By Jiahui Huang

China's Hesai Group is preparing to build its first factory overseas, looking to tap surging demand for its sensors used in cars, robotaxis and robots.

Hesai picked Thailand for its foray abroad because the location suits its clients' needs and because it is economically viable to set up manufacturing there, the company's chief executive said.

Operations at the Thai facility, which will produce the light detection and ranging sensors Hesai is known for, will start in late 2026 or early 2027, CEO Yifan Li told The Wall Street Journal on Wednesday.

The company is rushing to build up production capacity as an increasing number of automakers in China equip their vehicles with autonomous-driving features that require lidar sensors, which essentially allow the car to "see" its surroundings.

Major carmakers like BYD, Li Auto, Geely and Great Wall Motor use Hesai's sensors, and robotaxi firms are starting to drive up demand for the equipment too.

Li expects Hesai to ship 600,000 units of lidar sensors in the fourth quarter.

That would be up 36% from the prior quarter, when shipments more than tripled, pushing revenue up 48% on the year. The company also swung to a net profit during the July-September period from a loss in the year-ago quarter.

But that seems to have done little to cheer investors, which analysts say could be down to pressure on margins and a lack of detail on Hesai's product plans for 2026.

Hesai shares closed nearly 10% lower in Hong Kong on Wednesday, tracking the fall in its U.S.-listed stock overnight.

The company's gross margin narrowed to 42.1% from 47.7% in the third quarter, squeezed by lower revenue from high-margin non-recurring engineering services.

In Li's view, the margin is still "healthy and stable," and the company has shown that it can slowly reduce the average selling prices of its sensors while quickly growing sales.

Hesai is confident it can maintain a stable margin even if sale prices decline, the CEO said.

Competition from rival sensor maker RoboSense could also be weighing on investor sentiment, said Daiwa analyst Evelyn Zhang, noting that the Shenzhen-based company had surprisingly strong deliveries of 120,000 lidar sensor units in October.

While acknowledging that "Robosense is very competitive," Li pointed out that Hesai still has a much bigger share of the market than its peer.

"We actually have a very clear product strategy that has been proven to be extremely successful," the Hesai chief executive said.

He cited the company's next-generation ATX lidar product as an example, saying its rollout has been extremely successful.

"It's actually a good sign that we don't have to come up with a new product every six months to impress people," Li said.

Write to Jiahui Huang at jiahui.huang@wsj.com

(END) Dow Jones Newswires

November 12, 2025 05:26 ET (10:26 GMT)

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