EH (EH) Q1 2025: OC Milestone Triggers 900M RMB Full-Year Revenue Confidence

2025-05-26 | By EarningsIQ Research

EH’s first-in-China air operator certificate (OC) unlocks commercial flight operations and signals the start of scaled urban air mobility deployment. Despite a seasonal and regulatory-driven dip in Q1 deliveries, management’s conviction in a 900 million RMB full-year revenue target remains, with order momentum and production expansion poised to drive a sharp rebound. Strategic focus on phased rollouts, operational safety, and cost leadership position EH to capitalize as China’s low-altitude economy matures.

Summary

• Regulatory Breakthrough: OC approval enables commercial autonomous flights, establishing EH as a lifecycle urban air mobility platform.
• Order Pipeline Rebound: Q2 and H2 deliveries set to accelerate, driven by deferred demand and new operator certifications.
• Phased Expansion Path: EH’s deliberate rollout and infrastructure build aim to solidify long-term leadership in China’s low-altitude economy.

Performance Analysis

Q1 marked a pivotal regulatory win for EH, as the company secured China’s first air operator certificate for human-carrying, pilotless aerial vehicles, officially transitioning from product certification to commercial operations. However, revenues and deliveries fell sharply, with only 11 EH216S units delivered and 26.1 million RMB in revenue, reflecting seasonal softness, customer procurement cycles, and deferred orders pending OC issuance. Management attributed the volume shortfall to winter and Chinese New Year seasonality, government clients’ budgeting delays, and customer preference to place orders post-certification, leaving underlying demand intact.

Gross margin expanded to 62.4%, up from both the prior year and previous quarter, driven by higher average selling prices and zero discounts on retail sales in Q1. Operating expenses fell 31.6% sequentially, reflecting sharp cost controls and reduced compensation costs, though adjusted operating expenses rose year-on-year as EH continues to invest in R&D and talent. Despite an adjusted net loss of 31.1 million RMB, management emphasized that order activity and deliveries have rebounded in Q2, supporting confidence in a strong second half and unchanged 900 million RMB full-year revenue guidance.

• Deferred Deliveries: Customers delayed orders into Q2 to await OC, temporarily suppressing Q1 volume.
• Margin Upside: Retail pricing without discounts and procurement scale reduced COGS, boosting gross margin.
• Cost Flexibility: OpEx discipline and cash reserves (1.11B RMB) provide runway for R&D, production, and commercial scale-up.

Looking ahead, management expects Q2 and H2 to deliver significant sales and delivery growth as pent-up demand converts, new operator OCs are granted, and production ramps across multiple facilities.

Executive Commentary

Strategic Positioning

1. Regulatory First-Mover Advantage

Securing China’s first OC for autonomous human-carrying aerial vehicles positions EH as the regulatory benchmark and go-to partner for both operators and policymakers. This milestone enables commercial flights and sets the company up as the reference model for future operators, potentially shortening approval timelines for customers and accelerating industry adoption.

2. Phased Commercialization and Safety Focus

EH is executing a deliberate, phased rollout: starting with sightseeing and pilot projects, then expanding to urban commuting and broader transportation. The company’s “safety first” approach—trialing flights with internal staff and invited guests before public ticket sales—aims to build operational credibility and data, which are prerequisites for scaling and regulatory trust.

3. Scalable Production and Cost Leadership

Production capacity is being rapidly expanded via the Yunfu base (targeting 1,000 units per year), new assembly facilities in Hefei and Weihai, and partnerships with JAC Motors. EH’s multi-copter design offers a compact, cost-effective solution (2.39M RMB per unit) compared to competitors’ tiltrotor and fixed-wing models, which require larger infrastructure and cost more than 10M RMB. This cost and footprint advantage is central to EH’s urban deployment thesis.

4. Product Pipeline and R&D Ecosystem

EH continues to invest heavily in R&D (nearly half of staff), with the next-generation VT35 moving through flight testing and type certification. Strategic alliances with Tsinghua University and international partners are cultivating an ecosystem for low-altitude innovation, supporting both technology leadership and talent development.

5. Diversified Application and Global Expansion

Beyond passenger flights, EH is pushing into logistics, emergency rescue, and international markets. The company’s logistics UAVs have completed 200km flights, and specialized emergency UAVs are being piloted with national authorities. Internationally, EH216S demo flights in Spain, Mexico, and Thailand, plus ongoing regulatory engagement, are laying groundwork for global scale.

Key Considerations

EH’s Q1 was defined by a regulatory inflection point, not by immediate financial performance. The company’s ability to convert this OC milestone into commercial momentum will dictate its trajectory as China’s low-altitude economy accelerates.

Key Considerations:

• Order Conversion Timing: The pace at which deferred and new orders convert to deliveries will determine revenue realization in Q2 and H2.
• Operator Certification Pipeline: The number and speed of new operator OCs will directly impact fleet scale and recurring service revenue potential.
• Production Ramp Risks: Scaling from a few dozen to 1,000 units per year requires flawless execution in supply chain, automation, and quality control.
• Competitive Cost Structure: Maintaining price leadership and operational efficiency versus emerging domestic and international rivals is crucial for urban market share.
• Policy and Safety Alignment: Sustained regulatory engagement and adherence to “safety-first” protocols are non-negotiable for industry legitimacy and public acceptance.

Risks

Execution risk looms large as EH transitions from pilot projects to scaled commercial operations—any safety incident, regulatory delay, or production misstep could slow adoption or trigger reputational harm. Competitive pressure is intensifying as rivals with alternative designs near certification, while macro volatility and government budget cycles could impact order timing. Sustained cost discipline and operational rigor are essential to deliver on ambitious growth targets.

Forward Outlook

For Q2 2025, EH expects:

• Significant rebound in deliveries and revenue as deferred orders convert and new operator OCs are issued
• Continued gross margin strength, supported by higher ASPs and cost controls

For full-year 2025, management maintained guidance:

• 900 million RMB in total revenue

Management highlighted:

• Large orders from multiple provinces are set to deliver in phased batches starting Q2
• Operator pipeline is robust, with more OCs expected to be granted, accelerating commercial deployment

Takeaways

EH’s regulatory breakthrough is a strategic unlock, but the company’s ability to execute on commercialization, safety, and cost leadership will determine if it can translate first-mover status into durable market share and revenue scale.

• Commercialization Inflection: OC approval moves EH from certification to revenue-generating operations, but Q2 and H2 delivery execution are critical proof points.
• Cost and Margin Leverage: Retail pricing and procurement scale supported margin gains, but volume growth must follow for sustained profitability.
• Watch Operator Pipeline: The pace and breadth of new operator certifications will be a leading indicator for EH’s urban air mobility flywheel.

Conclusion

EH’s Q1 was less about near-term numbers and more about clearing the final regulatory hurdle to scaled commercial flight. The next two quarters will reveal whether pent-up demand and operational readiness can deliver on the promise of China’s low-altitude economy, with EH poised as the standard bearer.

Industry Read-Through

EH’s OC milestone signals a new phase for China’s urban air mobility sector, providing a blueprint for regulatory approval, phased rollout, and safety-first operations. Competitors will need to match EH’s lifecycle integration and cost structure to remain relevant as the market moves from pilots to scale. For the broader aerospace and mobility sectors, the rapid evolution of China’s low-altitude economy foreshadows new infrastructure, service models, and public-private partnerships that could reshape urban transport globally. Success or setbacks at EH will serve as a bellwether for investor confidence and regulatory pace across the sector.

EH Industrials Aerospace Urban Mobility Certification Autonomous Vehicles China Production