Author: MuMu

If you ask a small-town entrepreneur whether you will be fired by your company, the answer is definitely “no”.

But if you ask Hou Xiaodi, the CEO of TuSimple, which is listed on Nasdaq and specializes in autonomous driving, the answer will be “maybe”.

On October 31st, the self-driving truck company TuSimple, known as the “first stock of autonomous driving”, suddenly announced the termination of Hou Xiaodi’s all positions in the company.

As soon as the news came out, the stock price of this autonomous driving truck company was directly cut off, and the closing fell by more than 45%.

Background

On October 31st, TuSimple, a self-driving truck company, announced that the company’s board of directors had terminated the positions of the company’s CEO, president, and CTO Hou Xiaodi, and dismissed Hou Xiaodi’s position of chairman of the board of directors.

Ersin Yumer, the executive vice president of TuSimple, will temporarily assume the positions of CEO and president, and the company will also start to look for a new CEO candidate.

Brad Buss, TuSimple’s chief independent director, will serve as chairman of the board.

According to the documents submitted by TuSimple to the US Securities and Exchange Commission (SEC), Hou Xiaodi has been removed from all positions in the company, and his position as chairman of the board has also been dismissed. However, TuSimple’s official website still shows that Dr. Hou Xiaodi is still on the board of directors.

It is understood that this internal discord in TuSimple is related to an ongoing investigation led by the audit committee of the board of directors, which has led the board of directors to conclude that it is necessary to replace the CEO.

Interestingly, according to sources, as of the announcement, TuSimple personnel involved in the matter claimed to know nothing about the investigation.According to The Wall Street Journal, there may be two reasons for Dr. Hou Xiaodi’s direct dismissal: one is the possible involvement in “conflict of interest,” and the other is “technology output.”

This involves another company, “Hydron,” which was founded by Chen Mo, the co-founder and former CEO of TuSimple, earlier this year. Hydron is a hydrogen-powered truck company named “图灵智卡” in Chinese.

Subsequently, Hydron and TuSimple began to explore some kind of technical cooperation.

Before founding TuSimple, Chen Mo had participated in the operation of three companies, among which Cangqiong Advertising and Deep Blue Brothers had already been sold.

In June 2022, Chen Mo announced the establishment of a new company focusing on R&D, design, manufacturing, and sales of hydrogen fuel heavy trucks and hydrogen refueling infrastructure, named “Hydron,” which can be equipped with L4 level autonomous driving function.

Previously, Hydron has completed two rounds of financing, with a total financing amount of more than 80 million U.S. dollars, and a pre-investment valuation of 1 billion U.S. dollars.

It is precisely because of this relationship that TuSimple and Hydron have a closer cooperation in business, and it can also be understood that TuSimple is positioning itself as an L4 level autonomous driving solution provider, mainly doing autonomous driving trucks; while Hydron manufactures whole trucks, so the cooperation in business is logical.

However, according to TechCrunch’s report, TuSimple’s board of directors claimed in the submitted documents:

“In 2021, some employees did some work related to TuLing Intelligent Card during work hours, and the value of this work did not exceed 300,000 US dollars, but it was never informed or approved by the audit committee.”

This is also what was mentioned earlier, the possible “conflict of interest” involved.“`markdown
Hou Xiaodi responded promptly:

The painful fact is that, on October 30th, the board voted to remove me as CEO and Chairman of the Board without cause.

Unfortunately, the board’s process and conclusion are at best suspicious. As the truth emerges, I believe that our decision as a CEO and Chairman, as well as our vision for TuSimple, will be vindicated. My work and personal life are completely transparent, and I have fully cooperated with the board, as I have nothing to hide.

I want to be clear that I fundamentally deny any suspicion of wrongdoing.

I know that my leadership style may sometimes demand high standards, but that is because self-driving itself is a challenging task that requires unwavering commitment, and your dedication humbles me.

Unfortunately, the work we have accomplished together and the sacrifices we have made in the process are sometimes underestimated by those who do not understand the complexity of autonomous driving.

It is extremely unfair to let politics hinder our shared pursuit of dreams.

According to sources, the so-called interest may only be superficial rhetoric, and the more important issue may be the tech competition between China and the US. Why is there such a high degree of attention on the cooperation between TuSimple and Turing compared to normal business partnerships?

