UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

(Mark One)

☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2021

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report                 

For the transition period from                 to                

Commission file number 001-39151

EHang Holdings Limited

(Exact name of Registrant as specified in its charter)

N/A

(Translation of Registrant’s name into English)

Cayman Islands

(Jurisdiction of incorporation or organization)

Building C, Yixiang Technology Park

No. 72 Nanxiang Second Road, Huangpu District

Guangzhou, 510700

People’s Republic of China

(Address of principal executive offices)

Richard Jian Liu, Chief Financial Officer

Telephone: +86 20 2902 8899

EHang Holdings Limited

Building C, Yixiang Technology Park

No. 72 Nanxiang Second Road, Huangpu District

Guangzhou, 510700

People’s Republic of China

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
American depositary shares, each representing two Class A ordinary shares, par value US$0.0001 per share	EH	The Nasdaq Global Market
Class A ordinary shares, par value US$0.0001 per share*		The Nasdaq Global Market*

* Not for trading, but only in connection with the listing on the Nasdaq Global Market of American depository shares, each representing two Class A ordinary shares

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

As of December 31, 2021, there were 113,860,197 ordinary shares outstanding, comprised of (i) 73,723,637 Class A ordinary shares (excluding Class A ordinary shares issued to the depositary bank for bulk issuance of ADSs reserved for future issuances upon the exercise or vesting of awards granted under our share incentive plans), par value of US$0.0001 per share, and (ii) 40,136,560 Class B ordinary shares outstanding, par value of US$0.0001 per share. 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ☐    No  ☒

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    Yes  ☐    No  ☒

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Emerging growth company	☒

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.  ☐

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.    Yes  ☐    No  ☒

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP  ☒	International Financial Reporting Standards as issued	Other  ☐
	by the International Accounting Standards Board  ☐

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.    ☐  Item 17    ☐  Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.    Yes  ☐    No  ☐

TABLE OF CONTENTS

		Page
INTRODUCTION			1
FORWARD-LOOKING INFORMATION			2
PART I			4
Item 1.	Identity of Directors, Senior Management and Advisers		4
Item 2.	Offer Statistics and Expected Timetable		4
Item 3.	Key Information		4
Item 4.	Information on the Company		66
Item 4A.	Unresolved Staff Comments		111
Item 5.	Operating and Financial Review Prospects		111
Item 6.	Directors, Senior Management and Employees		126
Item 7.	Major Shareholders and Related Party Transaction		135
Item 8.	Financial Information		137
Item 9.	The Offer and Listing		138
Item 10.	Additional Information		139
Item 11.	Quantitative and Qualitative Disclosures about Market Risk		154
Item 12.	Description of Securities Other than Equity Securities		155
PART II			156
Item 13.	Defaults, Dividend Arrearages and Delinquencies		156
Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds		156
Item 15.	Controls and Procedures		157
Item 16A.	Audit Committee Financial Expert		158
Item 16B.	Code of Ethics		159
Item 16C.	Principal Accountant Fees and Services		159
Item 16D.	Exemptions from the Listing Standards for Audit Committees		159
Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers		159
Item 16F.	Change in Registrant’s Certifying Accountant		159
Item 16G.	Corporate Governance		160
Item 16H.	Mine Safety Disclosure		161
Item 16I.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections		161
PART III			162
Item 17.	Financial Statements		162
Item 18.	Financial Statements		162
Item 19.	Exhibits		162
SIGNATURES			165
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS			F-1

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INTRODUCTION

Conventions Used in this Annual Report

In this annual report, unless otherwise indicated or the context otherwise requires, references to:

• “AAVs” are to autonomous aerial vehicles;

• “ADSs” are to the American depositary shares, each of which represents two of our Class A ordinary shares;

• “ADRs” are to the American depositary receipts that evidence the ADSs;

• “China” and the “PRC” are to the People’s Republic of China, excluding, for the purposes of this annual report only, Hong Kong, Macau and Taiwan;

• “Class A ordinary shares” are to our class A ordinary shares, par value US$0.0001 per share;

• “Class B ordinary shares” are to our class B ordinary shares, par value US$0.0001 per share;

• “Ehfly Technology” are to Ehfly Technology Limited, our wholly-owned Hong Kong subsidiary;

