Sivian Smart Connects for Hong Kong Stocks: R&D Expenses Surge 159% Behind the Increase, Net Loss Expands 93.7% Over Three Years to 514 Million Yuan

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Main Business and Business Model: Intelligent Cockpit Solution Provider

Sihai Zhilian is positioned as a Chinese intelligent cockpit solution provider, with its core competitiveness in software development capabilities and full product coverage from end to cloud. The company mainly offers three categories of products and services: intelligent cockpit software solutions, integrated hardware and software solutions, and full-link technical services, specifically covering intelligent cockpit systems, panoramic imaging, map navigation, AI agents, and audio-visual entertainment, among others.

Based on the number of vehicles equipped with the integrated cockpit solution, the company ranks first nationwide in this sub-sector. The sales model is mainly direct sales, with a customer base concentrated in Chinese automotive manufacturers and tier-one suppliers. As of the last practicable date, it has covered about 20% of approximately 250 automotive manufacturers in China.

Operating Income and Changes: 47.5% growth to 706.35 million in 2025

The company’s operating income has shown fluctuating growth over the past three years, with a significant breakthrough in 2025:

In 2024, revenue remained basically flat, with a slight increase of 0.3% year-on-year; in 2025, it achieved explosive growth of 47.5%, mainly due to the significant increase in revenue from intelligent cockpit software solutions, reflecting the company’s breakthroughs in software business market expansion.

Net Profit and Changes: Three consecutive years of losses with expanding losses

The company has continued to incur losses over the past three years, with the scale of losses accelerating:

In 2025, the net loss reached 514 million, an increase of 93.7% from 265 million in 2023; the adjusted net loss (excluding the impact of redeemable liability interest) also showed an expanding trend, increasing from 59.8 million in 2023 to 188.2 million in 2025, with a growth rate of 214.7%, reflecting the continued deterioration of the company’s main business profitability.

Gross Margin and Changes: Drops to 24.4% in 2025, a decline of 5 percentage points over three years

The company’s overall gross margin has shown a continuous downward trend, facing severe challenges to profitability:

In 2025, the gross margin decreased by 5 percentage points compared to 2023, mainly due to the increase in hardware proportion and the decrease in software gross margin. By product, the gross margin of core businesses has shown a downward trend:

• Gross Margin of Intelligent Cockpit Software Solutions: 63.2% (2023) → 46.2% (2024) → 35.2% (2025), a cumulative decline of 28 percentage points over three years
• Gross Margin of Integrated Hardware and Software Solutions: 11.6% (2023) → 11.6% (2024) → 9.8% (2025), a cumulative decline of 1.8 percentage points over three years

Net Margin and Changes: Continues to be negative with expanding negative values

The company’s net margin remains negative, with the scale of negative values generally expanding:

Although the net margin in 2025 slightly improved compared to -78.9% in 2024, it still remained at a high level of -72.9%, meaning that for every 100 yuan in revenue, the company incurred a net loss of 72.9 yuan, reflecting the continued deterioration of the company’s overall profitability.

Composition and Changes of Operating Income: Software Revenue Share Increases to 57.7%

The company’s income structure has undergone significant changes, with the proportion of software business continuously increasing:

Revenue from software development fees has grown the most significantly, increasing from 71.14 million in 2023 to 318 million in 2025, with a compound annual growth rate of 119.3%, becoming the main driving force of revenue growth. Software license fees showed a trend of rising first and then falling, with the proportion in 2025 dropping from 28.7% in 2024 to 12.7%.

Related Transactions: Highly Dependent on Sihai Tuxin Group, Sales Proportion Nearly 40%

Sihai Tuxin Group, as the founding shareholder of the company, held about 33.97% of the company’s equity as of the last practicable date, and it is also the company’s main related transaction party:

The company has significant related transactions with Sihai Tuxin Group, with sales to it accounting for 44.6% of total revenue in 2025, and purchases accounting for 19.2% of total purchases, forming a two-way dependency relationship, which poses serious risks of related transactions and operational independence issues.

Financial Challenges: Net Asset Liabilities of 3.334 billion, Operating Cash Flow Continues to be Negative

The company faces severe financial challenges, mainly reflected in the following aspects:

2. Asset and Liability Status: As of December 31, 2025, the company’s net asset liabilities (asset deficit) reached 3.334 billion, mainly due to redeemable liabilities as high as 4.092 billion, posing a risk of insolvency.

3. Cash Flow Status:

The company has experienced net cash outflows from operating activities for three consecutive years, with a net outflow of 209 million in 2025, and cash and equivalents at the end of the period were only 65.44 million, indicating serious liquidity risks, putting the company’s ongoing viability to the test.

