Hesai: Worried about price collapse? The "Tesla discard" fights hard with volume

Ask AI · How can Hesai maintain a gross margin of over 40% amid a continuing decline in unit prices?

Overall, $Hesai Technology (HSAI.US) released its 2025 Q4 earnings report after the close of trading in Hong Kong on March 24 Beijing time. This earnings report again shows the typical sales-volume surge driven by “price dips.” However, the company, thanks to strong cost control, kept its gross margin intact and also provided an optimistic shipment guidance for 2026. Specifically:

1）Revenue at the low end of guidance, mainly due to the unit price coming in below expectations：Total Q4 revenue was about RMB 1 billion, up 39% year over year, below the market’s expected RMB 1.08 billion. It was at the low end (RMB 1.0–1.2 billion) of the company’s prior revenue guidance. The core reason is the continued decline in laser radar unit prices.

2）Shipments again beat expectations： In Q4, total laser radar shipments reached 631,000 units, up 184% year over year. This not only exceeded the market expectation of 619,000 units, but also topped the company’s earlier guidance of 600,000 units. Among them:

a. Robot radar shipments reached 80,000 units, significantly above the market expectation of 50,000 units. This may be because the share of lower-priced JT-series shipments increased.

b. ADAS laser radar shipments reached 550,000 units, with a year-over-year growth rate as high as 185%. It is expected to be driven mainly by the accelerated ramp-up of the lower-priced “thousand-yuan model” ATX. Management guided that in Q4, ATX will account for 80% of total shipments.

3）But the unit price is still accelerating downward： In Q4, the laser radar ASP fell to about RMB 1,557, down sharply 51% year over year. Compared with the RMB 1,790 in Q3, it also declined 13% quarter over quarter. This is significantly below the market expectation of RMB 1,718 (the market had initially expected a slight quarter-over-quarter dip). This is the most direct reason revenue came in below expectations. Dolphin Jun believes the continued downward slide in ASP mainly stems from the following three factors：

a. Product mix changes：The share of low-priced ATX continues to rise (expected to further increase from 70% in Q3 to 80% in Q4). “Thousand-yuan model” ATX is accelerating replacement of older AT128 units, whose pricing is several times higher;

b. Pricing strategy：ATX products’ market pricing is roughly around $200, and in Q4 the company offered discounts to key customers, causing its effective selling average price to fall further;

c. Robot business pulls down the average：Q4 saw a big jump in robot radar shipments, and within that, a higher share of the lower-priced JT series structurally lowered the blended average price.

4）Scale benefits and technology-driven cost reductions, yet gross margin remains steady：Despite the pressure of rapid unit-price declines, Hesai still achieved about a 41% gross margin in Q4, higher than the market’s 39.7% expectation and the company’s guidance of 40%. This is mainly due to：

a. Fixed manufacturing costs being diluted by a surge in shipment volume：In Q4, laser radar sales were 630,000 units, and shipments continued to grow 43% quarter over quarter;

b. Effective technology-driven cost reductions through platform-based product lines, application-specific integrated circuit (ASIC) design, and ongoing optimization across the supply chain and manufacturing process. This offset the risks from price declines.

c. Higher-margin service revenue saw some rebound;

5）Core profit slightly below expectations, but overall expense control remains solid：

GAAP net profit was RMB 150 million, within the top end of guidance (RMB 70 million–RMB 170 million). This was mainly thanks to recognition of interest income and other income (together about RMB 120 million). In Q4, Hesai received about $6.4 million (about RMB 45 million) in knowledge property arbitration compensation paid by Ouster.

After excluding these factors, core operating profit was about RMB 40 million (gross margin – core three fees), slightly below the expected RMB 60 million. This was mainly because R&D and sales expenses rose quarter over quarter. Overall, however, the company’s expense control still remains within a stable and reasonable range.

Dolphin Jun’s core view：

Overall, Hesai continues to play out the “volume increases while price decreases” logic driven by accelerating technology cost reductions and improving penetration rates in this quarter. Although Q4 revenue looked somewhat flat because laser radar unit prices (ASP) continued to decline, the company successfully defended its high gross margin level of over 40% by leveraging excellent cost control capabilities and scale effects.

Looking ahead to 2026, Hesai significantly raised its shipment guidance, further highlighting the logic of “technical equality” and accelerated penetration of laser radar in the automotive industry：

a. Full-year shipment guidance is strong, with extremely ample in-hand orders： The company raised its full-year 2026 shipment guidance significantly to 3.0–3.5 million units (from 2.0–3.0 million units). Year over year, it still maintains high growth of 85%–116%, far exceeding the market expectation of 2.66 million units. To match the surge in demand, the company plans to double its annual production capacity from 2.0 million units in 2025 to more than 4.0 million units in 2026.

