ZEEKR, feed an autonomous driving IPO

Mondo Cars Updated on 2024-01-30

**: Straight-through IPO;Text: Shao Yangang

The first stock of autonomous driving in Hong Kong stocks is finally here.

On December 20, Zhixing Automotive Technology, an autonomous driving solution provider, officially landed in Hong Kong, with an issue price of 29HK$65 shares, with a net proceeds of 5HK$9.5 billion. On the first day of listing, the share price of Zhixing Automotive Technology opened low, falling below the issue price, and as of today, Zhixing Automotive Technology reported 25HK$85 shares, with a total market capitalization of 58HK$5.1 billion.

It is worth noting that in this IPO, Zhejiang Qixin, Suzhou Industrial Park Industrial Investment**, Runmiao Asset Management and Harvest International Investment, the cornerstone investors of Zhixing Automotive Technology, subscribed for a total of 17,524,000 shares, accounting for about 79 of the global offering shares24%, with a total subscription of about $66.5 million, or about 5HK$1.9 billion.

Founded in 2016 by a team that has been working in the autonomous driving industry for more than 10 years, Zhixing Automotive Technology is one of the few companies in China to commercialize autonomous driving solutions on a large scale, despite burning money like other autonomous driving companies.

As Song Yang, the founder of the company, said, Zhixing Automotive Technology started its business in the "spring of autonomous driving", and seven years later, Zhixing Technology became "China's fourth largest autonomous driving domain controller provider". In 2023, when simultaneously entering the capital market with star companies in the autonomous driving track such as Zongmu Technology, Suteng Juchuang, WeYuan Zhixing, Black Sesame Intelligence, and Youjia Innovation, Zhixing Automotive Technology passed the hearing of the Hong Kong Stock Exchange after only submitting one application.

Nowadays, Zhixing Automotive Technology has the halo of "the first autonomous driving stock in Hong Kong stocks", how will it promote its commercialization process in the future?

Entrepreneurs in the autonomous driving track are often linked to their own glamorous resumes, and Song Yang is no exception.

Before officially starting his business, Song Yang was already a senior practitioner in the automotive industry. From 2004 to 2014, Song worked for 10 years at the Suzhou subsidiary of Bosch Automotive, a global auto parts giant. In 2010, Song Yang became the No. 1 employee and head of Bosch's Autonomous Driving Division in China through self-nomination. After that, Song Yang joined BetterLife Automobile, a subsidiary of Joyson Electronics, to establish the Active Safety Division and served as the head of the Active Safety Business in China.

With long-term experience in the automotive chain, Song Yang figured out the standard routine of the car factory to choose the best business, and he also realized the core difference between independent enterprises and international business giants, which became an opportunity for Song Yang to decide to start a business. At that time, domestic start-ups in the field of autonomous driving also started one after another, and a number of autonomous driving star companies such as Pony.ai, AutoX, and WeRide were founded at this time, which also gave Song Yang the feeling that "the autonomous driving industry is coming to spring".

At the end of 2016, Song Yang, who had left his post for 2 months, pulled up a senior team and officially founded Zhixing Automotive Technology in the Artificial Intelligence Industrial Park of Suzhou Industrial Park to start his entrepreneurial journey.

Lu Yukun, CTO of Zhixing Automotive Technology, was the engineering manager of the R&D department of Bailide Automotive and the deputy engineering director of Nexteer Automotive Systems (Suzhou)**, responsible for the research and development of automotive passive safety technology and driver assistance systems, as well as the research and development of autonomous driving technology, respectively.

Li Shuangjiang, director of software development at Zhixing Automotive Technology, and Song Yang have been friends for many years, having previously served as the manager of the automotive software department of Bosch and the manager of the automotive active safety department of Bailed Automobile, respectively responsible for the research and development of autonomous driving software and sensors, as well as the development of autonomous driving software and intelligent front camera-related software.

Since July 2017, Zhixing Automotive Technology has been providing R&D and testing services for autonomous driving functions to automotive OEMs. In 2018, Zhixing Automotive Technology finally ushered in a breakthrough, this year, Zhixing Automotive Technology won the first mass production contract for early IFC products, began to provide customers with R&D services for L3 autonomous driving solutions, and reached a strategic cooperation with Mobileye.

In addition, in 2018, Zhixing Automotive Technology also acquired an automotive electronics foundry, which can not only adjust products according to user needs, but also provide OEM services to other partners to increase revenue.

With the team's background and commercialization progress, Zhixing Automotive Technology has also been frequently favored by the primary market in the 7 years since its establishment.

It is reported that Zhixing Technology began to accept the first round of external investment in September 2017, and the prospectus shows that as of before the IPO, Zhixing Technology has completed 9 rounds of financing, and has successively introduced Li Auto, Mingshi Capital, iFLYTEK Venture Capital, CCB International, Guozhong Capital, Oriza Origin and other institutions, with a total of 91.9 billion yuan of external investment.

Zhixing Autotech's first round of financing came from Li Auto and Mingshi Capital. It is reported that on the first and last day of September 2017, Mingshi Capital and Li Auto signed investment agreements with Zhixing Technology respectively, with a total capital injection of 10.2 million yuan, and later invested 2.55 million yuan through equity transfer.