Check out TuSimple’s financing information:

• In January 2016, TuSimple Future received a RMB 50 million Series A financing from Wei Capital (Sina Weibo Innovation Fund).
• In April 2017, TuSimple received tens of millions of US dollars in Series B financing, with investors including NVIDIA, Wei Capital, and Zhiping Capital. In November of the same year, it received $55 million in Series C financing, with investors including Wei Capital and Zhiping Capital.
  “`- In February 2019, TuSimple received $95 million in Series D funding from Weichuangjian Investment, and in September completed a $120 million Series D+ financing round with investment from UPS, Mando, and DHVC.
• In November 2020, TuSimple completed its Series E financing with a total funding amount of $350 million (approximately RMB 2.28 billion), with investment from Traton Group, Navistar, and VectoIQ.
• TuSimple was listed on Nasdaq in April 2021, raising a total of $1.35 billion and becoming the world’s “first self-driving company” to go public.

TuSimple has received investment from Sina, NVIDIA, Zhiping Capital, Composite Capital, DHVC, UPS, and Mando, one of which is the important investor “Weichuangjian Investment (Sina Weibo Innovation Fund)”.

The connection is that Sun Dream is TuSimple’s largest shareholder, holding 20% of Class A shares. Sun Dream is a subsidiary of Sina, and Sina’s CEO, Guowei Cao, and CFO Bonnie Zhang are both members of TuSimple’s board of directors.

It is reported that FBI and SEC investigators are investigating TuSimple and its executives to determine whether they violated fiduciary and securities laws by failing to disclose this relationship properly.

Bloomberg also reported that “US authorities are investigating whether TuSimple shared proprietary technology with China-based Turing Group that is protected by US intellectual property laws and transferred key autonomous-driving technology to them”.

The document also mentions other allegations, including that TuSimple shared confidential information with it and its partners during the evaluation of Turing Zhika as its potential OEM partner in 2022.

From this, it can be seen that the key is whether TuSimple transferred core technology to Turing, which may be the most important factor in the outbreak of the incident.

“Data Security” Will Become the New Sword.## Translation

Data security is an absolute and non-negotiable topic for every country. The uniqueness of autonomous driving lies in the fact that the information collected about roads is excessively detailed. Therefore, autonomous driving companies must first adapt their technology and functions to local regulations and supervisions globally.

After Tusimple went public, it reached an agreement with the U.S. authorities shortly after, expressing the transfer of some technology supervision rights for its autonomous trucking business to the U.S. government.

Tusimple will also adopt a technical control plan to restrict its Chinese branch’s access to autonomous driving data. Jim Mullen, the Chief Administrative and Legal Officer of Tusimple, stated in an interview that these restrictive measures include the source code and algorithm of its autonomous driving trucking business.

Moreover, two members of its Board of Directors associated with the Sina Corporation will also resign upon expiration of their terms. In addition, Tusimple is also preparing to sell its Asian business.

In addition, Tusimple appointed a security officer and established a “Government Security Committee”. This committee must hold regular meetings and report to the U.S. Foreign Investment Committee, which is subordinate to the U.S. Department of the Treasury.

Previously, Tusimple stated that the U.S. government had determined that it had no unresolved national security issues through a series of measures.

That is to say, compliance matters. In fact, Tusimple has had exchanges with local regulatory authorities and taken relevant measures. Therefore, the dismissal of Dr. Hou Xiaodi appears to be a complicated issue.

Conclusion

There is one detail, although the Board of Directors unilaterally dismissed Dr. Hou Xiaodi, according to Tusimple’s financial report, Hou Xiaodi, Chen Mo, and Sina still hold the largest stakes in Tusimple.

Hou Xiaodi and Chen Mo both hold more than 11% of the shares. According to the A/B share structure designed by Tusimple, Class A shares correspond to one vote, while Class B shares correspond to 10 votes. This means that Chen Mo and Hou Xiaodi jointly holdapproximately 60% of the voting rights of the company.

Moreover, Hou Xiaodi claimed that he has never sold any shares of the company, so perhaps there will be a significant turning point in this matter.

This article is a translation by ChatGPT of a Chinese report from 42HOW. If you have any questions about it, please email bd@42how.com.