On November 28, 2025, Connected Auto, a smart vehicle technology company, officially submitted its IPO prospectus to the Hong Kong Stock Exchange, aiming for a main board listing. As a leading player in China's smart cockpit domain controller sector, the company achieved a staggering 523% revenue growth over the past three years. However, this growth comes with accumulated losses nearing RMB 1 billion, alongside concerns over high customer and supply chain concentration. The IPO marks a critical step to address funding constraints while testing the sustainability of its business model.
**The Paradox of High Growth and Persistent Losses** Connected Auto's revenue trajectory is remarkably steep, surging from RMB 369 million in 2022 to RMB 2.656 billion in 2024—a sixfold increase in three years. Notably, 2023 saw a 523.3% year-on-year revenue surge, driven by booming demand for smart cockpits and strong sales of key vehicle models.
Yet, rapid expansion has not translated into profitability. Cumulative net losses reached RMB 968 million during this period, with H1 2025 losses widening to RMB 262 million—exceeding the total for 2024. More critically, operating cash flow remained negative, with net outflows escalating from RMB 250 million in 2022 to RMB 1.011 billion in 2024, highlighting the lack of self-sustaining cash generation.
The root of losses lies in high R&D spending and thin margins. While 2024 gross margin improved to 16.2% from 9.5% in 2022, it still lagged behind industry peers (Desay SV: 19.88%; Huayang Group: 20.69%). Persistent R&D costs and a 17.5% year-on-year rise in raw material prices—driven by supplier Bosch—further squeezed profits. This "growth-at-all-costs" approach reflects the dilemma faced by smart auto suppliers balancing innovation and market expansion.
**Dual Dependence: Customers and Supply Chain Risks** Connected Auto's extreme concentration adds to its vulnerabilities. From 2023 to H1 2025, its top five clients contributed over 98% of revenue, with the largest single customer accounting for nearly 60%. While such partnerships initially fueled scale, they now expose the company to volatility. In 2024, sluggish sales from its top client dragged revenue growth down to 15.6%, with H1 2025 sales dipping 0.7% year-on-year.
Supply chain reliance on Bosch is another critical weakness. Purchases from Bosch made up 82.9% of total procurement in 2023, remaining at 80.3% in 2024. Though Bosch’s dual role as key supplier and shareholder offers technical synergy, it weakens Connected Auto’s pricing power and supply chain autonomy. A 2024 price hike by Bosch forced the company to absorb higher costs passively.
Moreover, product diversification remains minimal. In H1 2025, smart cockpit solutions still dominated revenue (99.8%), with negligible contributions from newer ventures like zonal controllers, underscoring weak risk resilience.
**Industry Competition and IPO Challenges** While operating in a high-growth sector, Connected Auto faces intensifying competition. Ranked second in China’s smart cockpit domain controller market by 2024 revenue, its technological edge leans more on integration than breakthrough innovation. As automakers like NIO Inc. and XPeng accelerate in-house R&D, Connected Auto risks losing ground unless it differentiates in areas like cockpit-ADAS integration.
The IPO proceeds are earmarked for R&D and capacity expansion, but investors will scrutinize three key challenges: (1) achieving profitability by balancing R&D and margins; (2) diversifying its client base; and (3) building supply chain resilience. With a 198.3% debt-to-equity ratio and RMB 1.272 billion in accumulated losses, failure to demonstrate post-IPO profitability could deflate its valuation.
**Conclusion: A Reality Check for Smart Auto Ambitions** Connected Auto’s IPO encapsulates the shift from scale-driven growth to sustainable quality in China’s smart auto supply chain. Backed by strategic investors (including NIO Capital, Bosch, and Wuxi State Capital), it has ridden the smart cockpit wave. Yet, its profit struggles and structural risks reveal the sobering challenges beneath the sector’s hype.
*Disclaimer: This article incorporates AI-generated content and does not constitute investment advice. Market risks apply; caution is advised.*
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