EHang: “Chinese UAM Global Dominance Looming?”

Eleven days have passed since the momen­tous news broke that EHang had gained Type Cer­ti­fi­ca­tion (TC) from the Civ­il Avi­a­tion Admin­is­tra­tion of Chi­na (CAAC), mak­ing it the first eVTOL com­pa­ny in the world to achieve such an acco­lade. 

After a dra­mat­ic week when on the Mon­day (Octo­ber 9th) the Chi­nese com­pa­ny announced its pro­pos­al to vol­un­tar­i­ly sus­pend share trad­ing had been approved by Nas­daq “in antic­i­pa­tion of an upcom­ing announce­ment con­cern­ing a very sig­nif­i­cant devel­op­ment regard­ing its busi­ness oper­a­tions,” investors had a nail-bit­ing week pon­der­ing what the news might be. 

Yet, four days lat­er (Octo­ber 13th), few were sur­prised by the dis­clo­sure. EHang had been flag­ging the poten­tial TC head­line to the mar­ket for over a year.

EHang receives first type cer­ti­fi­ca­tion from China’s CAAC for its EH216‑S eVTOL air­craft

Under­stand­ably, the share price was all over the place on that Fri­day. At one point the futures price briefly struck USD37 dur­ing pre-mar­ket trad­ing, only to set­tle at USD20.30 by the close of play. Since, it has grad­u­al­ly declined clos­ing yes­ter­day (Octo­ber 23rd) at USD16.25. Investors have sold on the news after an 88 per­cent or more share price rise dur­ing the year. 

On Octo­ber 17th, defenseworld.com post­ed that Gold­man Sachs had upgrad­ed EHang (EH) from a neu­tral to buy rat­ing in a research note issued to investors. The finan­cial colos­sus offers a USD30.50 price objec­tive.

The web­site also points out that a num­ber of hedge funds have recent­ly bought shares of EH. GTS Secu­ri­ties LLC pur­chased a new stake in the sec­ond quar­ter val­ued at USD163,000, while Gold­man raised its stake by 3.9 per­cent. The com­pa­ny now owns 530,903 shares of EHang’s stock val­ued at around USD8,054,000. 

Oth­er invest­ment com­pa­nies who also raised their stakes include Quad­ra­ture Cap­i­tal Ltd, Itau Uni­ban­co Hold­ing S.A and Schon­feld Strate­gic Advi­sors LLC. Cur­rent­ly, 16.49 per­cent of EHang’s stock is owned by insti­tu­tion­al investors.

Avi­a­tion jour­nal­ist of more than thir­ty years, Philip But­ter­worth-Hayes, post­ed on his UAMN web­site (Octo­ber 16th) a fea­ture enti­tled, ‘What EHang’s EH216 Type Cer­ti­fi­ca­tion Means for the Glob­al Avi­a­tion Indus­try’.

He writes, “The announce­ment will have a pro­found impact on the indus­try.” And goes on, “The com­pa­ny plan for a rapid ramp-up in pro­duc­tion and deliv­ery – first to around 2,000 tourist hot spots in Chi­na and then to neigh­bour­ing nations in Asia. This means that the coun­try will be intro­duc­ing autonomous advanced and urban air mobil­i­ty ser­vices before any eVTOLs have been cer­ti­fied in Europe and North Amer­i­ca and ten to fif­teen years before these regions plan for uncrewed ver­sions, on a tri­al basis.”

Philip But­ter­worth-Hayes

But­ter­worth-Hayes points out, “While reg­u­la­tors in the West strug­gle to imple­ment even first gen­er­a­tion UAS traf­fic man­age­ment (UTM) sys­tem for drones, EHang has devel­oped and cer­ti­fied not just an autonomous air­craft, but an entire AAM eco-sys­tem.”

Accord­ing to the com­pa­ny, the Unmanned Air­craft Cloud Sys­tem (UACS), also cer­ti­fied by the CAAC, includes a traf­fic man­age­ment sys­tem, flight plan pro­cess­ing, air­craft com­mand and con­trol, sys­tems mon­i­tor­ing and flow-con­trol func­tions, “enabling clus­ter man­age­ment of mul­ti­ple air­crafts with­in the same air­space, and ensur­ing safer and more reli­able oper­a­tions.” 

He again points out, “Unlike oth­er eVTOL man­u­fac­tur­ers, EHang can mar­ket this entire eco-sys­tem to coun­tries and cities pre­pared to align their cer­ti­fi­ca­tion process­es to that of the CAAC.” Along with oth­er poten­tial Chi­nese fly­ing taxi com­pa­nies, this gives “an extra­or­di­nary lead in this vast glob­al mar­ket. It will mean EHang will be able to deliv­er afford­able AAM ser­vices at a scale and pace beyond the reach of any com­peti­tors in the West.”

Under­stand­ably, crit­ics from Europe and North Amer­i­ca are scep­ti­cal. But­ter­worth-Hayes com­ments, “The oper­a­tional and busi­ness plans do not add up, they argue. The cab­in size is too small and two hours to ful­ly charge an EH216 is too long. They wor­ry about the safe­ty and reli­a­bil­i­ty cas­es.”

The real­i­ty sug­gests there are now three ways the EHang AAM pro­gramme may go. He con­tin­ues, “Com­plete suc­cess and mass dis­tri­b­u­tion around the world; a minor hic­cup of two which slows the pro­gram down, but does not fun­da­men­tal­ly detract from the company’s longer term busi­ness plans; and a third, where there are more seri­ous inci­dents, which will intro­duce more sig­nif­i­cant delays and obsta­cles.”