• “EHang,” “we,” “us,” “our company” or “our” are to EHang Holdings and its subsidiaries and, in the context of describing our consolidated financial information only, also include the VIE and its subsidiaries;

• “EHang Holdings” are to EHang Holdings Limited, our Cayman Islands holding company;

• “RMB” and “Renminbi” are to the legal currency of China;

• “shares” and “ordinary shares” are to our Class A ordinary shares and Class B ordinary shares;

• “UAM” are to urban air mobility;

• “UAVs” are to unmanned aerial vehicles;

• “US$,” “U.S. dollars,” “$,” and “dollars” are to the legal currency of the United States;

• “VIE” and “EHang GZ” are to Guangzhou EHang Intelligent Technology Co., Ltd., a company incorporated in China that has entered into a series of contractual arrangement with our wholly-owned PRC subsidiary, and we refer to the VIE and its subsidiaries collectively as the VIEs or consolidated affiliated entities; and

• “WFOE” and “EHang Intelligent” are to EHang Intelligent Equipment (Guangzhou) Co., Ltd., our wholly-owned PRC subsidiary.

Our reporting currency is the Renminbi because our business is mainly conducted in China and substantially all of our revenues are denominated in Renminbi. This annual report contains translations of Renminbi amounts into U.S. dollars at specific rates solely for the convenience of the reader. The translations of Renminbi amounts into U.S. dollars in this annual report is based on the rate certified for customs purposes by the Federal Reserve Bank of New York. Unless otherwise noted, all translations from Renminbi amounts into U.S. dollars and from U.S. dollars to Renminbi amounts in this annual report were made at a rate of RMB6.3726 to US$1.00, the noon buying rate in effect as of December 30, 2021 set forth in the H.10 statistical release of the U.S. Federal Reserve Board. We make no representation that any Renminbi or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or Renminbi, as the case may be, at any particular rate, or at all.

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FORWARD-LOOKING INFORMATION

Special Note Regarding Forward-Looking Statements

This annual report contains forward-looking statements that reflect our current expectations and views of future events. These forward-looking statements are made under the “safe-harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. Known and unknown risks, uncertainties and other factors, including those listed under “Item 3. Key Information—D. Risk Factors,” may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements.

You can identify these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “likely to,” “potential,” “continue” or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include, but are not limited to, statements about:

• our goals and strategies;

• our future business development, financial condition and results of operations;

• the trends in and expected growth of the PRC and global UAV industry;

• our expectations regarding the demand for and market acceptance of our products and services;

• our expectations regarding our relationships with distributors, customers, component suppliers, strategic partners and other stakeholders;

• our expectations regarding our capacity to develop, manufacture and delivery AAV products in fulfilment of our contractual commitments;

• competition in our industry;

• the impact of the COVID-19 pandemic;

• relevant government policies and regulations relating to our industry; and

• assumptions underlying or related to any of the foregoing.

These forward-looking statements involve various risks and uncertainties. You should read thoroughly this annual report and the documents that we refer to with the understanding that our actual future results may be materially different from, or worse than, what we expect. Other sections of this annual report include additional factors that could adversely impact our business and financial performance. Moreover, we operate in an evolving environment. New risk factors and uncertainties emerge from time to time and it is not possible for our management to predict all risk factors and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We qualify all of our forward-looking statements by these cautionary statements.

This annual report contains certain data and information that we obtained from various government and private publications. Statistical data in these publications also include projections based on a number of assumptions. The AAV industry may not grow at the rate projected by market data, or at all. Failure of this market to grow at the projected rate may have a material adverse effect on our business and the market price of our ADSs. In addition, the rapidly evolving nature of the AAV industry results in significant uncertainties for any projections or estimates relating to the growth prospects or future condition of our market. Furthermore, if any one or more of the assumptions underlying the market data are later found to be incorrect, actual results may differ from the projections based on these assumptions. You should not place undue reliance on these forward-looking statements.

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You should not rely upon forward-looking statements as predictions of future events. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this annual report and the documents that we refer to in this annual report and have filed as exhibits to this annual report, of which this annual report is a part, completely and with the understanding that our actual future results may be materially different from, or worse than, what we expect.

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PART I

Item 1. Identity of Directors, Senior Management and Advisers

Not applicable.

