New listing preview | Tu Da Tong: Accumulated losses of approximately $540 million in less than three years. What is the end goal of laser radar manufacturers competing for "quantity-based pricing"?

Jeffrey Moore's work "Crossing the Chasm" has an important point: the biggest obstacle high-tech products encounter in the marketing process is a huge "chasm" between the early market and the mainstream market. If companies can successfully "cross the chasm" with appropriate strategies, the company and even the entire industry can achieve a leap in value. In recent years, there has been continuous debate in the industry about the choice of LiDAR, but the market "noise" has not hindered the industry development. Currently, LiDAR has "crossed the chasm," with a penetration rate of over 28% for new energy vehicles in the Chinese market priced above 150,000 RMB. Industry insiders and research institutions optimistically predict that the LiDAR market will experience a surge in demand by 2025. Against this background, major players in the LiDAR industry have entered a "sprinting" mode, full of motivation to accelerate their layout and help the industry reach new heights. After Hesai Technology and RoboSense, another LiDAR company is trying to enter the capital market. According to the Hong Kong Stock Exchange disclosure on February 12th, TuDaTong has applied for a shell listing on the Hong Kong Stock Exchange. At the end of December last year, TECHSTARACQ-Z Acquisition Corporation announced a business merger agreement with Seyond Holdings Ltd. and its wholly-owned subsidiary Merger Sub, reaching a Special Purpose Acquisition Company (SPAC) merger agreement, which will be listed on the Hong Kong Stock Exchange through a merger with a special purpose company. NIO's contribution to revenue exceeds 90% Cannot hide losses exceeding one billion US dollars The prospectus shows that TuDaTong is a global leader in designing, developing, and producing car-grade LiDAR solutions. According to insights consulting data, by 2023, the company delivered a total of over 147,000 car-grade LiDAR devices, ranking first globally in sales revenue for ADAS LiDAR solutions by 2023. TuDaTong provides LiDAR solutions for advanced driver assistance systems (ADAS), autonomous driving systems (ADS), and other automotive and non-automotive applications. As of the last practicable date, NIO has chosen the company's LiDAR solutions for nine of its models. Specifically, TuDaTong released the first long-distance image-level LiDAR solution series Cheetah in 2018, followed by the Falcon series in 2020. In terms of mid-range detection, the company strategically chose the 905nm system for urban mid-range low-speed front and side-view applications in the Sparrow series LiDAR solutions. Several original equipment manufacturers (OEMs) and ADAS or ADS companies, such as NIO, Deepway, Monarch Tech, and Shanxi Heavy Auto, have chosen to integrate TuDaTong's LiDAR solutions into several of their models or ADAS. The company has started mass production and delivery of the relevant LiDAR solutions. During the performance period, the company delivered over 391,000 sets of car-grade LiDAR solutions to OEMs. Additionally, as of the last practicable date, the company has secured orders from six more OEMs and ADAS or ADS companies (including HongJing Intelligent Driving, Zitu Technologies, PonyAI, and three other companies focusing respectively on commercial vehicles, passenger electric vehicles, and ride-hailing services) for integration into their freight and logistics applications and commercial vehicle applications. The company has also signed cooperation agreements with multiple ADAS and ADS companies (such as EasyControl Intelligent Driving). Under these agreements, the company will use its technology, design capabilities, and industry experience to support and assist in integrating its LiDAR solutions into their pipeline models or integrated ADAS for various applications such as commercial vehicles, freight, and logistics. In terms of performance, TuDaTong is in a loss situation. For the nine months ending in 2022, 2023, and 2024 (referred to as the reporting period), the company's revenues were 66.302 million yuan (USD), 121 million yuan, and 119 million yuan, respectively. The net profit for the same period was -188 million yuan, -219 million yuan, and -130 million yuan, resulting in a cumulative loss of 5.37 billion yuan over three years. TuDaTong's revenue comes from the sales of the Falcon series LiDAR solutions, the Sparrow series LiDAR solutions, the Jaguar series LiDAR solutions, and others (mainly including software sales, electronic materials sales, and engineering services). It is worth noting that in the first nine months of 2024, revenue from the Falcon series amounted to 116 million US dollars, accounting for 97.7%; revenue from the Sparrow series was 2.25 million US dollars, accounting for 1.9%; the Jaguar series did not contribute to revenue in 2024. Despite the Falcon series contributing more than 90% of revenue, this product division has always been in a loss situation. The gross profit margin for the Falcon series during the period was -64.6%, -36.2%, and -15.7%, resulting in gross losses of 42.036 million yuan, 42.964 million yuan, and 18.137 