Robotaxi rising

Caroline Zheng

Chinese ride-hailing platform Chenqi Technology, better known as Ruqi Mobility, has filed for an initial public offering in Hong Kong as it steps up its bets on self-driving services amid growing competition.

Jointly founded by state-owned automaker Guangzhou Automobile (2238) and Tencent (0700) in 2019, the Guangzhou-based firm's investors now include autonomous driving startup Pony.ai and rival WeRide and it has secured about 2.7 billion yuan (HK$2.94 billion) from three rounds of funding, putting its valuation at 5.36 billion yuan.

Ride-hailing services accounted for 86.6 percent of Ruqi's revenue in the first half of this year and saw even higher percentages in the past three years.

Ruqi caters to 21.6 million users mainly in the Greater Bay Area and cities such as Guangzhou, Shenzhen, Dongguan and Zhuhai.

It was the second-largest mobility service platform in the Greater Bay Area in terms of gross transactions in 2022, according to Frost & Sullivan.

But Ruqi's market share, which stood at 4.8 percent last year, is still far behind ride-hailing giant Didi Global's 57.2 percent share.

Ruqi's revenue has grown but it remains in the red due to the high costs of retaining drivers and customers.

Revenue jumped 35.6 percent to 1.37 billion yuan in 2022 from a year earlier and income also surged 48 percent year-on-year to 913 million yuan in the first half of the year.

But Ruqi recorded a gross loss as its costs - which mainly includes service fees for drivers - always surpassed total revenue although posting a narrowing trend.

Its net loss also widened by 14.3 percent to 913 million yuan in the first six months.

Adding to concerns is Ruqi's high debt ratio, which surged to 243 percent as of June this year from 18.1 percent in 2020.

Several cities in the Greater Bay Area including Dongguan recently warned of overcapacity in the ride-hailing market while Shanghai has suspended issuing new ride-hailing permits since July.

So the next bet for Ruqi would be self-driving services as the company is developing an open platform for autonomous vehicles it calls robotaxis.

As of June, a total of 261 vehicles including 30 owned by Ruqi have participated in operational tests under the robotaxi service, with 18,490 hours of test time and 457,000 kilometers of accident-free operations completed.

Currently, its robotaxi service generates less than 0.1 percent of its total revenue.

Research and development expenses, meanwhile, stood at 105 million yuan last year, accounting for 7.9 percent of its revenue during the period.

Ruqi plans to use 40 percent of the net proceeds it raises from the IPO for R&D of autonomous driving and robotaxi operation services.

Meanwhile, Didi Global, which delisted from New York in 2022, is reportedly planning to list in Hong Kong next year. Didi said earlier this year that it is working with Chinese carmakers to develop its own robotaxis, which it aims to put into service by 2025.

GAC and its entities currently hold over 35 percent of Ruqi's shares while Tencent has 18.4 percent. Other shareholders include Guangzhou Public Transport with 5.9 percent, Pony.ai with 5.3 percent, and Didi subsidiary Jovial Lane, which has a 2.84 percent stake.

China International Capital Corp (3908), Huatai International and ABC International are joint sponsors for the proposed offering.