Item 2. Offer Statistics and Expected Timetable

Not applicable.

Item 3. Key Information

Our Corporate Structure and Contractual Arrangements with the VIE and its Shareholders

EHang Holdings Limited is not a PRC operating company but a Cayman Islands holding company conducting operations in China primarily through our PRC subsidiaries, including EHang Intelligent Equipment (Guangzhou) Co., Ltd., or EHang Intelligent, with some operations conducted through Guangzhou EHang Intelligent Technology Co., Ltd., or EHang GZ, a variable interest entity, or VIE, and its subsidiaries. PRC laws and regulations impose certain restrictions or prohibitions on foreign ownership of companies in the UAM industry. Pursuant to the latest version of the “negative list,” namely, the Special Management Measures (Negative List) for the Access of Foreign Investment (2021), which became effective on January 1, 2022, our principal business does not fall into the “restricted” or “prohibited” categories. However, the VIE’s business may expand to operate the commercial general aviation businesses, in which foreign investment is restricted. Accordingly, we conduct some of our operations in China through EHang GZ, or the VIE, and its subsidiaries, and rely on contractual arrangements among our PRC subsidiary, the VIE and its shareholders to control the business operations of the VIE. Revenues contributed by the VIE and its subsidiaries accounted for 25.0%, 19.6% and 0.4% of our consolidated revenues for the years ended December 31, 2019, 2020 and 2021, respectively. As used in this annual report, (i) “EHang GZ,” “variable interest entity” or “VIE” refers to Guangzhou EHang Intelligent Technology Co., Ltd., a company incorporated in the People’s Republic of China; (ii) “EHang Intelligent” or “WFOE” refers to EHang Intelligent Equipment (Guangzhou) Co., Ltd., our wholly-owned PRC subsidiary; (iii) “Ehfly Technology” refers to Ehfly Technology Limited, our wholly-owned Hong Kong subsidiary; (iv) “EHang Holdings” refers to EHang Holdings Limited, our Cayman Islands holding company; and (v) “EHang,” “we,” “us,” “our company,” or “our” refers to EHang Holdings Limited and its subsidiaries and, in the context of describing our consolidated financial information, also includes EHang GZ and its subsidiaries. Investors in our ADSs are not purchasing equity interest in the VIE or its subsidiaries but instead are purchasing equity interest in a Cayman Islands holding company.

Our WFOE has entered into a series of contractual arrangements with the VIE and its shareholders. These agreements enable us to:

• exercise effective control over EHang GZ;

• receive economic benefits from EHang GZ that potentially could be significant to EHang GZ; and

• have an exclusive option to purchase all or part of the equity interests and assets in EHang GZ, when and to the extent permitted by PRC laws.

These contractual arrangements among our WFOE, the VIE and its shareholders include shareholders voting proxy agreements, exclusive consulting and services agreements, exclusive option agreements, loan agreements, and share pledge agreements. As a result of these contractual arrangements, we have control over and are the primary beneficiary of the VIE and its subsidiaries and hence consolidate their financial results under U.S. GAAP. For more details of these contractual arrangements, see “Item 4. Information on the Company—C. Organizational Structure—Contractual Arrangements with the VIE and its Shareholders.”

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However, the contractual arrangements may not be as effective as direct ownership in providing us with control over the VIE and we may incur substantial costs to enforce the terms of the agreements. If the VIE or its shareholders fail to perform their respective obligations under the contractual arrangements, we could be limited in our ability to enforce the contractual arrangements that give us effective control over the VIE, and these agreements have not been tested in China courts. Furthermore, if we are unable to maintain effective control, we would not be able to continue to consolidate the financial results of these entities in our financial statements. Please see “Item 3. Key Information—D. Risk Factors—Risks Relating to Our Corporate Structure—We rely on contractual arrangements with the VIE and its shareholders for a large portion of our business operations, which may not be as effective as direct ownership in providing operational control” and “Item 3. Key Information—D. Risk Factors—Risks Relating to Our Corporate Structure—The shareholders of the VIE may have potential conflicts of interest with us, which may materially and adversely affect our business and financial condition.”