million yuan, respectively. Importantly, the company recorded gross losses of 41.3 million yuan, 42.4 million yuan, and 18 million yuan during the period, showing a narrowing trend, and TuDaTong expects to achieve positive gross profit in the fourth quarter of 2024. Taking advantage of NIO's rise in popularity, competitors band together to lower prices Furthermore, TuDaTong heavily relies on major clients. NIO has been TuDaTong's largest client during the previous financial periods. During the period, revenue from NIO was 58.8 million yuan, 110 million yuan, and 110 million yuan, accounting for 88.7%, 90.6%, and 92.4% of the company's total revenue in the same period, respectively. It is not optimistic that TuDaTong's dependence on NIO is becoming increasingly serious, negatively impacting its independent operation. More specifically, thanks to NIO's popularity, TuDaTong's market share rapidly increased to 15% in 2022 and reached 19% in 2023. However, TuDaTong's market share fluctuated, with a market share of 27.5% in the first five months of 2023, dropping to 14.6% from January to October this year, nearly half compared to the peak. In thisDuring this period, competitors such as ROBOSENSE and Hesai Technology quickly caught up.In 2023, ROBOSENSE shipped 259,000 units of LiDAR, a year-on-year increase of more than 3 times, with sales of car LiDAR reaching approximately 243,000 units, a year-on-year increase of more than 5 times, and market share doubling to reach 21%. Hesai Technology shipped 222,000 units of LiDAR, a year-on-year increase of 176.1%. In the first three quarters of 2024, ROBOSENSE's total LiDAR sales reached 382,000 units, a year-on-year increase of 260%, while Hesai Technology delivered a total of 279,000 units of LiDAR, a year-on-year increase of 108.2%. Meanwhile, during the same period, Tuteng's LiDAR shipments were only 150,000 units. It is believed that Tuteng was the first supplier to achieve mass production of automotive-grade high-performance LiDAR solutions, and the only company globally able to mass-produce automotive-grade 1550nm LiDAR, so Tuteng's LiDAR products were initially positioned in the high-end market. It is worth mentioning that due to the high cost and price, Tuteng's 1550nm LiDAR can only be used in vehicles priced at over 300,000 yuan. However, this year, all car manufacturers have made advanced driver assistance systems one of their core product competitiveness factors, leading to the upgraded models equipped with LiDAR achieving lower prices, down to the 150,000 yuan level. Currently, the mainstream LiDAR wavelengths are 905nm and 1550nm, with Hesai Technology and ROBOSENSE focusing on 905nm products. Tuteng's 1550nm wavelength LiDAR has a detection range of up to 500 meters, suitable for L3 and L4 level autonomous driving, but the downside is its expensive price. Sinolink's report points out that 905nm LiDAR is the trend because gallium arsenide material, which emits 905nm laser, is cheaper, while silicon, which receives 905nm laser, is more readily available. However, faced with Hesai's focus on high performance and ROBOSENSE's "cost-effectiveness" strategy, Tuteng's product prices have seemed to decrease in an attempt to capture the market share and survive the encirclement. According to the prospectus, Falcon's sales during the period were 74,029 units, 147,743 units, and 164,716 units, showing significant growth. Meanwhile, the average selling price of the product decreased from 879 yuan to 703 yuan during the same period. Nevertheless, the future of the LiDAR solutions market is promising. According to data from ZHOUCHI Consulting, the global LiDAR solutions market is expected to reach 4 billion USD in 2024 and further increase to 65.2 billion USD by 2030, with a compound annual growth rate of 59.5%; the global market size for LiDAR solutions for ADAS (Advanced Driver Assistance Systems) applications is expected to reach 1.9 billion USD in 2024 and further increase to 23.2 billion USD by 2030, with a compound annual growth rate of 52.4%; the global market size for LiDAR solutions for autonomous driving applications is expected to reach 900 million USD in 2024 and further increase to 28.6 billion USD by 2030, with a compound annual growth rate of 78.8%. Among the 1550nm LiDAR models, Tuteng's Falcon series has successfully achieved mass production with significantly lower costs than similar models, while the company's Lingque series LiDAR solutions are expected to deliver performance indicators similar to other 905nm models. According to the prospectus, Tuteng plans to raise 474 million Hong Kong dollars through this IPO, with 60% of the funds allocated to researching and developing new LiDAR architectures and upgrades, 20% to expanding production facilities and improving production lines, and the remaining funds for global expansion. With the promising market outlook, Tuteng, running at full speed, is expected to enjoy the industry's growth dividends. In summary, from the prospectus, it is evident that Tuteng is ready to make money. However, at present, it seems that Tuteng's price dive shows no signs of stopping. Looking at the competition among LiDAR manufacturers, one can't help but wonder what the end game of the company's "price for volume" strategy will be.