ADAS business： The company has already captured all orders from the top ten OEMs in China. Cumulatively, it covers more than 40 brands and over 160 vehicle models. Among them, in-hand orders for the facelift ATX have already exceeded 6 million units (expected 2026 April SOP, featuring its self-developed FMC500 SOC chip), demonstrating very strong scalability. Hesai’s guidance suggests that ADAS business shipments could more than double (2.77 million units).

Robot business： In the first year, JT-series shipments have already exceeded 200,000 units. Combined with “grass-cutting robot” intention orders reserved at the scale of tens of millions of units from leading brands such as Dreame and Mova, and with nearly full coverage achieved in the Robotaxi/Robovan space, robot radar shipments are also expected to achieve a year-over-year doubling (480,000 units).

b. The spring season is still strong despite Q1 being a traditional off-season, with product mix optimization supporting ASP stability：

Hesai set its net revenue guidance for 2026 Q1 at RMB 650 million–RMB 700 million, up 24%–33% year over year. Given that Q1 is typically a sales off-season for the automotive industry (historically about 12% of the full-year shipment volume), the 26 Q1 shipment volume is estimated to be around 400,000–450,000 units.

Dolphin Jun expects that although the price of the core flagship product ATX will continue to decline from about $200 in 2025 to $150 in 2026 (a year-over-year decline of about 25%), the blended ASP in Q1 is expected to be RMB 1,548, which should be basically flat with the Q/Q level of RMB 1,557 in Q4.

This is mainly driven by improvement in shipment structure：In Q1, the ADAS radar shipment schedule will slow down, while shipments of high-end robot radars—which have higher prices and higher gross margins—are expected to reach about 100,000 units. Their share will rise to 22%–25% (up significantly by 13 percentage points quarter over quarter), providing a strong hedging effect.

Dolphin Jun believes Hesai is a high-certainty target that continues to benefit on fundamentals from “increased penetration of intelligent driving” and “expansion into the second growth curve of the robotics track”：

① Passenger-vehicle track firmly sits at “No. 1,” with a clear competitive landscape

From the market-share perspective, although Hesai’s market share has fluctuated since last June due to Huawei’s ramp-up of radar supplementation, Huawei’s laser radars are mainly packaged and shipped in a soft-and-hard integrated form, and are priced higher, primarily serving the ZhiXuan Car and HI mode ecosystems.

Therefore, in the independent third-party Tier 1 market, the actual competition is still concentrated among Hesai, Sagitar (速腾聚创), and TuDutong (图达通). At present, thanks to Hesai’s strong shipments of the low-priced ATX, in Q4 its market share in passenger-vehicle laser radar reached 31.3%, which is about 13 percentage points higher than “No. 2” Sagitar. Hesai remains the industry leader.

② 2026 guidance far exceeds expectations, dispelling concerns about “customer loss,” and the “volume increases while price decreases” logic continues to deliver

Previously, the market worried that its ADAS radar growth in 2026 would slow down (and even trigger concerns about major customers’ order loss). This time, guidance was raised sharply to 3.0–3.5 million units, completely dispelling market doubts. The huge incremental volume mainly comes from four dimensions：

1）ATX enters the “thousand-yuan model” era, continuing penetration into lower-tier markets：

Chang’an Qiyuan Q05, Leapmotor A10, and others have become among the first 10万元-level models equipped with laser radar. Dolphin Jun expects that in the first half of 2026, laser radar will accelerate penetration into price bands below 100,000 yuan.

From a customer-splitting view, Dolphin Jun expects that Hesai’s core incremental growth in 2026 will mainly be composed of large orders from Xiaomi (exclusive supply of about 550,000 units), Leapmotor (essentially exclusive supply of about 600,000 units), Li Auto (exclusive supply of about 450,000–500,000 units), BYD (about 300,000–350,000 units, roughly half of the total), Geely (about 500,000 units), and Great Wall (about 200,000 units), etc.

2）L3 advanced intelligent driving drives a multiple growth in per-vehicle radar attach：

It is expected that the rollout of L3-level autonomous driving regulations in 2026 will become an important catalyst. L3 sensing requirements will double, and per-vehicle radar solutions will upgrade from a single main radar in L2 to “1 main radar (ATX/ETX) + multiple blind-spot radars (FTX).” This will not only boost per-vehicle radar value from about $200 to $500–$1,000, but also, because L3 uses high-frequency operation, customers will be more tolerant of radar prices.