There are also substantial uncertainties regarding the interpretation and application of current and future PRC laws, regulations and rules regarding the status of the rights of our Cayman Islands holding company with respect to the contractual arrangements with the VIE and its shareholders. It is uncertain whether any new PRC laws or regulations relating to variable interest entity structures will be adopted or if adopted, what they would provide. If we or the VIE is found to be in violation of any existing or future PRC laws or regulations, or fail to obtain or maintain any of the required permits or approvals, the relevant PRC regulatory authorities would have broad discretion in accordance with the applicable laws and regulations to take action in dealing with such violations or failures. Please see “Item 3. Key Information—D. Risk Factors—Risks Relating to Our Corporate Structure—If the PRC government finds that the agreements that establish the structure for operating some of our operations in China do not comply with PRC regulations relating to the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations” and “Item 3. Key Information—D. Risk Factors—Risks Relating to Our Corporate Structure—Our business may be significantly affected by the Foreign Investment Law.”

Our corporate structure is subject to risks associated with our contractual arrangements with the VIE. Investors may never have a direct ownership interest in the businesses that are conducted by the VIE. Uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements, and these contractual arrangements have not been tested in a court of law. If the PRC government finds that the agreements that establish the structure for operating our business in China do not comply with PRC laws and regulations, or if these regulations or the interpretation of existing regulations change or are interpreted differently in the future, we and the VIE could be subject to severe penalties or be forced to relinquish our interests in those operations. Our holding company, our WFOE, the VIE, and investors of our company face uncertainty about potential future actions by the PRC government that could affect the enforceability of the contractual arrangements with the VIE and, consequently, significantly affect the financial performance of the VIE and our company as a whole.

We and the VIE face various legal and operational risks and uncertainties related to doing business in China. Some of our business operations are conducted in China through the VIE, and we and the VIE are subject to complex and evolving PRC laws and regulations. For example, we and the VIE face risks associated with regulatory approvals on offshore offerings, the use of variable interest entities, anti-monopoly regulatory actions, and oversight on cybersecurity and data privacy, as well as the lack of inspection by the Public Company Accounting Oversight Board, or PCAOB, on our auditors, which may impact our ability to conduct certain businesses, accept foreign investments, or list on a U.S. or other foreign exchange. These risks could result in a material adverse change in our operations and the value of the ADSs, significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause such securities to significantly decline in value. For a detailed description of risks related to doing business in China, “Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in China.”

PRC government’s significant authority in regulating our operations and its oversight and control over offerings conducted overseas by, and foreign investment in, China-based issuers could significantly limit or completely hinder our ability to offer or continue to offer securities to investors. Implementation of industry-wide regulations, including data security or anti-monopoly related regulations, in this nature may cause the value of such securities to significantly decline. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in China—The PRC government’s significant oversight over our business operation could result in a material adverse change in our operations and the value of our ADSs.”

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Risks and uncertainties arising from the legal system in China, including risks and uncertainties regarding the enforcement of laws and quickly evolving rules and regulations in China, could result in a material adverse change in our operations and the value of our ADSs. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in China— Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and us.”