In July 2020, Li Auto once again participated in the B round of financing of Zhixing Automotive Technology, and both Mingshi Capital and Li Auto invested another 5 million yuan each, and at that time, Li Auto officially landed on NASDAQ. As of the listing of Zhixing Automotive Technology, Li Auto's shareholding ratio through Beijing Chehejia was 45%。

The last round of financing of Zhixing Automotive Technology, that is, the C3 round of financing in the second half of 2022, introduced new investors including Halla Keruidong Suzhou, Dechuang Automobile, Yinghao Investment and other investors.

With rounds of financing, the valuation of Zhixing Technology has also increased step by step, from the valuation of 85 million yuan after the first round of investment to 3.3 billion yuan after the last round of financing before the IPO, the valuation of Zhixing Technology has increased by more than 38 times in 5 years.

Before the listing, Song Yang held 239% of the shares. Based on the issue market value of HK$6.7 billion, he is worth more than HK$1.5 billion.

After 10 years of experience at Bosch Automotive, Song Yang agrees with the idea that society should be diversified, and the industry should also be diversified. Monopolies limit market development and technological progress, which is bad for all businesses in the long run. At the time of the start-up, autonomous driving, including perception, decision-making, and control, was controlled by international manufacturers. Therefore, Song Yang wanted to start from the core layer of decision-making, break the monopoly chain, and help independent brands occupy a favorable position in business negotiations.

Zhixing Automotive Technology is positioned as a system integrator for car manufacturers. Compared with car manufacturers, Zhixing Automotive Technology plays the role of Tier 1, providing them with overall solutions combining software and hardware, and will also choose different partners focusing on the perception layer as the leading suppliers, and package their products to car companies, including millimeter-wave radar, maps, etc.

As a tier1 focusing on the field of front-mounted passenger cars, Zhixing Technology has established a gradual development route that is more in line with the needs of OEMs from the beginning of its establishment.

In the beginning, Zhixing Automotive Technology provided OEMs with IFC products based on their core algorithms alone, without providing related implementation and installation services. The IFC product consists of an SoC-powered controller and a camera that enables L2 autonomous driving functions independently.

In 2020, the fourth year of the establishment of Zhixing Automotive Technology, Song Yang finally waited for the fixed-point letter from the first OEM, and the large-scale mass production was finally realized, and the commercialization problem of the autonomous driving track was no longer an obstacle to entrepreneurship. It was also after this year that Zhixing Automotive Technology began to have scale income.

According to the prospectus, in 2020, 2021, 2022 and the first half of 2023, Zhixing Automotive Technology will achieve revenue of 4765 respectively50,000 yuan, 17.8 billion yuan, 13$2.6 billion and $54.3 billion yuan, and the loss during the year was 538270,000 yuan, 46.4 billion yuan, 34.2 billion and 997480,000 yuan.

According to Frost & Sullivan, in terms of sales revenue of autonomous driving domain controller solutions in 2022, Zhixing Automotive Technology is the fourth largest autonomous driving domain controller provider in China, with a market share of 8., after taking into account OEM-developed domain controllers6%, and is also the second largest third-party autonomous driving domain controller provider in China, with a market share of 262%。

The vast majority of Zhixing Auto's revenue comes from autonomous driving solutions and products sold to automakers, and as of the first half of 2023, a total of about 130,000 autonomous driving domain controllers have been delivered. Most of the products are provided to Geely Group's Zeekr Automobile, which is a basic version of Mobileye's technology and autonomous driving domain controllers.

It is reported that the autonomous driving domain controller solution provided by ZEEKR 001 is one of the first applications in the industry to be equipped with Mobileye's EyeQ 5H SoC. In 2020, 2021, 2022 and the first half of 2023, the revenue of the autonomous driving domain controller solution provided by Zhixing Automotive Technology for ZEEKR accounted for the total revenue, respectively. 6% and 935%。

However, the autonomous driving domain controller solutions sold to Geely's Zeekr Automobile, have lower gross margins compared to other business segments, such as autonomous driving-related R&D services and sales of PCBA products. According to the prospectus, in 2020, 2021, 2022 and the first half of 2023, its gross profit margin will be. 3% and 76%。It can be seen that in order to achieve economies of scale in the mass production stage, Zhixing Automotive Technology must also improve its bargaining power with leading merchants and customers.

It is worth noting that in June 2023, Zhixing Automotive Technology also received a fixed-point letter related to another luxury brand under Geely Group.

At present, Zhixing Automotive Technology has commercialized two autonomous driving domain controller product lines that support L2 to L2+ autonomous driving functions, covering a wide range of first-class passenger cars and full driving scenarios, including highways, ring roads, complex urban roads, rural roads and parking lots.

In addition to supervision, Zhixing Automotive Technology also provides self-designed and self-developed IDC series, including IDC MID and IDC High. However, the mass production of these products is relatively small.

Although the commercialization of Zhixing Automotive Technology has formed a scale, it is still losing money, and the current large customers have not yet formed a bargaining power, and the scale of high-margin products has not yet been realized, which is not a gain for the "first share of autonomous driving in Hong Kong stocks".

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