One of China’s leading autonomous driving start-ups is set to go public in New York as soon as this week, with the strained relationship between Beijing and Washington lurking in the background.
WeRide, which makes software that powers driverless vehicles, has given potential investors an extensive list of the many ways geopolitics could damage their investment.
Export controls on Chinese firms by the U.S. government could limit WeRide’s access to advanced semiconductors. One WeRide supplier has been designated a “Chinese military company,” which could complicate its supply chain if restrictions escalate. A crackdown on Chinese autonomous vehicle companies could curb WeRide’s ability to use its technology in America.
The Chinese government, the company also said, “has significant oversight and discretion over the conduct of our business, and may intervene or influence our operations.”
Any investment in a seven-year-old startup in a nascent industry carries risk, but not always of the sandwiched-between-two-superpowers variety. Shares in WeRide are set to trade on the Nasdaq stock exchange.
WeRide, headquartered in Guangzhou, is among a wave of Chinese electric vehicle and automotive technology companies turning to American financial markets for capital to fund their global ambitions, even as Washington enacts policies to freeze them out of the American market.
The Biden administration is expected to propose banning the most advanced automated driving software from China, according to two people who were briefed on the proposal. The ban would apply to all software at and above Level 3 or “conditional automation,” where a vehicle drives autonomously but with a person behind the wheel who is prepared to intervene if necessary. The proposal adds another hurdle, in addition to onerous tariffs, for Chinese automakers looking to break into the U.S. market
“The degree of difficulty in doing this in the U.S. is substantial today given the regulatory scrutiny that some of the Chinese offerings have been facing,” said Josh Lerner, a Harvard Business School professor focused on venture capital and entrepreneurship.
Blue-chip startups with ties to China that would have listed in the United States before have looked elsewhere or run into geopolitical roadblocks.
Congress passed a law in April requiring ByteDance, the Chinese parent company of TikTok, to sell the popular social media app or face its ban in the United States. Shein, the fast-fashion retailer founded in China, had filed paperwork last year to go public in New York, but its focus has shifted to a London listing amid the growing acrimony between Beijing and Washington.
The fact that WeRide and others are still willing to endure such scrutiny, Professor Lerner said, is a testament to the challenges Chinese companies face raising money in China. The number of initial public offerings in mainland China fell 75 percent in the first half of 2024 as Chinese market regulators tightened listing requirements amid sluggish stock markets and a real estate market in crisis.
WeRide was founded in 2017 by Tony Xu Han, the company’s chief executive and former chief scientist at the autonomous driving arm of Baidu, the tech giant. WeRide operates pilot robotaxi hailing services in China and the United Arab Emirates, while providing its self-driving software to car makers. It also sells driverless buses, delivery vans and street sweepers.
The company has raised $1.4 billion and was last valued at around $5 billion, according to Pitchbook, which tracks startups. WeRide has some notable investors including Alliance Ventures — a fund from Nissan Motor, Renault Group and Mitsubishi Motors; and the German auto parts manufacturer Robert Bosch GmbH.
Nvidia, the Silicon Valley giant that dominates the business of advanced chips, was also an early investor and is a key supplier.
The company said it was planning to raise up to $440 million in the offering and a private placement to investors, including some existing shareholders. WeRide said it generated $55 million in revenue in 2023, a 24 percent fall from a year earlier. The company continues to invest heavily in research and development, and its net loss has outstripped its revenue. It lost $268 million last year.
While it detailed risks in its public offering paperwork, as all companies going public are obligated to do, WeRide also downplayed the impact of trade measures aimed at keeping key technology out of Chinese hands.
WeRide said that export controls blocked an unidentified chip supplier from supplying some of its semiconductors, but added that WeRide was unaffected because the restrictions did not include the chips it buys. Another supplier was tagged by the Pentagon as associated with China’s military, but WeRide said it didn’t think this would affect its ability to continue using that supplier. The company declined to comment, citing the customary “quiet period” restrictions ahead of the I.P.O.
WeRide has a small presence in the United States, restricted to research. The company is one of seven authorized by California to test vehicles without a safety driver present. Its 14 vehicles drove more than 40,000 miles on the state’s roads last year, although all but roughly 50 of those miles were done with a safety driver present, according to data from California’s Department of Motor Vehicles. Hundreds of driverless cars operated by Waymo, which is owned by Google’s parent company, Alphabet, logged millions of miles in California last year.
This month, California’s utility regulator approved a permit for WeRide to carry passengers in its autonomous cars with or without a safety driver in the areas around San Jose. It cannot offer rides to the general public.
However, most of WeRide’s staff is in China, where much of its research is conducted. China has been aggressively expanding driverless car testing on public roads as part of a push to establish global leadership in the field.
Gene Munster, a managing partner at Deepwater Asset Management in Minneapolis, said WeRide faced “an uphill battle to win investor support given the multiple geopolitical risks.”
By going public now, Chinese automotive technology companies might be hoping to raise considerable sums of money before the November election. A new U.S. president, Mr. Munster said, might “shut the U.S.-China I.P.O. window.”
Pony.ai, another Chinese autonomous driving startup, plans to list on Nasdaq or the New York Stock Exchange soon, according to an April announcement from China’s securities regulator. Any Chinese company seeking a U.S. listing must get permission from the regulator.
Zeekr Intelligent Technology Holding, an electric vehicle maker, listed its shares in May, raising $441 million in the biggest public offering of a Chinese company since Didi Global went public in 2021. Zeekr shares are down 27 percent from its public offering price.
Didi, a ride hailing firm, was flying high when it went public without government permission. Didi had a dominant hold in China and a roster of impressive investors including Apple, which plowed $1 billion into the company in 2016. But Chinese regulators tightened the clamps on Didi.
Two days after its offering, regulators forced the company to stop registering new users in China and started an investigation into the company’s practices. It took steps to block Didi from online app stores. Six months later, Didi said it would delist its shares from the New York Stock Exchange.
Ana Swanson contributed reporting.
