9680.HK
Chenqi gets ready to list

The ride-sharing company’s listing could raise up to $167 million as its shares get set to debut next Wednesday

Key Takeaways:

  • Shares of Chenqi will make their trading debut next week, as the company banks on its new robotaxi segment to sell investors on its future
  • The firm hopes to differentiate itself in the crowded ride-sharing market with its status as one of only three companies offering robotaxis in addition to manned vehicles

  

By Edith Terry

Fasten your seatbelts for the latest in a stream of new ride-sharing listings.

If all goes according to plan, Guangzhou-based Chenqi Technology Ltd. (9680.HK) will ride onto the Hong Kong Stock Exchange with a trading debut next Wednesday, completing its IPO after an initial application expired in February. The deal could raise as much as HK$1.3 billion ($166 million) and give Chenqi a market cap of HK$9.2 billion if the shares price at the top of their range, though a weak pricing could value it as low as HK$6.9 billion.

The deal is a relatively big one for Hong Kong, with five bookrunners. The list is also a very made-in-China affair, led by CICC, Huatai International and ABC International, indicating the majority of investors will probably come from China and Asia.

Chenqi is pitching the future, not the present, to investors, as it tries to distinguish itself from a crowded field of rivals, some of which are also floating shares. The company, which uses the OnTime brand, or Ruqi, plans to spend HK$443 million of its IPO proceeds on R&D for its autonomous driving and robotaxi operations. That may eventually replace its current ride-sharing business, which is losing money even as it sustains the company in the present.

The question is whether investors will buy into Chenqi’s forward-looking story, in which it expects the cost of operating driverless taxis to dip below that of manned vehicles starting in 2026. With the company’s 36,800 monthly active drivers accounting for 76.3% of its costs last year, Chenqi said it will continue losing money until 2028, according to its latest prospectus.

The company’s service fees for drivers rose from 1.1 billion yuan in 2021 to 1.7 billion yuan last year, up 55% during that time. Its revenue over that period rose even faster, more than doubling from 1 billion yuan in 2021 to 2.2 billion in 2023, as it improved its efficiency.

Chenqi currently operates 281 robotaxis, of which it owns just 35. It said that small fleet’s contribution to its revenue was “marginal,” adding the robotaxi service operated for an aggregate of 20,080 hours and logged 450,699 kilometers of accident-free operations in 2023. The company is banking on its position as a leader in China’s affluent Greater Bay Area – a region centered on Hong Kong and Guangzhou, with a population of 69.1 million and a per capita income 72% above the national average – to keep it going as it drives towards a future where driverless cars can compete with traditional drivers.

That point will come in 2026, according to third-party research in the prospectus, as the cost of manned taxis increases from 1.7 yuan per kilometer in 2019 to an estimated 2 yuan per kilometer in 2026 and 2.4 yuan per kilometer in 2030. Over that time, robotaxi costs per kilometer are expected to fall steadily from 23.3 yuan in 2019 to 4.5 yuan in 2023 and 2.1 yuan in 2026, and could fall to 1 yuan by 2030. Chenqi’s own robotaxi cost per kilometer is 1.77 yuan, for which it charges 10.90 yuan per ride, according to the prospectus.

Booming market

By 2030, China’s autonomous driving technology service market size will reach 76.64 billion yuan, while an emerging robotaxi market will be worth 275.5 million yuan, according to third-party data in the prospectus.

Chenqi says it is the world’s first mobility platform “to launch a commercialized hybrid operation of manned ride-hailing and Robotaxi, and is also the first domestic mobility service platform with a proprietary robotaxi fleet for commercialization.” It has only two major competitors in its niche as a hybrid operator, including the dominant DiDi Global, which controlled 75.5% of China’s overall ride-sharing market last year.

But there’s also plenty of competition in the robotaxi space from most of China’s major internet companies, which are conducting similar pilot programs.

Commuters in Shanghai began using robotaxis from riderless car start-up AutoX and AutoNavi owned by Alibaba (BABA.US, 9988.HK) in 2020. Baidu (BAIDU.US, 9888.HK) was approved for robotaxi pilot operations driving to Beijing’s Daxing Airport in February 2024 through its Apollo Go service. And U.S. giant Tesla (TSLA.US) is reportedly likely to receive a license to test its advanced driverless system in China through a proposed robotaxi service.

Chenqi itself is backed by another internet giant, Tencent (0700.HK), as well as robotaxi operator Pony.ai and autonomous driving technology company WeRide.

Those and other investors have pumped nearly 3 billion yuan into Chengqi over three funding rounds starting from 2019. Other investors have included Guangzhou Auto, which is a leading stakeholder with 35.5% of the company, and DiDi-backed Voyager Group. The company’s latest funding round last year valued it at 5.36 billion yuan, falling short of “unicorn” status defined as companies worth $1 billion or more.

Congestion in China’s ride-sharing industry has become a problem for everyone in China, not just Chenqi. The sector also faces a different kind of conundrum in having too many workers chasing too few jobs, with municipal governments trying to convince the unemployed not to put more ride-sharing cars on the streets and ratchet up the competition even further.

The National Ride-Hailing Regulatory Information Platform reported in June that the number of licensed drivers qualified to offer ride-sharing services more than doubled from 2.9 million at the end of 2020 to 6.8 million by March 2024, while demand for ride-hailing services grew by just 45%. It said China had a sizable 349 ride-hailing operators in April, up from 309 a year earlier.

At least two of Chenqi’s rivals are also racing to market, led by Dida (2559.HK), whose shares debuted in Hong Kong last week and have plummeted since then, and CaoCao, whose Hong Kong IPO application is still pending. Many also expect DiDi to try to list in the next few years, after its brief period as a New York-listed company ended after just a few months in 2021.

The explosion in operators, made possible in part by the rise of a new generation of aggregating platforms that can offer many different services, led Shanghai to stop accepting new ride-hailing permit applications last year. As it continues to lose money in the competitive sector, Chenqi’s gross margin clocked in at negative 7% last year, though that was an improvement from negative 10.7% in 2022. Even DiDi didn’t manage to turn a profit until last year, with a gross margin of 15.2%, showing how tough the industry has become.

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