EHang has released additional details in response to allegations made in a report published by Wolfpack Research last week, and says it is in the process of taking legal action against the activist short-seller.

The Guangzhou-based company describes itself as ‘the world’s leading autonomous aerial vehicle technology platform’, and the report by Wolfpack Research claims it is ‘an elaborate stock promotion, built on largely fabricated revenues based on sham sales contracts with a customer who appears to us to be more interested in helping inflate the value of its investment in EHang, than actually buying its products.’

In the aftermath, EHang stocks fell more than 60 per cent at the end of trading last Tuesday. The price gradually started to increase towards the end of the week, finishing at $59.80 by the close of play on Friday.

In summary, Wolfpack Research’s report went into detail about EHang customer, Shanghai Kunxiang Intelligent Technology Co.

It said: “We have gathered extensive evidence including behind-the-scenes photographs, recorded phone calls, and videos of on-site visits to EHang’s various facilities, as well as Kunxiang’s offices which lead us to believe that Kunxiang signed sham sales contracts to benefit its investment stock price in EHang.

“Kunxiang has an exaggerated physical presence and its real operations appear to be a fraction of what is claimed. Out of the three addresses listed on Kunxiang’s website, one is a hotel with no Kunxiang presence, one is a 13th floor address of an 11-storey building and the last oneonly had one Kunxiang employee in the office on a weekday afternoon.

“To the extent Kunxiang actually does sell vehicles, it did not want to sell EHang’s products to us. When asked, the only employee on-site at Kunxiang, who claimed to be the finance manager, had no hesitation voicing his disapproval of the EH216, and instead offered their own, supposedly much higher quality products for sale.

“Kunxiang appears to be a willing participant in EHang’s stock promotion. According to the same finance manager at Kunxiang, Kunxiang made an undisclosed RMB100 million ~$14 million pre-IPO investment in EHang, which leads us to believe its true motive for signing these shambolic contracts was to benefit its investment, which is worth ~RMB473 million ~$68 million today.

“As is common with a sham customer, SAIC files and national credit reports show that Kunxiang was established just 9 days before it signed a RMB450 million ~$65 million sales contract with EHang. Kunxiang had only RMB10 million ~$1.4 million of registered capital, rendering far too thinly capitalized to actually fulfill this purported sales contract. Nonetheless, Kunxiang signed another RMB30 million ~$4.3 million contract with EHang four months later.”

Responding to these claims concerning Shanghai Kunxiang Intelligent Technology Co, EHang released a press release on Friday and its responses have been published in their entirety below. Today (Monday), it also released further information concerning sales contract with a customer.

  • Kunxiang is one of EHang’s customers but it is not a related party of EHang. Kunxiang had never been a shareholder of EHang prior to its IPO. Kunxiang has never purchased any shares from EHang after its IPO. Although any person can purchase EHang’s ADSs from the open market after EHang becomes a public company, EHang has no knowledge that Kunxiang has ever purchased any of EHang’s ADSs, and EHang does not believe Kunxiang holds any meaningful shares whatsoever in the Company at any given time. 
  • On February 1, 2019, EHang entered into a sales contract with Kunxiang to sell 3 units of EHang 216 passenger-grade AAVs for a total price of RMB4.5 million, or RMB1.5 million per unit (inclusive of value-added tax). EHang has posted a copy of this contract as well as its English translation on its IR website:
  • Pricing and other terms provided by EHang to Kunxiang are not substantially different from those offered to other customers in China and all contracts with Kunxiang are based on arm-length transactions. The average unit price under EHang’s February 2019 contract with Kunxiang is in line with the average unit price for the Company’s overall passenger-grade AAV sales since 2019. Although the Company has not directly disclosed the average selling price of its passenger-grade AAVs in its public filings, such average selling price can be inferred from two metrics the Company does publicly disclose: (i) the number of passenger-grade AAVs sold in a period, and (ii) the amount of revenues generated by air mobility solutions, which have mostly been derived from the sales of passenger-grade AAVs, in the same period.
  • While it is not EHang’s place to comment on its customer’s office buildings or employees, Kunxiang has confirmed to EHang that the allegations made by the short-seller concerning Kunxiang or its employees in this so-called research report are false and misleading. Just for an example, the Wolfpack Research told an outright lie that the office building where Kunxiang is located only has 11 floors by showing an office building index, but a simple site visit will tell you that building indeed has 15 floors.
  • Kunxiang remains as an important customer of EHang. EHang appreciates that Kunxiang has the vision to be an early adopter of EHang future-defining products and EHang intends to strengthen its relationship with Kunxiang. However, Kunxiang is no longer the largest customer of EHang in the fiscal year ended December 31, 2020.

eVTOL Insights has approached Wolfpack Research for a comment on the matter.