iMotion Automotive revs up for IPO with Geely in its rear-view mirror

The maker of autonomous driving domain controllers relies on Geely, one of China’s top private car makers, for 95% of its revenue 

Key Takeaways:

• iMotion Automotive has filed for a Hong Kong IPO, reporting its revenue grew 51% in the first half of this year to 540 million yuan
• The company has obtained ‘letters of nomination’ from 15 carmakers who have said they will or expect to buy its autonomous driving domain controllers

By Lau Chi Hang

Autonomous driving has taken pole position among car investors lately. A top believer is electric vehicle (EV) leader Tesla (TSLA.US), whose colorful CEO Elon Musk said at the World Conference on Artificial Intelligence in Shanghai this year that his company’s self-driving technology is very close to leaving behind any need for human participation. He even claimed that Tesla vehicles will be capable of fully autonomous driving by the end of this year.

Others like Wang Chuanfu, chairman of BYD (1211.HK; 002594), which is vying with Tesla to become the world’s biggest EV maker, are less convinced. “Autonomous driving is nothing but a scam. Like an emperor’s new clothes, it is just a concept wrapped up in capital and speculation, and is really just high-level assisted driving in the end,” Wang said at another investor conference earlier this year.

Into that mix, Song Yang, chairman and founder of iMotion Automotive Technology (Suzhou) Co. Ltd., which made its second application for a Hong Kong IPO earlier this month, is more on the believer end of the spectrum. Song even left a secure, high-paying job to pursue his dream.

After obtaining bachelor’s and master’s degrees in electrical engineering at big-name Chinese schools, Song started to work for auto parts giant Bosch in 2004, where he served as a senior engineer, head of the passive safety engineering department, and manager of the advanced driver assistance department for 10 years. From there he went to Joyson Safety Systems, then known as Key Safety Systems, as general manager of its active safety systems division.

But believing that autonomous driving would be the wave of the future, Song left his cushy job in 2016 and founded iMotion, specializing in autonomous driving domain controllers and other autonomous driving solutions.

With his strong technical background, Song quickly took in at least eight funding rounds that included big names like Li Auto (2015.HK; LI.US), CCB International and Shenzhen Merchants Investment Management. In the process, his company’s value cruised from 85 million yuan ($11.67 million) after the initial round to whopping 3.3 billion yuan in the latest round.

With the backing of such big investors and industry trends in its favor, iMotion made a first go at a Hong Kong listing in April this year, but failed. According to its latest prospectus filed earlier this month, the company’s revenue soared from just 47.7 million yuan in 2020 to 1.33 billion yuan last year. It lost nearly 100 million yuan on 543 million yuan in revenue in the first half of this year. While any loss isn’t good, the latest figure represents a big improvement over the 300 million yuan loss in the year-ago period.

Promising market 

Like many tech start-ups, iMotion doesn’t seem too bothered by its losses at this stage in its development, and is instead focused on what it sees as a market with huge potential. China’s autonomous driving market is expected to grow sharply with the adoption of more electric vehicle and smartcar technologies. The size of the automated driving market in China, including software and hardware for passenger and commercial vehicles, as well as driverless taxi services, is expected to exceed 1.1 trillion yuan by 2035, while the global market should reach 3.1 trillion yuan by then, according to third-party data cited in the prospectus. 

China’s autonomous driving domain controller market was worth about 9.8 billion yuan in 2022, of which 3.3 billion yuan went to third-party autonomous driving domain controller suppliers. That segment of the market is expected to reach 64.5 billion yuan by 2026, representing a compound annual growth rate of 60.1% from 2022 to 2026. Not bad for anyone thinking of joining the race.

iMotion is already China’s second-largest third-party provider of self-driving domain controllers, with 26.2% of the market, based on revenue from the sale of its self-driving domain controllers in 2022. But such a leadership position, and its enviable growth rates, can’t cover up iMotion’s biggest Achilles heel, namely its high dependence on a single customer. That customer is Geely, one of China’s leading private car makers, which is the source of 95% of iMotion’s revenue.

Hooked on Geely

iMotion has been a non-exclusive supplier of autonomous driving solutions to Geely’s Zeekr electric vehicle (EV) brand since June 2021, which partly explains its recently exploding revenue. Geely provided 53% of iMotion’s revenue in 2021, but the figure swelled to 96.4% and was roughly the same at 95% in the first half of this year. Put differently, Geely has become the power source fueling iMotion’s rapid growth.

“Given that the majority of our revenue comes from Geely, if the company decides to terminate or reduce its cooperation with us in the future, it may result in a material adverse effect on our business, financial and operating results,” iMotion wrote in its prospectus, in what looks like understatement of the year.

In a less extreme scenario, it noted, Geely could also reduce its business with iMotion rather than simply cutting the cord completely. “In recent years, Geely has been developing various self-driving capabilities for its models in-house and partnering with other providers to develop self-driving solutions,” it pointed out.

To lower the risk of such an outcome, iMotion has also been actively trying to wean itself off Geely. It said it has recently received “letters of nomination” from 15 car makers, including Great Wall Motor (2333.HK; 601633.SH), Chery, and Dongfeng Motor (0489.HK; 600006.SH), which have either purchased or indicated they expect to purchase iMotion’s self-driving domain controllers and related products.

Nonetheless, such “letters of nomination” are not the same as a contract. As iMotion Automotive says, there is no guarantee that customers will purchase its services and products in large quantities at favorable prices, and such letters may even be terminated. That said, iMotion’s fate looks quite tied to Geely, at least for now, meaning potential investors might be well advised to closely follow the progress of Geely’s Zeekr brand.

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