The Geely-backed auto technology startup ECARX's sole focus on the auto industry will give it an advantage over its larger competitors, according to its CFO.
The company, founded in 2017 by Geely Chairman Eric Li and CEO Ziyu Shen, is going head-to-head with major technology players such as Qualcomm and Nvidia in the fast-growing automotive computing market. ECARX's products, which include a central computing platform and intelligent cockpit systems, are already in about 5 million vehicles worldwide, and the company employs about 1,500 people.
ECARX went public via a reverse merger with a special purpose acquisition company in December in a deal that generated $410 million for the company and valued it at about $3.8 billion. But since the listing, its stock price has dipped by 37 percent and its market cap has fallen to about $1.7 billion.
Narasimhan said the company plans to diversify its customer base, relying less on Geely's auto brands and looking to expand its footprint beyond China and into Europe — and, eventually, into North America.
As a result, ECARX, which lost $223.5 million in 2022, expects losses to shrink this year before reaching EBITDA profitability in 2024, with revenue expected to surge to as much as $2.8 billion by 2027 from $516 million in 2022.
Narasimhan spoke with Automotive News Reporter John Irwin on May 11, following the company's first investor day earlier that week. The conversation has been edited for length and clarity.
Q: How does ECARX expect to quickly turn around its bottom line, from a $223.5 million loss in 2022 to profitability by 2024?
A: We are extremely focused on staying lean. Basically, the growth in revenue is helping us achieve profitability while maintaining that lean, fixed-cost structure. But we'll continue to invest in R&D. We forecast that revenue growth will be at a much faster rate than our R&D investments.
In 2027, we'll have revenue of between $2.6 billion and $2.8 billion. That's a [compound annual growth rate] in revenue of 40 percent from 2022 actuals. Our profit would be about $340 million to $360 million, and cash flow would be about $300 million by 2027. That's where we see us landing in 2027. We're confident we'll get there.
To what extent will ECARX's customer base diversify in that time?
Today, about 56 percent of our revenue comes from Geely brands. By 2027, we're expecting that will be one-third. We're expected to grow quite a lot outside of that Geely ecosystem over the next five years, primarily driven by our product range, our capabilities and the demands we see that OEMs want to be addressed right now.
We have a number of discussions happening, some of them in advanced stages, outside of China. We see the next set of growth opportunities in Europe. That will enable us, in the longer term, to enter North America and the rest of the world.
What differentiates ECARX from competitors?
Because of our relationship with OEMs, we normally get involved in a very early, concept stage of product development. We are integrated with the vehicle development process and what the customer experience should look like. That's a massive advantage because we have a seat at the table to show the OEM what the future looks like.
We're also purely automotive. We have a [system on a chip] that we developed purely for automotive applications. That means some features are already integrated into the hardware. You don't need software working on top to make it work. You don't need to develop software, and your power consumption becomes better because the software is not consuming the power. The speed of response is better. Those are major advantages.
As we see the OEM and customers demanding more and more digital experiences, efficiency of power usage becomes more important. These features actually make it much more efficient from a power consumption perspective. It means you can add more features for less.
Where will the company's R&D investments be focused as it diversifies its geographic footprint?
We plan to open an engineering center in North America. We'll have more engineering centers outside of China. Those things will continue to evolve. The technology is changing so quickly that the investment will be more in advanced chip technology and more advanced SOC and less power consumption. That's our core expertise.