UBS: Pony.ai Operations Expansion Accelerating, Maintain Buy Rating

Overview

This UBS report is based on management’s participation at the 2026 Asia Investment Conference (AIC) and reiterates their 'Buy' rating and $20 target price for Pony.ai. The core view is that Pony.ai's Robotaxi business is performing positively in major Chinese cities, with unit economics continuously improving, and the joint deployment model has started contributing revenue in Q1 2026 and is being accelerated. Despite industry regulatory concerns, the company states its operations are unaffected and will not adjust annual fleet targets. Additionally, the company has raised revenue forecasts for 2026–2028 to reflect accelerated domestic and international expansion, while expecting net losses to widen.

Core views

In terms of domestic Robotaxi operations, management indicated that operations in Tier 1 cities show positive momentum, with steady consumer adoption driven by improved route efficiency, smooth ride experience, and strong safety records. As fleet scale expands, economies of scale and manufacturing cost optimization are reducing operational costs. The company aims to further reduce the Bill of Materials (BOM) cost of individual Robotaxi (including vehicle and autonomous driving kit ADK) from the current RMB 270,000 to below this level next year. Regarding regulation and fleet targets, management explicitly stated that although regulatory attention on Robotaxi safety has increased, company operations have not been affected and do not expect adjustments to annual fleet goals. In terms of business model, the company has recorded revenue contributions from the 'joint deployment' model since Q1 2026 and expects this model to be adopted more rapidly in the domestic market. Most overseas operations will also adopt this light-asset joint deployment model. Management believes that the superior ride experience offered by Robotaxi should translate into premium pricing rather than competing directly with human taxi drivers. Regarding Robotruck operations, management noted that the fourth-generation Robotruck is on track for mass production in H2 2026, and due to shared technology and ADK, it also benefits from similar cost reduction trends as Robotaxi. However, management also mentioned that Robotruck commercialization requires broader regulatory oversight than Robotaxi, as long-haul routes span multiple jurisdictions and require approvals from various cities, making its timeline structurally longer compared to single-city Robotaxi operations.

Analysis framework

UBS's analytical approach primarily focuses on tracking company operational data and management guidance. First, they evaluate improvements in Robotaxi unit economics (revenue growth and cost optimization) to validate the feasibility of its business model. Second, they assess the impact of the regulatory environment on actual operations and fleet expansion targets to judge short-term risk controllability. Third, they analyze the revenue contribution and adoption rate of the light-asset 'joint deployment' model to evaluate the efficiency and capital expenditure of its domestic and international expansion. Finally, they consider the technical iteration and regulatory complexity of Robotruck to estimate the commercialization timeline for this other business line. In valuation, UBS adjusted earnings forecasts based on revised revenue and gross margin assumptions, applying a P/S approach combined with a success probability of large-scale commercialization to derive the target price.

Methodology notes

• Valuation MethodPS valuation

  Revenue Multiple Valuation Based on 2030 Expected Sales

  UBS uses a 2030 expected P/S multiple of 7.5x as the base and applies a 60% probability of successful large-scale commercialization to calculate the target price. This method is commonly used for high-growth tech or startup companies that are not yet profitable, using assumptions about future market size and company share to reverse-engineer current value, incorporating a probability factor to reflect uncertainties related to technological commercialization or regulatory approval.

• Company Fundamentals & Financial Framework

  Unit Economics Analysis

  The report focuses on the revenue growth and cost decline of individual Robotaxi units, i.e., unit economics. For business models reliant on economies of scale (like Robotaxi), tracking profitability per vehicle (BOM cost, operating cost vs. per-vehicle revenue) helps determine whether the business model works and can be replicated and scaled. The target cost reduction from RMB 270k is a key indicator.

• Industry/Industrial Analysis Framework

  Regulatory and Geopolitical Risk Analysis

  The report identifies regulatory environment and geopolitical uncertainty as primary risks for the industry and the company. For heavily regulated sectors like Robotaxi and Robotruck, analysis must not only focus on the technology itself but also assess the speed and difficulty of policy approvals (such as cross-city operation permits) and geopolitical challenges in international expansion, which directly influence the pace and ceiling of business growth.

Key data

• 12-Month Target PriceUS$20.00Based on 2030E P/S 7.5x and 60% success commercialization probability
• Current Stock PriceUS$10.03As of May 29, 2026
• RatingBuyMaintain Buy Rating
• Robotaxi BOM Cost TargetRmb 270kCurrent per-vehicle cost (including vehicle and ADK), plan to reduce further next year
• 2026-28E Revenue Adjustment+10-20%Increased Robotaxi revenue forecast due to accelerated domestic and international operations
• 2026-28E Gross Margin Adjustment-4-5pptReflects gradual improvement in user economics, expected gross margin decline
• 2026-28E Net LossIncrease 10-20%Expected net loss expansion due to rising operating expenses and declining gross margins
• Gen-4 Robotruck Production TimelineH2 2026On schedule

Impact & implications

UBS believes that the unit economic improvement and promotion of the light-asset joint deployment model in Pony.ai’s Robotaxi business are important signals of accelerated expansion, which enhances long-term profitability and market penetration. Although short-term net losses are expected to widen due to increased investment, the revenue revisions reflect institutional confidence in its commercial prospects. The Robotruck production plan is on track, but regulatory complexity reminds investors that the return period for this business line may be longer. Overall, UBS views Pony.ai as being in a critical phase of business scaling, assuming no major regulatory reversals occur.

Risks

• Slower macroeconomic growth could lead to lower demand for Robotaxi and Robotruck than expected.
• Geopolitical uncertainty may negatively affect international cooperation and overseas expansion for Chinese Robotaxi companies.
• Slower-than-expected regulatory relaxation in operational region expansion may limit Robotaxi companies' ability to operate in specific areas, slowing new order uptake and utilization rates.
• Slower development of new technologies could result in reduced demand and lower investment.
• Execution risks in domestic and international Robotaxi operations, including slow domestic order growth or regional expansion, as well as regulatory changes in international markets.
• Project delays may cause delayed revenue recognition.
• Uncertainty regarding the timeline for regulatory relaxation of Robotruck, whose L4 expansion depends on further regulatory approval for urban and highway operations.