“LiDAR is a fool’s errand. Anyone relying on LiDAR is doomed. Doomed!” So said Elon Musk in 2019, dismissing a technology that maps out environments like radar or sonar, but with light waves instead (LiDAR is short for light detection and ranging). Relying on pulses from a laser, it calculates the distances between sensors in mapped terrain based on the time that a beam of light takes to hit a surface and reflect back. It has been lauded for its ability to resist poor weather conditions and generate high-resolution information. But it is an expensive and power-intensive technology. Tesla’s prefers to use smart camera systems in its self-driving technology stack.
Musk is one of the loudest voices against LiDAR but it has been favoured by competitors including Waymo, Uber, BMW and General Motors. That’s good news for the Chinese firms that account for a growing share of LiDAR production.
Hesai Technology was expected to be the first to float its shares in the sector, until it pulled the plug on its STAR Market IPO in March. Staying private for longer, Hesai completed its latest round of financing on June 8, raising $300 million from a consortium led by Xiaomi, Meituan, Hillhouse Capital and Citic’s private equity arm. Its long term backers include search giant Baidu and Robert Bosch, the world’s largest auto parts supplier.
Founded in Silicon Valley in 2013, Hesai moved its headquarters to Shanghai the following year as co-founder Sun Kai, a Stanford graduate, joined the ‘Thousand Talents Plan’, a strategy to entice Western-educated scientists home to China with promises of research funding and other support (see WiC27). More than half of the 65 manufacturers with permits to test autonomous vehicles in California had adopted Hesai’s technology as of 2019, 36Kr, a tech news portal, has reported. Baidu, Didi, Pony.ai and Kodiak (a California-based autonomous truck developer) are among Hesai’s clients.
So why did Hesai cancel its market debut in Shanghai? Although revenues have grown (multiplying nearly 18 times to Rmb348 million, or $54 million, between 2017 and 2019), spending on research and development has surged as well, at one point constituting 151% of its annual income. That has left the company in the red, with the unpredictability in its bottom line blamed for the suspension of its IPO at a time of heightened scrutiny by the securities regulator in China (see WiC539).
Another potential concern for investors is its earlier emphasis on ‘mechanical’ LiDAR as a technological approach, as opposed to ‘solid-state’ designs. The former collects data by rotating a laser or mirror to steer a light beam and thus illuminating the field of view point-by-point. Its advantage is that it can see further in a full 360-degree arc. But its complexity and bulkier size makes it a less desirable option for mass-market vehicles, critics claim. Solid-state LiDAR, which does not require motorised apparatus for scanning, is generally seen as more straightforward and less expensive to make. It is better suited to applications at scale, with new iterations that work like cameras, providing instantaneous scene illumination.
Nine of the 10 products sold by Hesai belong to the mechanical category, begging the question of how Hesai is going to respond to the rise of the solid-state format. Shenzhen-based RoboSense unveiled China’s first automotive-grade solid-state LiDAR production line in March and has started deliveries on contracts. Innovusion – headquartered in California and Suzhou, and a solid-state LiDAR supplier to NIO – received $64 million in fresh funding in May to increase its production capacity too. Velodyne, which sued Hesai for patent infringement before agreeing a licencing deal, has launched another solid-state LiDAR that will be sold at competitive prices once it gets into high-volume production.
Hesai says the funds raised from its latest financing round will go towards production of hybrid solid-state LiDAR for auto industry OEMs. That may indicate that co-founder Sun recognises that there is going to be a ‘winner takes all’ format for this technology, i.e. whichever player becomes the industry standard in mass-market sales.
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