2. High R&D Investment: R&D expenses increased from 103 million in 2023 to 268 million in 2025, a growth of 159% over two years, maintaining a revenue proportion of 21.7% to 43.8%, but failing to translate into corresponding profits.

Peer Comparison: Limited Market Share, High Industry Competitive Pressure

The company has a low market share in the industry and faces intense competition:

Based on the shipment volume in 2025, the company ranks fifth among Chinese intelligent cockpit solution providers based on domestically produced system-level chips, with a market share of only 2.6%; it also ranks fifth among cockpit infotainment system suppliers, with a market share of 3.4%.

Major competitors include Company A with a market share of 23.1%, Company B with 6.6%, and Company C with 5.5%, among others, indicating a high industry concentration and significant competitive pressure from both domestic and international enterprises.

Major Customers and Customer Concentration: Top Five Customers Contribute 79.3% of Revenue

The company has a highly concentrated customer base, posing severe customer dependency risks:

Although customer concentration has decreased, the top five customers still contributed nearly 80% of revenue in 2025, with the largest customer (Sihai Tuxin Group) accounting for 44.6%, indicating significant customer concentration risks. Any adjustments to major customers’ business or termination of cooperation would have a substantial adverse impact on the company’s operations.

Major Suppliers and Supplier Concentration: Top Five Suppliers Account for 41.0%

The company’s supplier concentration is also at a high level:

In 2024, supplier concentration reached as high as 50%, and although it decreased in 2025, it still maintained a high level of 41%. Major suppliers include Sihai Tuxin Group, Supplier A, Supplier E, etc., indicating risks to supply chain stability.

Actual Controllers, Major Shareholders, and Key Shareholders: Dispersed Equity Structure with No Controlling Shareholder

As of the last practicable date, the company’s equity structure is as follows:

The company has no controlling shareholder, and the equity is relatively dispersed. Sihai Tuxin Beijing is the largest shareholder, holding 27.01%; Didi is the second-largest shareholder, holding 20.60%. The dispersed equity might lead to reduced decision-making efficiency and could trigger conflicts of interest among shareholders.

Core Management Team Background and Compensation: Executives Mostly From Sihai Tuxin, Incomplete Compensation Disclosure

The main members of the company’s core management team include:

• Cheng Peng: Non-executive director and chairman, also serving as a director, vice chairman, and CEO of Sihai Tuxin Beijing, without salary from the company.
• Yang Laitu: CEO, joined the company in March 2021, with 2025 compensation not disclosed.
• Wang Jianqin: Executive director and senior vice president, joined the company in April 2018, with 2025 compensation not disclosed.
• Chen Xiaolan: CFO, joined the company in November 2023, with 2025 compensation not disclosed.

For the fiscal year ending December 31, 2025, the total amount paid or payable to directors was approximately 1.6 million RMB, but specific compensation for core executives was not disclosed, indicating insufficient transparency. It is noteworthy that Chairman Cheng Peng also serves at the major shareholder Sihai Tuxin, which may pose a risk of conflict of interest.

Risk Factors: Multiple Risks Intertwined, Ongoing Viability in Doubt

The company faces multiple risk factors, primarily including:

2. Continuous Loss Risk: As of December 31, 2025, cumulative losses reached 3.471 billion, and there has been continuous cash outflow from operating activities, with significant uncertainty about future profitability.

3. Customer Concentration Risk: The top five customers contribute 79.3% of revenue, with the largest customer Sihai Tuxin Group accounting for 44.6%, indicating extremely high customer dependency.

4. Related Transaction Risk: Significant related transactions with Sihai Tuxin Group may affect the company’s operational independence and financial fairness.

5. R&D Investment Risk: R&D expenses are high (38.0% in 2025), but have not translated into profits, leading to uncertain returns on R&D investment.

6. Industry Competition Risk: With a low market share, the company faces intense competition from domestic and international enterprises, which may lead to further declines in market share.

7. Liquidity Risk: The net current liabilities amount to 4.118 billion, with cash reserves of only 65.44 million, resulting in enormous short-term repayment pressure.

8. Legal Risk: Involves litigation with Baidu, with a first-instance judgment requiring compensation of 10 million yuan, currently under appeal, posing risks of additional financial expenditure.

9. Supply Chain Risk: The company primarily relies on third-party contract manufacturers for producing hardware products, facing challenges in supply chain stability and cost control.

Sihai Zhilian, as a continuously loss-making intelligent cockpit solution provider, although having certain technical advantages in the niche market, faces multiple risks such as customer concentration, related transaction dependencies, ongoing losses, and tight liquidity. Investors should cautiously assess the sustainability of its business model and profitability prospects, being wary of investment risks.

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