While it is a challenge for autonomous driving companies such as Waymo, Baidu (NASDAQ:BIDU) and WeRide to figure out a sustainable business model, a young Chinese company called Neolix, which was founded in 2018 in Beijing, believes it is already on the right track and set to break even in the near future.
By the end of 2019, Neolix produced and delivered 225 autonomous driving vehicles to large tech companies and local governments. Instead of passengers, the company’s unmanned vehicles transport items. Over the years, Neolix has rolled out vehicles with separate cargo space inside to deliver goods including parcels ordered from e-commerce platforms or to retail fast-moving food or drinks. The company has also launched vehicles with a singular cargo space inside, to transport items weighing up to 350 kilos.
What’s more, Neolix has also unveiled vehicles to function as self-driving patrols, able to detect abnormal situations when inspecting an area.
The company has set an annual sales target of 1,000 vehicles for 2020, which will make them break even, explained Jie Jinghua, co-founder and chief operating officer of the firm, in a recent interview with KrASIA, adding that Neolix has already received 300 orders in the first trimester.
Selling self-driving vehicles to companies and governments
This young startup has its own manufacturing plant in Changzhou, a city in eastern China’s Jiangsu province. The firm says that the 136,000 square meter facility is one of the world’s first production lines for L4 autonomous driving solutions, which means vehicles that can be fully autonomous under specific conditions, such as in designated self-driving zones.
“Our buyers are early adopters of autonomous driving technologies, including Alibaba’s logistics arm Cainiao Networks, JD.com, Meituan-Dianping, and local governments, which normally use these vehicles as moving vending machines in tourist destinations,” said Jie.
Situated in scenic spots such as parks, Neolix’s mobile vending machines also tap the new retail sector by selling beverages. Consumers can stop a Neolix vehicle, which runs at about 10 kilometers an hour, by waiving a hand, scanning a QR code, or pressing a button.
Although many Chinese tech giants are also developing their own autonomous driving vehicles to deliver parcels or food, Neolix believes they can still sell them vehicles, Jie explained, adding that some of these companies are not likely to invest time and resources to build hardware supply chains similar to Neolix’s existing infrastructure. Generally, these firms buy Neolix vehicles and refit them by adding more specific autonomous driving solutions, to meet their specific demands, said Jie.
In February, one of the firm’s clients, JD.com (NASDAQ: JD), took the spotlight when it delivered medical goods to a hospital in Wuhan—once the epicenter of the COVID-19 pandemic—using L4 autonomous driving robots units. The growing adoption of unmanned autonomous driving vehicles by larger companies seems like a golden opportunity for Neolix.
“These large companies may buy even more from us as the benefits of these vehicles are more obvious amid the COVID-19 pandemic,” Jia said.
Although the future outlook might look positive, Neolix fell short of its sales target for 2019. When the Changzhou plant was first put into operation in May 2019, the company expected to sell 1,000 vehicles by the year’s end, but sold just 225.
In October, the firm signed a framework agreement with Middle Eastern e-commerce company Noon, which ordered 5,000 vehicles that will be used in Dubai and Abu Dhabi, in the United Arab Emirates, to deliver parcels ordered by Noon’s customers and as moving retail cars. However, the progress of the deal is progressing slower than expected, with only five vehicles handed over to Noon at this point, according to Jie.
“Our clients’ demands can vary so that we need to customize our vehicles from time to time, and the pace may be slowed down accordingly,” said Jie, adding that the relatively high prices for Neolix vehicles still deter some buyers, but economies of scale should improve affordability in the long term.
“As more vehicles are produced, the costs of components will be lowered and final prices will be reduced accordingly,” Jie said.
COVID-19 comes as an unexpected boost
Excluding vehicles that Neolix sold to clients, the company deployed 18 vehicles in Wuhan to transport medical goods and vital necessities, as well as to disinfect outdoor areas, including some at the Leishenshan makeshift hospital, Jie said.
Neolix managed to refit a vehicle with all-around disinfecting capabilities within 72 hours, after the company learned the Wuhan government would like to deploy some vehicles in the Leishenshan hospital, where COVID-19 patients were being treated early this year, explained a Neolix spokeswoman to KrASIA.
“There was no time for these vehicles to learn about the roads there,” said the spokeswoman, adding that high-definition maps are usually required for the optimal operation of Level 4 autonomous vehicles. To solve this problem, Neolix’s vehicles worked under a “remote control” model, where a firm’s employee remotely managed the vehicle movements.
As the COVID-19 also increased demand for e-commerce delivery people, Neolix’s unmanned vehicles have also tacked the food-delivery sector, transporting group meals to companies in Beijing from February this year, from restaurant operators such as Meizhou Dongpo and Xiaoheng Shuijiao.
“These dining companies did not have enough hands to fulfill orders since many of their workers could not come back to work on time after the Lunar New Year holiday due to strict travel restrictions,” said Jie.
While most of Neolix’s pandemic-related work was not-for-profit, the utilization of unmanned self-driving vehicles showcased the possibilities of this technology for the public use, Jie remarked.
Standing on its own feet, but still seeking VC investment
While Neolix stands out as one of the few autonomous driving companies vowing to be financially self-sufficient in the near future, Jie admitted that his firm still needs outside venture capital funds.
Right after Neolix closed a Series A+ financing round in March, collecting around RMB 200 million (USD 28.8 million), the startup has already started plans for a new fundraising round, according to Jie.
Funds in the upcoming round will be used to attract talent for R&D, to build a bigger manufacturing plant, and to increase the automation-level of its current plant.
As Neolix built its early versions of vehicles on Baidu’s Apollo open-source autonomous driving software, the company is now been gradually replacing Baidu’s systems, such as the controlling platforms, with in-house technologies, said Jie. Currently, the firm is mostly self-reliant in both software and hardware, he added.
“We would like to innovate the autonomous vehicle sector at a much faster pace,” he ensured, referring to the company’s strategy to rely on its own revenues while collecting outside capital to seek expansion.
This article is part of KrASIA’s “Inside China’s Startups” series, where the writers of KrASIA speak with founders of tech companies in the country