Legend, Morningside saddle up for $112m driverless tech investment

Promising China-US startup Pony.ai lures the "godfather" of Chinese tech and a venture capital pioneer, as well as new backing from its seed round backers.

Pony.ai, an autonomous driving tech start-up that is barely a year old, announced a new $112 million investment round on Tuesday.

Co-leading the round are Legend Capital, one of three investment funds part-owned by Chinese tycoon Liu Chuanzhi’s Legend Holdings, and Morningside Venture Capital, one of China’s pioneering early-stage venture investors.

The interest from investors like Liu, best known as the founder of Lenovo and dubbed the "godfather" of China's burgeoning information technology industry, underlines the heat around China's autonomous driving hopefuls.

Seed round investors Sequoia Capital China and IDG Capital also participated in the new funding round, along with Hongtai Capital, Legend Star, Puhua Capital, Polaris Capital, DCM Ventures, Comcast Ventures, Silicon Valley Future Capital and others. Miracle Capital was the exclusive financial advisor in this round.

Led by CEO James Pang, former chief architect at Baidu’s US autonomous driving division, and CTO Lou Tiancheng, a megastar programmer nicknamed “Bishop Lou” who worked on self-driving cars at both Google and Baidu, pony.ai is shooting to create a level-four fully-autonomous vehicle platform. In layman's terms, that means a vehicles can perform all safety-critical driving functions and monitor road conditions for an entire trip – excluding under extreme weather such as rainstorms or snowstorms.

Investors are betting on vehicle autonomy as the future of mobility that will reshape transportation system and cities. Goldman Sachs estimates that autonomous fleets will create the biggest revenue pool in new mobility, generating $220 billion in revenues by 2030 – by which time fleet managers could earn a profit of $14,000 per car.

But the technological advancement required for driverless vehicles means investors need to chase the best talents they can find to place their bets, especially at an early stage where commercialisation options are open to debate.

“The self-driving vehicle is an inevitable trend that will disrupt the transportation system. The future market will be completely different from the traditional one we know today—business models and customer preferences will be redefined,” said Jin Wenji, managing director of Legend Capital, in the announcement.  

Jin added: “This market’s enormous potential makes its development opportunities and directions similarly vast. Pony.ai is one of the very few companies we’ve seen that possesses the critical success factors: a team with a proven track record and extremely well-rounded technical expertise from both research and industry backgrounds…I believe Pony.ai holds the most promise in delivering level-four technology to the mass market.”

Jin’s enthusiasm for pony.ai is consistent with what investors at Sequoia Capital and IDG Capital told FinanceAsia in December, when the company was included among the 10 hot start-ups FinanceAsia indentified that have the potential to disrupt their respective industries and possibly become the next leaders in their sectors.

The start-up plans to use money raised to continue technological development and invest in building its team. It will begin operating an autonomous driving fleet in Guangzhou in the first quarter, in addition to building key partnerships in China and the US.

With bases in both countries, the company now operates a self-driving fleet for road testing on a daily basis next to Tesla’s factory in the Bay Area of the US. It established its Chinese headquarters in Guangzhou, capital of Guangdong province, in October, and conducted road testing in the city’s Nansha Economic and Technological Development Zone in December.

As well as strong investor interest, Pony.ai’s successful fundraising reflects key policy support from the Chinese government.

2017 has seen a raft of announcements regarding driverless cars, with tech giants like Apple finally admitting it’s joining a vehicle autonomy race and more governments, such as the UK, giving the green light to perform driving trials on public roads.

China, which is the world’s biggest electric car market, has every motivation to get ahead of the game. On January 5, Chinese state planner the National Development and Reform Commission (NDRC) released a draft plan, saying the country would equip 90% of its big cities and highways with a wireless network to support smart cars by 2020.

It also launched a working committee, led by China's cabinet the State Council, in a bid to push through the smart vehicle strategies. Industry observers say this is a rare case in which China’s top leadership directly involves itself in an industry’s development – typically, the NDRC mandates such efforts to the likes of Ministry of Industry and Information Technology.

In terms of a legal framework, Beijing in December issued two sets of rules on automated driving, the nation's first, but they apply only to road testing of automated vehicles in Beijing. Nevertheless, lawyers say Beijing’s rules shed some light on the general direction of future national legislation on automated driving in China. It will be followed by further regulations at provincial and local levels and a national regime is likely to be implemented sooner rather than later, according to DLA Piper.

Meanwhile Shenzhen allowed a state-owned bus company to run four self-driving buses through an arranged route in its downtown in December.

Analysts believe more investment is still on its way to the autonomous vehicle market in China, following large-scale capital deployment by major automakers and tech giants in the country. Besides Baidu, which has announced an “All in AI” strategy and launched a fleet of Apollo autonomous vehicles, tech powerhouses such as Tencent, Alibaba and Huawei have laid out their respective plans for autonomous driving, but have yet to back up their visions with big-ticket money.

That suggests it will be a while before the brakes go on for investment in the blossoming sector.

¬ Haymarket Media Limited. All rights reserved.
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