Pony.ai, WeRide Shares Tumble in Hong Kong IPOs

Shares of Chinese autonomous driving firms Pony.ai and WeRide experienced a downturn in Hong Kong trading on Thursday, with Pony.ai sliding over 12% and WeRide dropping nearly 13%. This follows their initial public offerings (IPOs) where they raised a combined HK$9.1 billion (approximately $1.17 billion). Pony.ai secured HK$6.71 billion (around $860 million), while WeRide garnered HK$2.39 billion.

The dual listings come as both companies aim to increase their global footprint and compete with industry giants like Baidu’s Apollo Go in China and Alphabet’s Waymo in the U.S. The IPOs are expected to provide crucial capital for scaling operations and advancing their technology.

Both Guangzhou-based Pony.ai and WeRide have stated that a significant portion of the newly acquired funds will be allocated to the development of Level 4 autonomous driving technology. Level 4 automation implies a high degree of autonomy, requiring minimal human intervention in specific operational environments. This level of automation is seen as a key step towards widespread adoption of robotaxis and other autonomous vehicle applications.

WeRide CEO Tony Xu Han has indicated that the company will also be investing heavily in bolstering its artificial intelligence (AI) capabilities and expanding its data center capacity. Pony.ai CEO James Peng emphasized the importance of building supporting infrastructure, including autonomous-driving parking and charging facilities, alongside continued AI development.

Both CEOs have reiterated their commitment to driver safety as they pursue global expansion, targeting markets in China, the Middle East, Europe, and Asia. While they have already initiated fully autonomous robotaxi operations in select Chinese cities, securing full regulatory approvals in other regions remains a key objective. This global expansion strategy reflects the competitive landscape of the autonomous driving sector, where securing geographical advantage and demonstrating operational capabilities are vital for long-term success.

The regulatory landscape surrounding autonomous driving permits proved to be a delicate topic leading up to the listings.

According to local Chinese media reports, WeRide CFO Li Xuan alleged that Pony.ai misled investors by misrepresenting the number of cities where WeRide operates, among other issues. Pony.ai has not responded to requests for comments on these claims.

In the U.S., both companies harbor ambitions of partnering with ride-hailing giant Uber to deploy their robotaxis on the platform, pending regulatory approval. This strategic alliance would provide them with immediate access to a vast user base and accelerate the deployment of their autonomous vehicle technology.

However, their U.S. ambitions are facing headwinds. New regulations restrict the use of Chinese technology in connected vehicles, including self-driving systems, potentially hindering their entry into the U.S. market. This regulatory pressure underscores the geopolitical complexities facing Chinese technology companies operating abroad and emphasizes the need for diversifying their market presence.

“With the uncertainty in the markets around the world and the fact that there would be intense scrutiny on a Pony or WeRide trying to enter the U.S. market, a dual listing is a lot about risk mitigation,” said Tu Le, founder and managing director at Sino Auto Insights.

He added that the listings were also an acknowledgement that it’s gonna take a lot of capital and an endorsement of a market outside the U.S. for Pony.ai and WeRide to succeed.

The two companies’ weak performance in Hong Kong follows declines in New York, where WeRide shares dropped 5.2% and Pony.ai fell 2% on Wednesday.

The parallel listings of Pony.ai and WeRide underscore the accelerating trend of Chinese companies seeking dual listings in Hong Kong, representing a resurgence for the city’s IPO market. Both companies gained regulatory approval for their dual listings in mid-October, signaling a vote of confidence from Hong Kong regulators.

“For the HK stock exchange, clustering the listing at the same time helps to reinforce investor perception of HK as a tech-hub for Asia-focused technology companies,” Rolf Bulk, equity research analyst at New Street Research told CNBC.

Earlier this year, in May, CATL, the Chinese battery giant, completed a secondary listing in Hong Kong, ultimately raising $5.2 billion in what was, at the time, the world’s largest IPO of the year. This trend highlights the increasing importance of Hong Kong as a capital-raising hub for Chinese technology companies facing geopolitical headwinds elsewhere.

Geopolitical tensions and regulatory uncertainties in the U.S. continue to drive this growing trend, as companies seek to diversify their access to capital and mitigate potential risks. The regulatory environment in the U.S., coupled with ongoing trade tensions, has created an incentive for Chinese companies to seek alternative listing venues.

According to New Street Research’s Bulk, attracting Pony.ai and WeRide to Hong Kong offers these companies greater access to Asian capital markets and broadens their market presence in China and across the Asian region. This expanded access to capital will be crucial for fueling their continued research and development efforts and expanding their operational footprint.

“However, it will do nothing to advance the progress of their technology stack and regulatory approvals in Western markets. If anything, gaining approval in Western markets may be more challenging with a HK secondary listing,” he added. The implications of a Hong Kong listing on their ability to gain regulatory approval in Western markets are a key consideration for investors.

The listings also provide the financial resources necessary to compete with larger rivals such as Baidu’s Apollo Go and Alphabet’s Waymo, both of which operate significantly larger autonomous vehicle fleets. The competition in the autonomous driving market is fierce, and access to capital is a critical factor in determining which companies will emerge as industry leaders. The outcome will depend on continued technological innovations, strategic partnerships, and the ability to scale operations efficiently.

“Pony and WeRide are right up there among the global leaders,” said Sino Auto Insights’ Le. “WeRide has diversified their service portfolio a bit more but they both see Uber and the Middle East as two viable partners in their ability to get more pilots launched outside of China.”

“Investors should pay special attention to how their technology evolves with AI and other new tools becoming more mainstream,” Le said.

— CNBC’s Elaine Yu and Anniek Bao contributed to this report.