delay is delaying the plan. In August.
Pony was valued at $8.5 billion at the time of its 2022 capital raise. Toyota participated in that round as a follow-on investor after plowing $400 million into the startup in 2020, according to PitchBook data. The Japanese automaker’s stake in Pony is 13.4%. The Chinese AV startup has since secured $100 million from Saudi Arabia’s NEOM in 2023 and $27 million from Chinese VC GAC Capital in October.
But Pony’s board recently lowered the minimum valuation for the IPO to $4 billion, according to public filings. Pony also lowered its minimum target to raise in the deal from $425 million to $200 million.
But that’s not all that stands out in Pony’s IPO filing, so here are our top four takeaways.
Moderately sized fleet and operations
IPO filings are full of numbers that are previously vague or lack context, and Pony is no exception.
The company said it operates 190 “robot trucks” in Beijing and Guangzhou, and more than 250 robotaxis in Beijing, Guangzhou, Shenzhen and Shanghai. In the first three cities, robotaxi fares can be charged, while in Guangzhou and Shenzhen, they are completely driverless.
On the robotaxi side, Pony said it receives an average of 15 orders per day per robotaxi from the 220,000 users registered on the PonyPilot app. Overall, it says it has amassed more than 20 million “autonomous driving miles,” but only 2.4 million of those were without a human driver behind the wheel.
Pony complements its robotaxi service with a growing robot truck business. It has already secured 57 corporate customers, accounting for 73% of total sales in the first half of this year. But most of that money comes from Pony’s top three customers, which generated 62.8% of total revenue during the same period.
Are profits going up to the right?
It’s no secret that self-driving cars are an expensive business. And while Pony said it generated gross profits of $32 million and $17 million in 2022 and 2023, respectively, the company lost more than $270 million during those periods.
The biggest cause of these losses was Pony’s R&D spending. This is understandable, considering that Pony is a company developing pioneering technology that includes a very sensor-heavy autonomous stack. But I wonder whether Pony will actually prioritize operations over R&D. The startup’s workforce of about 1,300 employees as of June 30 was only 44% R&D, 16% technology deployment and production, and 28.5% operations. In 2023, $73 million was spent on salaries for research and development (R&D) employees alone, and the first half of this year ended with $335 million in cash.
Pony expects to bring in more revenue in the coming years, especially as robotaxi fares increase. However, they don’t seem very optimistic about cost savings. That’s because the filing doesn’t expect revenue costs to decline over time, only saying those costs “will continue to evolve in the near future.”
Pony’s revenue has now nearly doubled to $24.7 million in the first half of 2024 compared to the same period last year. In the first half of the year, the deficit was reduced compared to the same period last year. But while Pony’s revenue appears to be trending to the right in just the first half of the year, it still has a long way to go before it can surpass its 2023 total revenue of $71.9 million.
sixty. page. of. danger.
Every company must explain the risks associated with its business when it goes public. But damn if Pony didn’t write up his 60-page disclaimer incredibly thoroughly.
What is one of the main risks? There is a lack of sufficiently skilled staff with knowledge of U.S. Generally Accepted Accounting Principles (GAAP) to ensure proper compliance with SEC requirements.
Pony says it has addressed these weaknesses starting in late 2023, but recent evidence shows how this could be a real risk for Fisker’s young company. The EV startup’s bankruptcy was largely triggered by missing the deadline for submitting financial results for the third quarter of last year.
There are also challenges in the former People’s Republic of China, which Zeekr is well aware of. Pony said: “Chinese regulators have significant oversight power over our business and may influence our operations in the future as they deem appropriate to their economic, regulatory, political and social objectives.”
Pony continues to slight Imminent regulations on connected vehicles in China risk preventing extremely limited robotaxi testing from continuing in the United States. The startup said it has permission to test driver-driven AVs in California, but its U.S. operations generated “less than 1% of total revenue in 2023 and the six months ended June 30, 2024.”
Pony draws pretty pictures
We are now several years removed from the special purpose mergers and acquisitions craze that allowed startups to make outrageous predictions about their businesses. Remember when Faraday Future predicted we would sell more than 100,000 EVs in 2024? About 13 have been sold so far.
Since this is a traditional IPO, Pony doesn’t have so many licenses that it won’t be significantly affected by its projections. Still, Pony is so obsessed with the pride-inducing image of what its technology can do that it doesn’t want to share it with you.
“On the public roads of China’s biggest cities, Pony has achieved something once described only in science fiction: creating a car that drives itself,” the company wrote. “Passengers’ eyes widen in wonder and they use the app to open the door and climb into the back seat.”
“Once passengers leave the car, they pay via the app and complete this awe-inspiring journey. Meanwhile, the robotaxi drives itself to pick up the next passenger, leaving the passenger to wonder what other surprises the future holds.”
My eyes got really big.
