Pony.ai approved for U.S. IPO

The company known for its robotaxis has been approved by China’s securities regulator to list in New York, as it downshifts its ambitions to boost its revenue more quickly

Key Takeaways:

  • Pony.ai has been approved to list in the U.S., was valued at $8.5 billion in early 2022, and has raised over $1.1 billion across nine funding rounds through the present
  • The company has focused mostly on fully autonomous driving, but has recently shifted to Level 2 driver-assisted systems for faster commercialization


By Hugh Chen

Late last month, the automotive world was focused on Beijing as the city hosted China’s premier annual auto show. Among the many flashy exhibits, a seventh-generation Toyota bZ4X Robotaxi concept car from Pony.ai was a major crowd pleaser. The model showcased not only the company’s partnership with a major automaker, but also its commitment to fully autonomous vehicles – even as many of its rivals are looking at lower-tech assisted-driving technologies that can be commercialized more quickly.

Ahead of the show, Pony.ai received a significant boost on the financial front when China’s securities regulator approved the company’s plans for a U.S. listing. Pony.ai intends to sell up to 98 million shares and list on the Nasdaq or the New York Stock Exchange, according to an announcement on the China Securities Regulatory Commission’s website dated April 22.

That approval was one of the latest signals that Chinese regulators are easing their crackdown on tech companies listing abroad, following two years with only a handful of major new listings. The slowdown dates back to early 2021 after a controversial U.S. IPO by ride hailing giant DiDi, often considered the Uber of China, that ultimately derailed just months after its listing.

A key concern by Chinese regulators was data security, since DiDi and even smaller names like Pony.ai collect huge troves of data on everything from their individual users to conditions about China’s road networks. The regulators worried that information could become accessible to U.S. officials following a New York listing, though those concerns are easing following the rollout of a new regulatory framework for data security reviews.

Pony.ai is just the latest in a growing line of autonomous driving companies attempting to list, most recently including an application from Zongmu Technology to go public in Hong Kong. A successful listing by any of these companies would mark a show of confidence in a group whose slow pace of commercialization and years of unfulfilled promises have led to growing impatience among private equity and venture capital investors.

Founded in 2016, Pony.ai has been relatively successful in attracting investments, including its latest fundraising last October where it secured $100 million from Saudi Arabia’s NEOM and its affiliated investment fund. The company has raised more than $1.1 billion in nine funding rounds, according to the Tianyancha website. It was valued at $8.5 billion in early 2022 after its D-funding round, cementing its place as a high-tech “unicorn.”

Investors like the company partly for the background of its founders, Peng Jun and Lou Tiancheng, whose resumes both include stints working at Baidu’s (BIDU.US; 9888.HK) autonomous driving division that is considered a leader in China.

Investors may also like the company’s vision that has overwhelmingly focused on autonomous driving capabilities at Level 4 and above, which generally refers to fully self-driving vehicles that can operate without human intervention in most conditions. That sets it apart from many of its peers that have focused on less sophisticated Level 2 driver assistance systems that aren’t fully autonomous but are easier to commercialize.

Commercialization plans

Pony.ai was among the first group of companies licensed to operate its robotaxis in China. It currently has fleets of autonomous vehicles without safety drivers in four major Chinese cities: Beijing, Shanghai, Guangzhou, and Shenzhen, and has launched commercial driverless ride-hailing services in three of them.

The company charges mileage-based fees to people who book rides through its PonyPilot+ app. But its revenue is relatively small since areas where its robotaxis can operate are still strictly limited to designated zones in less populated areas. For example, its robotaxis are currently confined to just one district in Beijing right now, Yizhuang, which is well outside the city’s main downtown area.

Pony’ai launched a second line of robotrucks in 2018 when it established a truck business unit, followed by its registration in 2020 of a separate company called Pony.ai Truck.

But that business was going nowhere just a year after its establishment. By the end of 2021, Pony.ai merged its autonomous truck and passenger vehicle R&D teams, with the truck business team reportedly downsized to just around 10 people as its U.S. R&D center was almost entirely disbanded.

Robotruck commercialization is difficult for a number of reasons, including regulatory unpreparedness and immature technology. While autonomous driving on highways appears to look simpler than on city streets, the reality is more complex. A number of companies focused on robotrucks have recently run into difficulties, including the once-promising TuSimple (TSPH.US), which recently announced its withdrawal from the U.S. after earlier wowing audiences with its autonomous driving technology.

Multiple obstacles to commercializing Level 4 technology have led Pony.ai to follow a growing number of its peers in pursuing a more realistic approach by focusing on lower-tech Level 2 systems. Pony.ai made the strategic shift a year ago when its founder and CEO Peng announced the company would make a concerted effort to expand its “intelligent driver assistance business for passenger vehicles” as part of its broader commercialization efforts.

However, Pony.ai is hardly the first to try its hand at Level 2 driver assistance. Major domestic automakers, such as BYD (1211.HK; 002594.SZ), GAC Aion, and Xpeng Motors (XPEV.US; 9868.HK), have already selected preferred suppliers for such technology, according to a report from local media outlet Xuebao Finance, meaning Pony.ai may have difficulty finding major partners for its similar technology.

Still, such a move may be necessary for Pony.ai in the short term to start generating more substantial revenue. Despite fierce competition, the assisted driving market in China is large and growing rapidly, reaching 41.3 billion yuan ($5.7 billion) in 2022, up from 9.3 billion yuan in 2018, according to China Insights Consultancy.

Pony.ai could have an edge over rivals like Zongmu from the cutting-edge technology it has accumulated over the years in pursuing Level 4 and above autonomous driving. Nonetheless, the strong emphasis on its robotaxis during the Beijing Auto Show seems to show the company still sees fully autonomous Level 4 driving as a long-term goal. Now, it will need to find a way to get investors excited about its two-tiered strategy when it files its U.S. listing documents.

Pursuing that goal of Level 4 autonomy will, of course, require major ongoing R&D spending, which means that Pony.ai may lose money for quite some time. It may soon learn how investors feel about that kind of story, including whether they value Pony.ai as highly as the pricey $8.5 billion it was worth in 2022.

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