Chenqi keeps racking up losses in congested China ride-hailing race

The shared economy platform bled more red ink last year, as its hyped robotaxi business fails to show any signs of breakthroughs

Key Takeaways:

• Chenqi lost 564 million yuan in 2024, extending its long stream of red ink over the last four years
• The company has hyped the potential of its robotaxi service, but revenue from that part of its business has so far been miniscule

By Lau Chi Hang

It drove successfully onto the Hong Kong Stock Exchange last July, hoping to wow investors with its ride hailing and robotaxi services. But nine months later, Chenqi Technology Ltd. (9680.HK) is going nowhere fast.

The company’s stock has been under pressure nonstop since briefly basking in the spotlight after ringing the stock exchange’s fabled opening gong, and is now down nearly 70% from its HK$35 listing price. Its dwindling group of believers only got limited hope from its first post-listing financial results, released late last month, which included improving overall performance but also another annual loss of 564 million yuan ($77.7 million).

In the popular Hong Kong movie “Infernal Affairs,” undercover agent Chan Wing Yan, played by local star Tony Leung, famously utters at one point that “After three more years on top of another three years, it’s coming up on a decade.” Such thoughts could very well be coming from Chenqi investors, who are wondering how much longer they will need to wait for the company to finally drive into profitability.

Endless losses

Just six years after its inception, Chenqi’s road ahead is still pockmarked with uncertainties as its losses continue. The company didn’t hold out much hope for near-term profitability in its IPO prospectus last year, saying “we expect to continue incurring net loss and net operating cash outflows in 2024, 2025, 2026 and 2027.”

In other words, the company will continue to log losses for at least the next three years. As for after that, it’s probably still too early to say.

A look its latest results shows Chenqi had 34.5 million registered riders last year, up 44% year-on-year. It logged 2.98 billion yuan in transaction value, up 8% year-on-year, and its daily order volume reached nearly 310,000, up 15%. But its average value per order dropped from 28 yuan in 2023 to 26.4 yuan last year, suggesting it had to lower its fares or offer more incentives to drivers to keep its business growing.

And as we’ve already noted, the company lost 564 million yuan last year, 18% narrower than its 693 million loss in 2023. But a loss is still a loss, and adding on its 685 million yuan loss in 2021 and 627 million yuan in 2022, the company has lost a cumulative 2.57 billion yuan over the last four years – quite a chunk of change.

If Baidu can’t deliver, how can Chenqi?

Chenqi featured its autonomous robotaxi business as a selling point at the time of its IPO, but that business has failed to take off just yet. That service, which is included with Chenqi’s hitch carpooling service and promotion and marketing efforts under “other items” on its financial statements, generated just 2.04 million yuan in revenue for all last year, equal to just a tiny fraction of the company’s 2.4 billion yuan in total revenue. So, it seems unlikely the robotaxi business will make any meaningful contribution anytime soon.

Any success for that operation would undoubtedly be a major breakthrough. But the reality is that service is still very much in a trial phase, and is miles from being a profit engine. Even less certain is when it will make an official commercial debut and whether the company can run the business effectively.

Even internet giant Baidu’s (9888.HK, BIDU.US) Apollo Go robotaxi service is in a pilot stage, mostly operating in the Central Chinese city of Wuhan, with 1,000 unmanned taxis in service.

Baidu, which has far deeper resources than Chenqi, has lots of kinks to work out with its robotaxis. Those include vehicles not able to reach exact designated pick-up and drop-off sites, only able to drive at maximum speeds of 40 kph in the best conditions, and struggling to change routes in busy conditions or even coming to a complete halt.

Clearly, robotaxi services still face numerous challenges and won’t make meaningful contributions to anyone’s revenue or profits anytime soon. If even Baidu, the first in China to test the service on a large scale, can’t get its service fully launched, then how will Chenqi be able to do it anytime soon?

Capital, technology gaps

In terms of business model, ride-hailing service platforms like Chenqi’s are asset-light, using vehicles provided by drivers themselves. By comparison, robotaxis are far more capital intensive since the business must provide such vehicles.

Zhang Ning, a vice president at rival robotaxi operator Pony.ai (PONY.US), once told media that “in cities like Beijing, Shanghai, Guangzhou and Shenzhen, at least 1,000 vehicles need to be put into operation (by an operator) for the robotaxi business to at least break even.”

In other words, scale is key to the robotaxi business, with thousands or even tens of thousands of vehicles necessary to run a viable business. Expenses required to procure such vehicles, coupled with maintenance, charging, insurance and operating costs, could easily add up to billions of dollars.

At the time of its listing, Chenqi said it planned to use 40% of the funds it raised, or around HK$390 million ($50 million), for development of its robotaxi service. But that’s likely just a drop in the bucket for what it will need to keep developing the service until it’s one day viable.

The company could also return to the capital market to raise more funds, but could find few takers given the current state of its profitability and business operations. And the dismal post-IPO performance of its stock will hardly encourage new investors to buy more shares.

Perhaps Chenqi could shift to an asset-light model for robotaxis by opening its platform to such vehicles provided by third parties. But there’s nothing to prevent other ride-hailing services, including much bigger names like DiDi Global from doing the same.

In addition to Baidu and Pony.ai, China’s WeRide (WRD.US) is also pursuing robotaxi service in the country using advanced L4 and L5 autonomous driving technologies. Chenqi is collaborating with Pony.ai and has received investment from the company, but that doesn’t change the fact that the pair are at once both friends and rivals.

At the end of the day, Chenqi is really just a ride-hailing service platform without any obvious strength in autonomous driving. What’s more, it’s up against formidable competition in robotaxis, with Baidu operating at a much larger scale and more financial resources, while Pony.ai and WeRide boast technological advantages. That leaves Chenqi as mostly a second fiddle in the robotaxi race, making it hard to see how that part of the business could someday propel the company to profits that have so far been elusive.

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