The Holding Foreign Companies Accountable Act

The Holding Foreign Companies Accountable Act, or the HFCA Act, was enacted on December 18, 2020. The HFCA Act states if the SEC determines that a company has filed audit reports issued by a registered public accounting firm that has not been subject to inspection by the PCAOB for three consecutive years beginning in 2021, the SEC shall prohibit such securities from being traded on a national securities exchange or in the over-the-counter trading market in the U.S. The Company’s auditor, an independent registered public accounting firm, is not subject to the PCAOB’s inspection as announced by the PCAOB on December 16, 2021. The delisting of the ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment. Additionally, the inability of the PCAOB to conduct inspections deprives our investors with the benefits of such inspections. On June 22, 2021, the U.S. Senate passed the “Accelerating Holding Foreign Companies Accountable Act,” which, if passed by the U.S. House of Representatives and signed into law by the U.S. President, would decrease the number of non-inspection years for foreign companies to comply with PCAOB audits from three to two years, thus reducing the time period before the ADSs may be prohibited from trading or delisted. On February 4, 2022, the U.S. House of Representatives passed the America Competes Act of 2022 which includes the exact same amendments as the bill passed by the Senate. The America Competes Act however includes a broader range of legislation not related to the HFCA Act in response to the U.S. Innovation and Competition Act passed by the Senate in 2021. The U.S. House of Representatives and U.S. Senate will need to agree on amendments to these respective bills to align the legislation and pass their amended bills before the U.S. President can sign into law. It is unclear when the U.S. Senate and U.S. House of Representatives will resolve the differences in the U.S. Innovation and Competition Act and the America Competes Act of 2022 bills currently passed, or when the U.S. President will sign on the bill to make the amendment into law, or at all. In the case that the bill becomes the law, it will reduce the time period before our ADSs could be delisted from the exchange and prohibited from over-the-counter trading in the U.S. from 2024 to 2023. See “Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in China—Our ADSs will be delisted and our ADSs and shares may be prohibited from trading in the over-the-counter market under the Holding Foreign Companies Accountable Act, or the HFCA Act, if the PCAOB is unable to inspect or fully investigate auditors located in China. On December 16, 2021, PCAOB issued the HFCA Act Determination Report, according to which our auditor is subject to the determinations that the PCAOB is unable to inspect or investigate completely. Under the current law, delisting and prohibition from over-the-counter trading in the U.S. could take place in 2024. If this happens there is no certainty that we will be able to list our ADS or shares on a non-U.S. exchange or that a market for our shares will develop outside of the U.S. The delisting of our ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment. In addition, the potential enactment of the Accelerating Holding Foreign Companies Accountable Act would decrease the number of non-inspection years from three years to two, thus reducing the time period before our ADSs may be prohibited from over-the-counter trading or delisted. If this bill were enacted, our ADS could be delisted from the exchange and prohibited from over-the-counter trading in the U.S. in 2023.”

Permissions Required from the PRC Authorities for Our Operations

We currently conduct some of our operations through the VIE and its subsidiaries. Our operations in China are governed by PRC laws and regulations. As of the date of this annual report, our PRC subsidiaries, the VIE and the VIE’s subsidiaries have obtained the requisite licenses and permits from the PRC government authorities that are material for the business operations of our subsidiaries and the VIE in China, including, among others, General Aviation Enterprise Operation Licenses required for using UAVs in aerial spraying, aerial photography, operator training, flight show, aerial media solutions and other purposes. Given the uncertainties of interpretation and implementation of relevant laws and regulations and the enforcement practice by relevant government authorities, we may be required to obtain additional licenses, permits, filings or approvals for our business operations in the future. See “Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in China—Uncertainties exist with respect to the interpretation and implementation of the PRC Foreign Investment Law and its Implementation Regulations and how they may impact the viability of our current corporate structure, corporate governance and business operations” and “Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in China—We may be adversely affected by the complexities, uncertainties and changes in PRC regulations on technology companies.”

Furthermore, in connection with our previous issuance of securities to foreign investors, under current PRC laws, regulations and regulatory rules, as of the date of this annual report, we, our PRC subsidiaries and the VIE, (i) are not required to obtain permissions from the China Securities Regulatory Commission, or the CSRC, (ii) are not required to go through cybersecurity review by the Cyberspace Administration of China, or the CAC, and (iii) have not been asked to obtain such permissions by any PRC authority.

6

However, the PRC government has recently indicated an intent to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers. For more detailed information, see “Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in China—Uncertainties exist with respect to the interpretation and implementation of the PRC Foreign Investment Law and its Implementation Regulations and how they may impact the viability of our current corporate structure, corporate governance and business operations.”

Cash and Asset Flows through Our Organization

Our offshore holding company is permitted under PRC laws and regulations to provide funding to our PRC subsidiary only through loans or capital contributions, subject to the approval of government authorities and limits on the amount of capital contributions and loans.

For the years ended December 31, 2019, 2020 and 2021, EHang Holdings made capital contributions of RMB219.2 million, RMB66.6 million and RMB190.0 million (US$29.8 million), respectively, to its subsidiaries. No other transfers, dividends or distributions of cash or assets were made between EHang Holdings, its subsidiaries and the VIEs except for the foregoing capital contributions.

EHang Holdings is a Cayman Islands holding company with no material operations of its own. We currently conduct some of our operations through the VIE and its subsidiaries in China. As a result, although other means are available for us to obtain financing at the holding company level, EHang Holdings’s ability to pay dividends and to service any debt it may incur may depend upon dividends paid by its subsidiaries. Among them, our Hong Kong subsidiary Ehfly Technology’s source of dividend depends on dividends paid by its PRC subsidiaries, which in part depends on payments from the VIE under the contractual arrangements with the VIE.

