China’s Pony.ai shares drop 12%, WeRide down 8% in Hong Kong debut

Shares of China’s Pony.ai fell more than 12% on Thursday, while rival WeRide fell nearly 8% as autonomous driving companies began trading in Hong Kong.

pony.ai And WeRideThe company, which is currently listed in the US, raised HK$6.71 billion (about $860 million) and HK$2.39 billion in its initial public offerings, respectively.

Companies are trying to keep up with larger competitors. baiduApollo Go in China and AlphabetWaymo is in the USA at a time when interest in autonomous technologies is increasing.

Pony.ai and WeRide, both headquartered in Guangzhou, China, said the funds will be spent on scaling efforts and the development of Level 4 autonomous driving, a measure of driving automation that does not require human supervision or intervention in certain environments.

Proceeds from the latest fundraising will also be used to expand the company’s AI capabilities and data center capacity, WeRide CEO Tony Xu Han told CNBC.

The listings in Hong Kong come as companies seek to expand outside of China, where they have already begun operating fully autonomous robotaxis in some cities.

New regions include the Middle East, Europe and Asian countries such as Singapore. They have not yet received full approvals to operate their robotaxis in most of these regions.

In the USA, both companies aim to partner with the California-based company Uber Allowing them to deploy robot axes on the company’s ride-hailing platform once they receive regulatory approval.

But US plans face headwinds as government earlier this year effectively finalized a rule Banning Chinese technology in connected vehicles, including driverless systems.

“Given the uncertainty in markets around the world and the fact that there will be intense scrutiny on a Pony or WeRide attempting to enter the US market, dual listing is of great importance in mitigating risk,” said Tu Le, founder and managing director of Sino Auto Insights.

He added that the listings are also an acknowledgment that Pony.ai and WeRide will require a lot of capital to be successful and that validation of a market outside the US is necessary.

Pony.ai shares closed down nearly 2% in U.S. trading Wednesday, while WeRide was down 5.3%.

The rival listings of Pony.ai and WeRide highlight a recent trend of Chinese companies seeking dual listings in Hong Kong, in what has been a recovery year for the city’s IPO market.

The companies received approval for dual listing from Hong Kong regulators in mid-October.

“For the HK bourse, the clustering of listings helps strengthen investors’ perception of HK as a technology hub for Asia-focused technology companies,” New Street Research equity research analyst Rolf Bulk told CNBC.

In May, Chinese battery maker and technology company CATL completed a second listing in Hong Kong. It has raised $5.2 billion in the world’s largest IPO so far this year.

Hong Kong listings, according to New Street Research’s Bulk pony.ai and WeRide will help companies access Asia-based capital and expand their presence in China and the region.

“However, it will do nothing to advance the advancement of technology stacks and regulatory approvals in Western markets. On the contrary, gaining approval in Western markets may become more challenging with HK’s secondary listing,” he added.

Listings could also help firms keep pace with rivals such as China’s Baidu Apollo Go and Alphabet’s Waymo in the US, which now have larger fleets.

“Pony and WeRide rank top among global leaders,” said Sino Auto Insights’ Le. “WeRide has diversified its service portfolio a bit more, but both see Uber and the Middle East as two viable partners for their ability to launch more pilots outside of China.”

“Investors should pay particular attention to how their technologies evolve as artificial intelligence and other new tools become more prevalent,” Le said.

— CNBC’s Elaine Yu contributed to this report.