3）Overseas markets enter a breakthrough period, enabled by the NVIDIA ecosystem：

Hesai has completed the development of long-range radar C-sample components for a leading European OEM. Production for overseas markets is expected to begin by the end of 2026.

Meanwhile, NVIDIA Drive Hyperion, the full-stack platform (covering software/hardware and pre-trained AI models), greatly improves Hesai’s product integration efficiency and helps it quickly expand among overseas OEMs. Considering that overseas customers are less price-sensitive and prefer high-end products, overseas expansion will become an important tool to hedge against the decline in domestic ASP.

4）The robotics track becomes a second growth curve; Hesai still remains the Robotaxi king：

In robotics, the potential TAM is twice that of autonomous driving. Robot business ASP and profit margins are generally higher than ADAS products, which allows Hesai to effectively hedge against passenger-vehicle radar price-cut pressure and maintain overall high gross margins as the core.

Consumer/service robot orders are booming：Leveraging products designed specifically for micro and high-performance scenarios, such as the JT series, Hesai has signed exclusive supply agreements for grass-cutting robots with Dreame and its brand Mova. The related order backlog exceeds 10 million units, demonstrating extremely strong shipment breakout potential in this track.

Robotaxi/Robovan still firmly dominates the market：In the L4 autonomous driving market, Hesai remains the dominant player.

The company not only holds an absolute 60%–70% share of the global Robotaxi market, and has signed supply agreements with leading autonomous driving companies across North America, Asia, and Europe;

In the unmanned last-mile delivery logistics vehicle (Robovan) domain, it has also established a leading position—GGI laser radar positioning rank remains No. 1, and it is the sole exclusive laser radar supplier for multiple global leading manufacturers including Neolix and DoorDash.

And on the unit-price side, Dolphin Jun expects that in 2026 the laser radar ASP will continue to decline year over year by about 21% to RMB 1,460.

This is mainly affected by a higher share of low-priced ADAS (such as ATX falling to about $150, down 25% year over year), discounts tied to large customer volumes/prices, and annual price-cut requirements from automakers. However, it will be partially offset by the rollout of multi-radar L3 solutions, increased volume of higher-priced ETX, the addition of high-gross-margin overseas orders, and the robot business with strong profitability.

Despite ASP continuing to slide down, Hesai still expects the overall business gross margin in 2026 to remain resilient, mainly due to technology cost reductions plus scale effects ：

a. Domestic substitution and high integration of main control chips (self-developed FMC500 SOC chip based on the RISC-V architecture; highly integrated MCU, FPGA, and ADC. The single-chip design greatly compresses the core chip cost that accounts for 40% of BOM) ;

b. Self-developed SPAD integration technology (mass production in 2026);

c. Extreme scale effects (3.0–3.5 million units diluting fixed costs) and highly automated manufacturing.

On the expense side：

The company expects overall operating expenses to grow in the mid-double digits. This is mainly because the company is proactively investing about $200 million in R&D to expand its sensing side (“eyes”) and execution side (“muscles”) with cutting-edge new products.

If you exclude spending on new businesses, operating expenses for the core main business are expected to remain flat or decline in the high single digits to low single digits. This still comes from Hesai’s strong cost control ability + operating leverage effects + deep application of AI in internal operations (already bringing quantifiable cost reductions in the tens of millions of RMB).

Based on the current stock price, Dolphin Jun expects Hesai’s 2026 revenue to be RMB 4.85 billion, up 60% year over year; net profit of RMB 700–800 million, up 60%–70% year over year. This implies a 2026 P/S ratio of about 5.2x, and a 2026 P/E ratio of about 32–36x. With net profit still growing rapidly in 2026, Dolphin Jun believes this valuation is not expensive.

From a longer time horizon, the LiDAR industry has extremely strong “Moore’s Law” characteristics (point-cloud density rising exponentially, costs falling exponentially) and very high barriers (ecosystem lock-in plus scale effects).

Industry concentration will keep increasing, and the “the strong get stronger” effect will be significant. Hesai will remain “No. 1” in China.

Looking at the long-term TAM specifically: at present, the market value of about RMB 25.6 billion only reflects the base market for passenger-vehicle ADAS in China (conservatively estimated that this market will reach RMB 40 billion by 2030). Hesai’s overseas-market breakthrough is highly certain, and the robotics track offers a broad upside option. The upside potential remains good.

For details, please refer to 《Hesai: a “discarded” Tesla? Can it not stop the “glorious comeback” of LiDAR?****》’s valuation calculation.

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