China’s EHang sees impacts from COVID-19, but also opportunities

The Chinese autonomous aerial vehicle (AAV) developer EHang has experienced some labor and supply chain disruptions as a result of COVID-19, but is also finding new use cases for its products in the context of the global pandemic.

Speaking during EHang’s fourth quarter 2019 earnings call on March 24, EHang chief strategy officer Huaxiang (Edward) Xu acknowledged that the company is experiencing “some short-term turbulence from the virus outbreak” that is impacting its ability to deliver AAVs. EHang delivered 61 “passenger-grade” AAVs to customers in 2019, although these eVTOL aircraft are still uncertified and can only be used in approved trials.

“The absence and the later returns of some of our frontline workers and disruptions in our supply chain have caused the potential delays in the delivery schedule,” said Xu, noting that EHang is seeing specific delays in procuring speed controllers and is working to assess the impact of COVID-19 on the rest of its supply chain.

“Along with our suppliers and customers, we have gradually resumed work and operations since the middle of February in China,” Xu continued. “As we speak, the virus outbreak is under control in China. However, it has been spreading globally with unprecedented speed. Our overseas market development is expected to be delayed. We hope the situation would be gradually brought under control later on, as global governments are stepping up their efforts of virus control.”

While EHang’s customers in the tourism industry have been negatively impacted by COVID-19, the company is also seeing “new business opportunities from the crisis,” Xu told investors.

“For example, we have successfully tested our EHang 216 AAV flights by transporting medical supplies and staff from the ground base to the rooftop of a 25-floor building of Hezhou People’s Hospital in Guangxi, China. This suggests a good new application for our products in the field of emergency medical services.”

EHang’s earnings call was its first since being publicly listed on the Nasdaq in December 2019. The company reported its first ever quarterly positive operating cash flow and operating profit in Q4 2019, with revenues of RMB54.7 million (US$7.9 million) and profit of RMB2.1 million (US$300,000). Urban air mobility solutions accounted for around 68% of fourth-quarter revenues (RMB37.1 million or US$5.3 million).

For the full year, EHang reported total revenues of RMB121.8 million (US$17.5 million), an increase of around 83% from 2018, with urban air mobility solutions accounting for RMB85.9 million (US$12.3 million) in revenue. Operating loss for the year was RMB46.3 million (US$6.7 million), a decrease of nearly 38% from 2018.

During the earnings call, EHang chief financial officer Richard Liu told investors that the approximately US$41 million raised through the company’s initial public offering on the Nasdaq gives it a “solid cash position” and “extra strength in light of the unexpected virus outbreak.”

While EHang is anticipating its Q1 and potentially Q2 results to reflect the effects of the COVID-19 pandemic, “we expect such impacts to be short-term,” he said. “We are confident about our long-term growth prospects due to more new use case opportunities, new products, deepening expansion in China, growing global reach, and strategic partnerships.”