Current PRC regulations permit our PRC subsidiaries, such as EHang Intelligent, to pay dividends to us only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, EHang GZ, or the VIE, and EHang Intelligent are required to set aside at least 10% of their respective accumulated profits each year, if any, to fund certain reserve funds until the total amount set aside reaches 50% of their respective registered capital. EHang Intelligent and the VIE may also allocate a portion of their after-tax profits based on PRC accounting standards to employee welfare and bonus funds at their discretion. These reserves are not distributable as cash dividends. Furthermore, if EHang Intelligent incurs debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or make other payments to us. In addition, the PRC tax authorities may require us to adjust our taxable income under the contractual arrangements we currently have in place in a manner that would materially and adversely affect EHang Intelligent’s ability to pay dividends and other distributions to us. Any limitation on the ability of our subsidiary to distribute dividends to us or on the ability of the VIE to make payments to EHang Intelligent may restrict our ability to satisfy our liquidity requirements. See “Item 4. Information on the Company—B. Business Overview—PRC Regulation—Dividend Distribution.”

Additionally, the VIE receives substantially all of its revenues in RMB and the PRC government imposes controls on the convertibility of the RMB into foreign currencies and, in certain cases, the remittance of currency out of China. Under existing PRC foreign exchange regulations, payments of current account items, such as profit distributions and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval from the State Administration of Foreign Exchange of the PRC, or the SAFE by complying with certain procedural requirements. Dividends payments to us by Ehfly Technology, our Hong Kong subsidiary, in foreign currencies are subject to the condition that the remittance of such dividends outside of the PRC complies with certain procedures under PRC foreign exchange regulations, such as the overseas investment registrations by our shareholders or the ultimate shareholders of our corporate shareholders who are PRC residents. Approval by or registration with appropriate government authorities is required where RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. The PRC government may also at its discretion restrict access in the future to foreign currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demands, EHang Intelligent may not be able to pay dividends in foreign currencies to us and our access to cash generated from its operations will be restricted. See “Item 3.D. Key Information—Risk Factors—Risks Relating to Doing Business in China—Governmental control of currency conversion may limit our ability to utilize our operating revenues effectively and affect the value of your investment.”

7

None of our subsidiaries has declared or paid any dividend or distribution to us. We have never declared or paid any dividend on our ordinary shares. We currently intend to retain most, if not all, of our available funds and any future earnings to fund the development and growth of our business. As a result, we do not expect to pay any cash dividends in the foreseeable future. See “Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—Dividend Policy.” For the Cayman Islands, PRC and U.S. federal income tax considerations applicable to an investment in our ADSs or Class A ordinary shares, see “Item 10. Additional Information—E. Taxation.”

Under the current laws of the Cayman Islands, EHang Holdings is not subject to tax on income or capital gains. Upon payments of dividends to our shareholders, no Cayman Islands withholding tax will be imposed. For purposes of illustration, the following discussion reflects the hypothetical taxes that might be required to be paid in Mainland China and Hong Kong, assuming that: (i) the VIE has taxable earnings, and (ii) we determine to pay a dividend in the future.

	Tax calculation (1)
Hypothetical pre-tax earnings in the VIE (1)		100
Tax on earnings at statutory rate of 25% at WFOE level (2)		(25	)
Amount to be distributed as dividend from WFOE to Ehfly Technology (3)		75
Withholding tax at a treaty rate of 5%		(3.75	)
Amount to be distributed as dividend at Ehfly Technology level and net distribution to EHang Holdings (4)		71.25

Notes:

(1) For purposes of this example, the tax calculation has been simplified. The hypothetical book pre-tax earnings amount is assumed to equal Chinese taxable income.

(2) Certain of our subsidiaries and the VIE qualifies for a 15% preferential income tax rate in China. However, such rate is subject to qualification, is temporary in nature, and may not be available in a future period when distributions are paid. For purposes of this hypothetical example, the table above reflects a maximum tax scenario under which the full statutory rate would be effective.