The grow­ing dis­trust of Chi­na even allows a few crit­ics to believe that any such acci­dents will be sim­ply cov­ered up by the author­i­ties, any­way.

But­ter­worth-Hayes then drills down to the fun­da­men­tals of the Type Cer­ti­fi­ca­tion. He writes, “The suc­cess of the cer­ti­fi­ca­tion process has been the align­ment between the CAAC with its low alti­tude econ­o­my and gen­er­al avi­a­tion plan and China’s eVTOL and drone sec­tors. This will mean the CAAC is about to play a more sig­nif­i­cant glob­al role, as Chi­na will be able to set the stan­dards for autonomous pas­sen­ger ser­vices for years to come, as it will have unique sources of oper­a­tional data on which new rules and oper­at­ing pro­ce­dures for autonomous avi­a­tion will rely.”

The avi­a­tion expert con­cludes, “The cer­ti­fi­ca­tion of the EH216‑S is a huge deal, for a num­ber of rea­sons. The gut reac­tion of many in the West, among reg­u­la­tors and indus­try, will be to regard the pro­gram as a unique­ly Chi­nese exper­i­ment, with­out rel­e­vance to the crawl-walk-run devel­op­ment plans of their own domes­tic indus­tries. But they will also know that the coor­di­na­tion of activ­i­ty between indus­try and reg­u­la­tor which has result­ed in the type cer­ti­fi­ca­tion of the EH-216‑S, rather than the tech­nol­o­gy, is the key fac­tor which has pro­duced this mile­stone.”

Mean­while, Chi­nese web­site, news.sohu.com, released impor­tant infor­ma­tion this week con­cern­ing EHang which appears to have drift­ed below the news radar.

While the arti­cle states China’s first eVTOL route is expect­ed to be opened in Shen­zhen this year, “The EH216‑S will also under­go oper­a­tional qual­i­fi­ca­tion review and be offi­cial­ly put into com­mer­cial oper­a­tion after meet­ing rel­e­vant require­ments.”

It seems that now EHang has suc­cess­ful­ly gone through the most dif­fi­cult Type Cer­ti­fi­ca­tion process, the com­pa­ny will make efforts to obtain a pro­duc­tion license (PC) and a stand-alone air­wor­thi­ness cer­tifi­cate (AC). The report states, “The next step of obtain­ing a PC means that the reg­u­la­to­ry agency recog­nis­es the qual­i­ty and man­age­ment sys­tem of the air­craft man­u­fac­tur­er.” While the craft can be mass pro­duced, the com­plet­ed air­craft “can­not yet be put into com­mer­cial oper­a­tion until obtain­ing an AC.” This rep­re­sents an air­wor­thi­ness cer­tifi­cate applied by the cus­tomer after the air­craft is pro­duced and before it is offi­cial­ly deliv­ered to the cus­tomer.

Yet, this is actu­al­ly good news for EHang. 

sohu.com ends with a quote from Chi­nese Avi­a­tion Legal Expert, Lin Zhong. “Pre­vi­ous­ly, after the domes­tic large air­craft C919 obtained TC cer­ti­fi­ca­tion, it only took 70 days from TC to PC, and then only 20 days from PC to AC. There­fore, it is like­ly that large quan­ti­ties of EH216‑S will be put into the mar­ket much faster than expect­ed.”

So, where is the neg­a­tive EHang news, then?

Apart from the doom and gloom doom-say­ers, there doesn’t appear to be much. While such crit­ics believe EHang is just “a Chi­nese thing”, news released late last week announced that the com­pa­ny will inau­gu­rate the first autonomous Air Vehi­cle Oper­a­tions Cen­tre in Europe on Octo­ber 31st.

EHang and Span­ish Police Col­lab­o­rate to Explore AAV Use Cas­es in Emer­gency and Secu­ri­ty Mis­sions (Dis­played at Cua­tro Vien­tos Aero­drome, Madrid)

Span­ish web­site, www.hispaviacion.es, writes, “This inau­gu­ra­tion rep­re­sents a mile­stone in the deploy­ment of Urban Air Mobil­i­ty in Europe, by inte­grat­ing the oper­a­tion of elec­tric vehi­cles with autonomous eVTOL capac­i­ty, along­side infra­struc­ture, air traf­fic man­age­ment sys­tems, pro­ce­dures and infor­ma­tion tech­nolo­gies, of a Euro­pean inter­na­tion­al air­port.”

The arti­cle goes on. “The cre­ation of this oper­a­tions cen­tre, a pio­neer in the world, aris­es from the col­lab­o­ra­tion agree­ment signed between EHang and Aero­ports de Catalun­ya, and allows the nation­al aero­nau­ti­cal and air­port sec­tors to be posi­tioned at the fore­front of Advanced Air Mobil­i­ty.” 

It con­cludes, “The EH216‑S air­craft deployed at the cen­tre will allow the accu­mu­la­tion of exten­sive oper­a­tional expe­ri­ence and the gen­er­a­tion of knowl­edge, data and infor­ma­tion, of ines­timable val­ue, for the devel­op­ment of tech­no­log­i­cal solu­tions, reg­u­la­tions and pro­ce­dures, for the safe and effi­cient inte­gra­tion of eVTOLs in air­port envi­ron­ments.”  

The warn­ing of poten­tial Chi­nese UAM glob­al dom­i­nance sug­gest­ed by But­ter­worth-Hayes is, per­haps, more real­is­tic than West­ern crit­ics may have you believe.

For more infor­ma­tion

https://www.ehang.com/

(Top image: EHang 216‑S Fly­ing Over Europe)