Policy support for the low-altitude economy has strengthened, and Goldman Sachs has lowered EHang to Neutral

Overview

This report discusses the progress of Chinese eVTOL and low-altitude economy development, policy support and commercialization scenarios, and updates EHang’s rating and valuation. Goldman Sachs believes long-term industry opportunities remain positive, and use cases are expanding from aerial sightseeing to logistics, emergency services, and future air taxi/airport shuttle applications; however, EHang is currently valued at a relatively fair level, and the commercialization timeline for service launch may be longer than previously expected.

Core views

The core view is that the policy and regulatory framework is improving, and local government subsidies and manufacturing incentives are helping industry development; EHang, as a leading eVTOL player, has product breadth, order growth, and certification advantages; however, EH216-S commercial passenger service still needs to meet new CAAC operational and safety requirements, and VT-35 long-distance travel and overseas revenue opportunities remain in the early stages, so near-term upside is lower than the average across the coverage set, leading to a rating downgrade to Neutral.

Analysis framework

The report is structured around five angles: policy review, expansion of application scenarios, revisions to company revenue and profit forecasts, DCF valuation, and risk scenarios. Revenue outlooks are decomposed by business segment, valuation uses a DCF framework, and the target price is benchmarked against 2027E P/S and recent transaction multiples for reasonableness.

Methodology notes

• Valuation methodsDCF

  Discounted cash flow valuation

  The target price is based on DCF methodology to reflect long-term free cash flow generation capacity. Assumptions include 6% annual growth in phase 2 FCF from 2029E-2031E, terminal growth of 3%, WACC of 12%, COE of 15.2%, and COD of 3.0%.

• Valuation methodsP/S multiple cross-check

  Price-to-sales cross-check

  The new target price implies 3.7x 2027E P/S, close to the recent transaction average. The prior target price implied 7.5x 2027E P/S, close to the two-year average.

• factor_profileGS Factor Profile

  Goldman Sachs factor profile

  GS Factor Profile uses growth, profitability, valuation multiples, and composite factors to compare the stock attributes against the broader market and peer industries.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• EHang (EH)

  Core company covered by the report

  Strengths

  An eVTOL industry leader with an expanding product portfolio, growing order book, and key certifications (TC, AC, OC), while benefiting from low-altitude economy policy support.

  Weaknesses

  EH216-S commercial passenger service launch still needs time, AAV shipment assumptions have been lowered, profit forecasts are under pressure, and VT-35 and overseas expansion are still in early stages.

  Comparison

  The target price implies 3.7x 2027E P/S, close to the recent transaction average; upside is lower than the Greater China Technology coverage average of 48%.

  Risks

  Commercialization slower than expected, eVTOL deliveries below expectations, and weaker-than-expected policy or regulatory support.

• China low-altitude economy / eVTOL industrial chain

  Beneficiary sector theme

  Strengths

  Policy support has strengthened, with use cases expanding from aerial tourism to short-haul logistics, emergency services, airport shuttle, and air taxi.

  Weaknesses

  The industry is still in an early commercialization phase, and operational safety rules, airspace allocation, and business models still need validation.

  Comparison

  Local Chinese subsidies and national planning provide industrial catalysts, but large-scale revenue realization still depends on regulatory approvals and demand ramp-up.

  Risks

  Slower-than-expected regulatory pace, slower demand maturation, and rising costs or delays from flight experience and safety requirements.

Key data

• Rating changeDowngraded from Buy to NeutralThe downgrade is due to fair valuation and more conservative commercialization progress assumptions.
• Target priceUS$7.3The prior target price was US$16.9.
• 2026-28E revenue CAGR+77%Driven mainly by AAV shipment ramp-up, capacity expansion, and progress in the regulatory framework.
• 2027E revenue estimate revision-12%Total revenue was reduced from Rmb1,099m to Rmb972m.
• 2028E revenue estimate revision-8%Total revenue was reduced from Rmb1,816m to Rmb1,676m.
• 2027E net profit forecastNet loss Rmb23mPreviously, net profit was forecast at Rmb143m.
• 2029E-2031E phase 2 FCF growth6% YoYPreviously assumed 10% YoY.
• WACC12%COE 15.2%, risk-free rate 3.0%, equity risk premium 6.5%, beta 1.88.
• Anhui subsidyNew route operating reward of Rmb400kAdditional manufacturing and production incentives also available.
• Shenzhen subsidyRmb100-300 per person per flightFor eVTOL operations, with additional manufacturing and production incentives.
• Guangzhou subsidyPer manned autonomous aerial route not exceeding Rmb1mAdditional manufacturing and production incentives also available.

Impact & implications

For investors, policy support raises the long-term certainty of the low-altitude economy and eVTOL, but a re-rating of EHang requires clearer commercialization rollout, stronger shipment growth, or progress in the ecosystem technology stack. In the near term, the target price cut and lower profit forecast indicate the market should reduce expectations for rapid scale-up commercialization of EH216-S passenger services.

Risks

• Commercialization progressing slower or faster than expected could affect revenue and profit forecasts.
• eVTOL deliveries above or below expectations could impact company revenue, as AAV sales remain the main revenue driver.
• Policy and regulatory support weaker or stronger than expected could affect eVTOL operations, capacity expansion, and valuation.
• Higher R&D spending and slower revenue ramp-up could weigh on the pace of earnings improvement.

What to watch

• Progress of CAAC approvals for new operating and safety requirements for EH216-S commercial passenger service.
• The pace of AAV shipment ramp-up and changes in customer demand.
• Implementation of subsidy policies in Anhui, Shenzhen, Guangzhou, and new policy rollouts in additional cities.
• Progress of VT-35 long-distance travel and expansion into overseas markets.
• Whether 2027E/2028E revenue and gross margin can be delivered in line with revised forecasts.