Figure 1: ET-25 Road Facing LiDAR Mounted In-Cabin Behind Windshield
Yole Group just released their 2023 “Lidar for Automotive Report.” They estimate 2022 LiDAR automotive revenues at $332M/year, roughly split equally between L4 robotaxi and L2/L3 ADAS (Advanced Driver Assistance Systems) applications (L4 is complete autonomy with no human driver in designated geographical zones, traffic and weather conditions. L3 is similar, but the human driver is expected to take control of the car within 10 seconds). The automotive LiDAR market is expected to grow ~15X in the next five years to $4.7B/year in 2028, with L2/L3 ADAS market valued at ~$3.9B/year and the L4 robotaxi market at ~$600M.
Hesai (NASDAQ: HSAI) is the dominant LiDAR provider for the L4 robotaxi market today, serving major global players like Zoox, Aurora, Nuro, Baidu, Cruise, Aurora, Apollo, DiDi, Pony.ai, and AutoX. Yole estimates Hesai had two-thirds of this market in 2022 (~$110M). The L2/L3 market is different and accelerating, with many dominant players like Innovusion, Valeo, Innoviz and Cepton. Innovusion, in particular, led this market in 2022, supplying Nio Motors, a China-based EV (Electric Vehicle) provider, with 56,000 LiDAR units and 27% of the market in 2022 ($45M, implying an average selling price of ~$800/unit). Valeo is close behind Innovusion (major customers include Daimler, Hyundai, Honda and Stellantis). Hesai is estimated to be the third largest, with 23% of the market (~$37M, primarily supplied to Chinese automotive OEMs). Innvoiz and Cepton have secured significant design wins with Volkswagen and General Motors, respectively, with the former positioning itself as a Tier 1 supplier to Volkswagen. Their L2/L3 LiDAR revenues are expected to ramp as their OEM customer offerings and sales take off. Based on the Yole report, Hesai had a total of ~$150M in LiDAR revenues in 2022, which is impressive, and according to a recent press release, the highest amongst all automotive LiDAR providers.
Hesai filed for an IPO (Initial Public Offering) on the NASDAQ exchange in Q12023. Their Q12023 SEC filing indicates impressive growth in ADAS LiDAR shipments (~28K units vs. ~200 in Q12022), with L4 Robotaxi shipments of ~7K. Q12023 revenues are at ~$63M. A portion of this is likely NRE (Non-Recurring Engineering ) payments from automotive OEM customers, with average ASPs across the various product lines of < $1K/unit. This is significant revenue growth relative to 2022. The product line consists of:
1) Pandar Series: rotating rooftop units at different resolutions for L4 robotaxis
2) AT-128: long range, high resolution for L4 robotaxis and ADAS
3) FT-120: short range, wide FOV (Field of View) solid state
4) QT Series: Close object detection, wide FOV
5) ET-25: Long-range, in-cabin, road-facing (shown in Figure 1)
Hesai advertises 1) – 4) as automotive certified and integrated into cars today.
The ET-25 is a newer product (Figure 1) undergoing automotive grade and durability qualification. It uses 905 nm VCSEL (Vertical Cavity Surface Emitting Laser) arrays and has a compact form factor – 2.5 cm (H) x 14 cm (W) x 11 cm (D). The detection is probably done with a SPAD (Single Photon Avalanche Diode) array (the low peak powers of VCSELs typically require sensitive detectors like SPADs). The 2.5 cm height is impressive and arguably the most compact, high-performance LiDAR currently available (most other high-performance automotive-grade LiDARs have a height of ~4 cm). It promises a range of 225 m (at 10% reflectivity and behind-windshield mounting) and > 3M points per second. A mechanical scanner addresses the horizontal FOV, typically a problem for in-cabin mounting due to acoustic noise (a killer for passenger comfort). The ET-25 promises acoustic noise levels of < 25 dB, the same as normal human breathing sounds at a 1 m distance). Another critical aspect of the ET-25 is the power consumption – at a meager 12W, this is an essential enabler for in-cabin, behind-windshield mounting where power delivery and thermal management are challenging.
As the LiDAR market for ADAS and L3 autonomy in consumer cars ramps up, Hesai is well-positioned to increase its market penetration. The miniaturized form factor, low power consumption and behind-windscreen mounting are attractive for style-conscious automotive OEMs who want the perception superiority and safety LiDAR offers – but want it to be invisible.
According to CEO David Li, automotive OEMs want suppliers for critical components to have the appropriate quality, scalability, performance and cost levels. Additionally, they need financially robust suppliers that will exist in the longer time-frames that automotive demands. Dr. Li points to high revenues and shipped volumes that prove high-quality levels. This, along with significant manufacturing investments and strong financials (gross margins in the 35% range, with ~ $500M cash), positions the company to continue as a leading LiDAR supplier to automotive OEMs. He envisions Hesai as a Tier 1 automotive supplier, bypassing traditional Tier 1 automotive suppliers (similar to Innoviz). Unlike the L4 robotaxi market, where Hesai dominates, he indicates that the traction on ADAS and L3 with automotive OEMs has been slower, primarily because Hesai was conservative and wanted to be ready on all fronts to penetrate this market – product, cost, quality, manufacturing scalability. Hesai is bidding on multiple RFI/RFQs for U.S., Europe and Asia-based OEMs (in addition to many Chinese automotive OEMs). CEO David Li: “We are building a core part of an intelligent driving system. The ability to sense the environment is a critical part of this intelligence. At Hesai, we are driven to create and supply high-quality sensors at a price point that makes mass adoption possible because the result is increased safety for everyone on the road.”
Despite their leading position, the challenge for Hesai is to penetrate the lucrative ADAS and L3 market for passenger cars globally. Penetrating automotive OEMs in the United States, Europe, South Korea and Japan is challenging primarily because of political headwinds and trade control regulations between the United States and China. China recently instituted trade controls on autonomous car technology and critical components like LiDAR. While this does not restrict the export of products, it does require licensing, restricts sharing of proprietary information and makes it challenging to establish manufacturing centers close to automotive OEM factories. The ability of non-Chinese OEMs to audit manufacturing lines becomes difficult (needed if Hesai is to achieve Tier 1 supplier status). Export of Chinese autonomous vehicles is increasingly becoming a concern in the United States as well, with the Transportation Secretary Pete Buttigieg saying, “Whether we are talking about hardware or software, in the same way, there are concerns around telecom or TikTok, there are concerns around transportation technologies.” The concern is data sharing of people, their behavior and sensitive U.S. infrastructure with the Chinese government. Hopefully, diplomatic solutions to these headwinds can progress and enable suppliers like Hesai to maintain their current leadership position in automotive LiDAR.