(3) China’s Enterprise Income Tax Law imposes a withholding income tax of 10% on dividends distributed by a Foreign Invested Enterprise to its immediate holding company outside of Mainland China. A lower withholding income tax rate of 5% is applied if the Foreign Invested Enterprise’s immediate holding company is registered in Hong Kong or other jurisdictions that have a tax treaty arrangement with Mainland China, subject to a qualification review at the time of the distribution. There is no incremental tax at Ehfly Technology level for any dividend distribution to EHang Holdings.

(4) If a 10% withholding income tax rate is imposed, the withholding tax will be 7.5 and the amount to be distributed as dividend at Ehfly Technology level and net distribution to EHang Holdings will be 67.5.

The table above has been prepared under the assumption that all profits of the VIE will be distributed as fees to our PRC subsidiaries under tax neutral contractual arrangements. If, in the future, the accumulated earnings of the VIE exceed the service fees paid to our PRC subsidiaries (or if the current and contemplated fee structure between the intercompany entities is determined to be non-substantive and disallowed by Chinese tax authorities), the VIE could make a non-deductible transfer to our PRC subsidiaries for the amounts of the stranded cash in the VIE. This would result in such transfer being non-deductible expenses for the VIE but still taxable income for the PRC subsidiaries. Our management believes that there is only a remote possibility that this scenario would happen.

8

Should all tax planning strategies fail the VIE could, as a matter of last resort, make a non-deductible transfer to the WFOE for amounts of stranded cash in the VIE. This would result in the double taxation of earnings: once at the VIE level (non-deductible expense) and again at the WFOE level (for presumptive earnings on the transfer). This has the impact of reducing the amount available above from 71.25% to approximately 53% of pre-tax income, respectively. Management believes this scenario to be remote.

Financial Information Relating to the VIE

The following tables present the condensed consolidating schedule showing the results of operations, financial position and cash flows for our holding company, our subsidiaries, and the VIE, eliminating adjustments and consolidated totals as of December 31, 2020 and 2021 and for the years ended December 31, 2019, 2020 and 2021.

