Pony AI pulls ahead of WeRide in China robotaxi race

Both companies notched an important new advance last week when Shanghai unveiled a major expansion to its robotaxi program

Key Takeaways:

• Pony AI, WeRide and Baidu were among eight groups awarded licenses to operate in a major expansion of Shanghai’s robotaxi program
• Pony AI’s stock is up 16% since its U.S. listing last November, while WeRide has lost a third of its value since its Nasdaq trading debut a month earlier

By Doug Young

In the Chinese robotaxi race for supremacy, Pony AI Inc. (PONY.US) is winning over investors compared with rival WeRide Inc. (WRD.US). The fuel that’s exciting stock buyers appears to be Pony’s faster success in commercializing its robotaxi service, as the pair of independent operators race to find profits before burning through their cash.

Uber and its former CEO Travis Kalanick may also be taking bets on this particular race, with the former potentially backing both sides as the latter places his bets on Pony, based on recent reports that we’ll detail shortly.

Both companies were in the headlines on Saturday when each separately announced (Pony announcement; WeRide announcement) a major advance into Shanghai, China’s commercial capital, at a major AI event. The pair, along with Baidu’s (BIDU.US; 9888.HK) Apollo Go, were among eight groups awarded licenses to operate robotaxi services in the Jinqiao and Huamu districts of Shanghai’s massive Pudong area.

That development looks quite significant, since Shanghai previously limited robotaxi testing and services to its relatively remote Jiading district. The expansion to Huamu will bring robotaxi services to within 3 kilometers of Shanghai’s Lujiazui financial district, home to some of the world’s tallest buildings. Jinqiao is also home to many foreign companies and a large white-collar community more likely to use such robotaxi services.

The Shanghai expansion complements strong presences by Pony, WeRide and Baidu’s Apollo Go in China’s four megacities that also include Beijing, Shenzhen and Guangzhou. Just a day before announcing the Shanghai move, Pony AI announced its formal launch of around-the-clock service in Guangzhou and Shenzhen, expanding from 15-hour daily operation using rapidly maturing technology that allows for better autonomous driving at night.

Technology development aside, all three of these companies have also become quite adept at putting out steady streams of announcements on all their latest developments, trying to keep investors excited on their slow road to commercialization. WeRide has issued 27 announcements this year alone, or about one per week, while Pony AI has issued 17, or one every 12 days. No matter is too small for either company to shout about.

Both companies are in the early stages of trying to develop various global markets in the Middle East, Europe and North America, though the overwhelming amount of their operations are currently in China.

Despite their relatively similar profiles, shares of WeRide and Pony AI have fared quite differently since the former listed in New York last October and the latter followed a month later. Pony’s shares haven’t exactly galloped ahead, but are still up about 16% from their IPO price. That contrasts sharply with WeRide, whose stock has lost about a third of its value since its trading debut.

Pony’s rally has lifted its value to about $5.4 billion, while WeRide has dropped to about half that at $2.9 billion. Pony also boasts a stronger price-to-sales (P/S) ratio of 72, compared with WeRide’s 58. Here, however, we should point out that both figures are quite inflated, since neither company is generating too much revenue yet.

Accelerating commercialization

The growing divergence between this pair appears to lie in Pony’s faster commercialization of its core robotaxi services compared with WeRide. Pony’s revenue rose 12% in this year’s first quarter to $14 million from $12.5 million a year earlier, outpacing WeRide’s 1.6% year-on-year gain to 72.4 million yuan ($10.1 million) from 71.2 million yuan over that time.

While both of those revenue figures are quite small, they still consist mostly of non-robotaxi operations for both companies. But the robotaxi business is growing quickly for each, and is likely to become their biggest revenue source not far down the road.

Pony reported that revenue from its robotaxi services tripled in the first quarter of this year to $1.73 million from $576,000 a year earlier, as revenue from robotaxi fares rose ninefold. By comparison, WeRide’s first-quarter robotaxi revenue of 16.1 million yuan, or about $2.25 million, was actually higher than Pony’s, but only roughly doubled year-on-year. While some may say that doubling is quite strong, it’s coming off such a small base that WeRide will need to show some even stronger growth to win over investors.

Both companies have similar-sized fleets, with Pony AI forecasting it would operate 1,000 vehicles by the end of this year, compared with 1,200 for WeRide at the end of March this year.

While investors appear to be siding with Pony, ride-sharing giant Uber (UBER.US) appears to be playing both sides of the aisle, though it’s slightly in favor of WeRide. Both Pony and WeRide have separately announced inclusion of their robotaxis on Uber’s platform outside China, though such tie-ups are mostly symbolic at this point. What’s more, Uber has announced similar tie-ups with many other major robotaxi services, showing it doesn’t want to get left behind when such services finally become popular.

Uber announced a $100 million investment in WeRide in May, which would give it 3.4% of the company, based on WeRide’s current market value. Meantime, the New York Times reported a month ago that Uber was in early talks to help its co-founder and former CEO Travis Kalanick acquire Pony AI’s U.S. subsidiary. Such a deal looks curious since Pony officially calls Fremont, California its headquarters, even though the vast majority of its operations are in China.

As Uber’s attempts to back both Pony and WeRide demonstrate, it’s still far too early to say which of the companies has the best chances of success. The U.S. ride-sharing giant is probably most interested in the China exposure it would gain from investing in Pony and WeRide, since neither company has any clear advantage in a global market where they would face stiff competition from better-funded rivals like Tesla (TSLA.US) and Waymo, which is backed by Google.

Not surprisingly, both Pony and WeRide are currently losing money, though not at an alarming rate. Pony lost $37.4 million in the first quarter, but still has $738.5 million in cash and other highly liquid investments in its coffers – enough to fund similar losses for 20 years. Similarly, WeRide lost 385 million yuan in the quarter, but also had 4.43 billion yuan at the end of March, or enough to fund its losses for more than 11 years.

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