Lidar Industry Faces Challenges Due to Investigation

Shares of lidar markers are experiencing a decline in Tuesday trading. Despite the absence of any earnings reports or ratings changes, the Federal government appears to be the reason behind this downward trend.

Lidar, which functions as laser-based radar, serves as an essential component for self-driving cars and other equipment. While lidar sensors tend to be more costly, they offer advantages such as enhanced resolution and the ability to detect objects at greater distances.

Recently, several members of Congress from the House Select Committee on Strategic Competition between the United States and the Chinese Communist Party have urged Treasury Secretary Janet Yellen, Defense Secretary Lloyd Austin, and Commerce Secretary Gina Raimondo to initiate an investigation into Chinese lidar manufacturers.

In a letter from the House committee, it is emphasized that lidar constitutes critical technology utilized in autonomous systems and robotics. The concern arises from the fact that lidar remains exempt from U.S. export controls and government procurement restrictions.

The committee's main objectives are to safeguard U.S. technological secrets from reaching China and to address potential unfair advantages enjoyed by Chinese lidar manufacturers, who receive backing from the Chinese government, within the American market.

While this situation may not seem entirely detrimental to U.S. lidar makers, investors remain uneasy. Luminar Technologies stock experienced a nearly 10% decline during midday trading, while Innoviz Technologies shares were down over 7%. Ouster stock initially dipped by as much as 4%, but it has since recovered and is now slightly down. On the other hand, the S&P 500 and Nasdaq Composite both remained relatively stable.

Stock Reaction Reflects Investor Concerns

Growing Importance of Lidar in the Automotive Industry

The automotive industry sees lidar technology as an increasingly critical component. Lidar systems assist car manufacturers in developing driver-assistance systems that improve safety and pave the way for fully autonomous vehicles.

Hesai's Unique Position

Interestingly, the market response to Hesai's stock seems peculiar. With sales totaling approximately $180 million in 2022, Hesai surpasses Luminar by four times in terms of revenue. Furthermore, nearly 60% of Hesai's revenue is generated within China, while about 30% comes from North America.

Asian-Pacific Region

Looking at Luminar's sales in 2022, approximately 10% originated from the Asian-Pacific region. This demonstrates that there is a lucrative market beyond China for lidar technology.

Challenging Period for Lidar Stocks

Lidar stocks, including Luminar, Innoviz, and Ouster, have faced a difficult period recently. Over the past year, their share prices have declined by around 68%, 66%, and 57% respectively. The combination of rising interest rates and a slowing economy has dampened investor enthusiasm for start-up companies that are yet to achieve profitability.

Note: Wall Street analysts do not anticipate profitable years for American lidar makers before 2026 at the earliest.