Ehang, a Chinese company that builds drones large enough to carry human passengers, filed paperwork with the US Securities and Exchange Commission to go public on Nasdaq with a $100 million offering of depository shares. The company, which has flown thousands of test flights over the years, is preparing to launch what it hopes is the world’s first autonomous air taxi service in the coming months.
The company’s primary vehicle is the two-seater, 16-rotor Ehang 216, which is based on the previous generation Ehang 184, but with eight arms instead of four. This allows the vehicle to seat two passengers instead of just one. The 216 was first announced in February 2018, after which time the company demonstrated both piloted and autonomous test flights. A piloted flight test with Dutch Prince Pieter-Christiaan took place at the Amsterdam ArenA in April 2018.
Ehang recently received approval from local and national regulators to launch a commercial air mobility service in Guangzhou, China. As part of the pilot program, Ehang is working with the Guangzhou government to set up an air traffic control center to oversee its “autonomous aerial vehicles.” On the passenger front, Ehang has said it plans to use the pilot program to test more flight routes and “vertiports” from which its electric aircraft would take off and land. The company also plans to cargo deliveries of low-weight medical supplies, including blood and organs for emergency use.
Ehang is one of dozens of companies that are convinced “flying cars” will become a viable mode of urban transportation in the future. These include drone makers, aerospace firms, ride-hailing companies, and even a few automakers. There are broad technical and regulatory challenges that could prevent this future from being realized — which Ehang acknowledges in its filing with the SEC — but the sheer number of prototypes that have taken flight around the globe suggests some version of an aerial taxi service may eventually come to pass.
Founded in 2014, Ehang last announced funding in 2015 when it raised $42 million in a Series B round, according to TechCrunch. Ehang got its start in the commercial drone business, though, recently, it has stopped selling its drones in the US and Germany due to “intense competition” in both of those countries, according to the filing. As a result, Ehang’s subsidiaries in those countries declared bankruptcy.
Ehang lists other risk factors, including the ongoing trade war and the Trump administration’s use of national security powers to ban certain Chinese companies from selling products in the US. Ehang warns that its autonomous aerial vehicles could also end up on a “blacklist” in the future.
Ehang is not a profitable company: in the first half of 2019, it had a net loss of $5.5 million and net operating cash outflows of $5.8 million. It’s also particularly dependent on one customer for the bulk of its revenue, around 45 percent, it says. As of June 2019, the company’s accounts receivable from two customers accounted for 66 percent of Ehang’s total balance. The company would be “adversely affected” if these customers canceled orders or stopped purchasing Ehang’s products, it says.
Ehang acknowledges that one crash or fatality could upend its entire business. This risk factor, in particular, should be read and absorbed by anyone who thinks flying taxis will become a common sight in cities in the future. It’s a fairly substantive reality check (emphasis ours):
An accident involving an AAV provided by us or another manufacturer could cause regulatory agencies around the world to tighten restrictions on the use of AAVs, particularly over populated areas, and could cause the public to lose confidence in our products and AAVs generally. There are risks associated with autopilot, flight control, communications and other advanced technologies, and, from time to time, there have been accidents associated with these technologies. The safety of certain cutting-edge technologies depends in part on user interaction, and users may not be accustomed to using such technologies. We could face unfavorable and tightened regulatory control and intervention on the use of autopilot and other advanced technologies and be subject to liability and government scrutiny to the extent accidents associated with our autonomous navigation systems occur. Should a high-profile accident occur resulting in substantial casualty or damages, either involving our AAVs or products offered by other companies, public confidence in and regulatory attitudes toward AAVs could deteriorate. Any of the foregoing could materially and adversely affect our results of operations, financial condition and growth prospects.
In an interview earlier this year with The Verge, Ehang chief marketing officer Derrick Xiong said the greatest challenge his company faces is “social acceptance” of autonomous flying taxis. “We need to have more flying hours, we need to have more flight data,” Xiong said. “We need to increase our testing passenger from 200 people to 2,000 people to 20,000 people.”
Xiong recalled feeling “really nervous” during his first test flight in the Ehang 184 three years ago, but once he landed, he immediately wanted to go again. “I was like, you know, I want to do one more!” he said.