9

Selected Condensed Consolidated Statements of Operations Data

	For the year ended December 31,
	2019																		2020																		2021
	Parent			Other subsidiaries			WFOE			VIE and VIE’s subsidiaries			Eliminating adjustments			Consolidated totals			Parent			Other subsidiaries			WFOE			VIE and VIE’s subsidiaries			Eliminating adjustments			Consolidated totals			Parent			Other subsidiaries			WFOE			VIE and VIE’s subsidiaries			Eliminating adjustments			Consolidated totals
	(RMB in thousands)
Revenues		—			8,728			94,865			62,288			(44,067	)		121,814			—			64			146,905			68,372			(35,248	)		180,093			—			2,199			57,550			28,399			(31,341	)		56,807
- Third-party revenues		—			8,728			82,604			30,482			—			121,814			—			64			144,749			35,280			—			180,093			—			2,199			54,378			230			—			56,807
- Inter-company revenues(1)		—			—			12,261			31,806			(44,067	)		—			—			—			2,156			33,092			(35,248	)		—			—			—			3,172			28,169			(31,341	)		—
Costs of revenues		—			(8,497	)		(67,825	)		(17,640	)		43,366			(50,596	)		—			—			(99,530	)		(10,239	)		35,855			(73,914	)		—			(1,616	)		(49,098	)		(720	)		30,657			(20,777	)
- Third-party cost of revenues		—			(153	)		(39,744	)		(10,699	)		—			(50,596	)		—			—			(66,438	)		(7,476	)		—			(73,914	)		—			(48	)		(20,069	)		(660	)		—			(20,777	)
- Inter-company cost of revenues(1)		—			(8,344	)		(28,081	)		(6,941	)		43,366			—			—			—			(33,092	)		(2,763	)		35,855			—			—			(1,568	)		(29,029	)		(60	)		30,657			—
Gross profit		—			231			27,040			44,648			(701	)		71,218			—			64			47,375			58,133			607			106,179			—			583			8,452			27,679			(684	)		36,030
Sales and marketing expenses		—			(375	)		(14,488	)		(12,093	)		101			(26,855	)		—			(4,419	)		(24,072	)		(8,695	)		—			(37,186	)		—			(6,859	)		(29,848	)		(7,105	)		583			(43,229	)
General and administrative expenses		(1,529	)		(946	)		(21,746	)		(12,727	)		—			(36,948	)		(1,144	)		(3,537	)		(44,442	)		(12,490	)		—			(61,613	)		(5,668	)		(1,383	)		(166,531	)		(13,889	)		83			(187,388	)
Research and development expenses		—			—			(38,232	)		(19,296	)		361			(57,167	)		—			—			(91,967	)		(13,337	)		52			(105,252	)		—			—			(115,141	)		(22,123	)		116			(137,148	)
Total operating expenses		(1,529	)		(1,321	)		(74,466	)		(44,116	)		462			(120,970	)		(1,144	)		(7,956	)		(160,481	)		(34,522	)		52			(204,051	)		(5,668	)		(8,242	)		(311,520	)		(43,117	)		782			(367,765	)
Other operating income		—			—			1,286			2,121			—			3,407			—			466			3,125			2,985			—			6,576			—			1,696			4,544			4,959			—			11,199
Operating loss		(1,529	)		(1,090	)		(46,140	)		2,653			(239	)		(46,345	)		(1,144	)		(7,426	)		(109,981	)		26,596			659			(91,296	)		(5,668	)		(5,963	)		(298,524	)		(10,479	)		98			(320,536	)
Share of (loss) income from subsidiaries and VIEs(2)		(47,151	)		(44,997	)		2,815			—			89,333			—			(86,938	)		(80,960	)		30,740			—			137,158			—			(308,305	)		(306,742	)		(8,730	)		—			623,777			—
Interest and investment income		135			239			292			217			—			883			463			1,741			1,468			123			—			3,795			14			3,965			891			273			—			5,143
Interest expenses		—			—			(588	)		(249	)		—			(837	)		—			—			(2,131	)		(206	)		—			(2,337	)		—			—			(1,445	)		(358	)		—			(1,803	)
Foreign exchange gain (loss)		—			81			(160	)		188			—			109			—			144			(107	)		(370	)		—			(333	)		—			(450	)		(253	)		(124	)		—			(827	)
Other income		—			—			184			256			—			440			—			820			318			89			—			1,227			—			742			2,735			2,610			(1	)		6,086
Other expenses		—			(1,384	)		(6	)		(26	)		—			(1,416	)		—			(1,350	)		(1,270	)		(507	)		—			(3,127	)		—			(6	)		(1,340	)		(343	)		140			(1,549	)
Loss before income tax and (loss) income from equity method investment		(48,545	)		(47,151	)		(43,603	)		3,039			89,094			(47,166	)		(87,619	)		(87,031	)		(80,963	)		25,725			137,817			(92,071	)		(313,959	)		(308,454	)		(306,666	)		(8,421	)		624,014			(313,486	)
Income tax expenses		—			—			—			(754	)		—			(754	)		—			—			—			(206	)		—			(206			—			(21	)		—			(113	)		—			(134	)
Loss before (loss) income from equity method investment		(48,545	)		(47,151	)		(43,603	)		2,285			89,094			(47,920	)		(87,619	)		(87,031	)		(80,963	)		25,519			137,817			(92,277	)		(313,959	)		(308,475	)		(306,666	)		(8,534	)		624,014			(313,620	)
(Loss) income from equity method investments		—			—			—			(74	)		—			(74	)		—			—			—			236			—			236			—			—			(276	)		—			—			(276	)
Net (loss) income		(48,545	)		(47,151	)		(43,603	)		2,211			89,094			(47,994	)		(87,619	)		(87,031	)		(80,963	)		25,755			137,817			(92,041	)		(313,959	)		(308,475	)		(306,942	)		(8,534	)		624,014			(313,896	)
Net income (loss) attributable to non-controlling interest		—			—			—			(551	)		—			(551	)		—			93			3			4,326			—			4,422			—			170			135			(368	)		—			(63	)
Net loss attributable to EHang Holdings Limited		(48,545	)		(47,151	)		(43,603	)		1,660			89,094			(48,545	)		(87,619	)		(86,938	)		(80,960	)		30,081			137,817			(87,619	)		(313,959	)		(308,305	)		(306,807	)		(8,902	)		624,014			(313,959	)
Modification of redeemable convertible preferred shares and accretion to redemption value of redeemable and convertible preferred shares		(27,248	)		—			—			—			—			(27,248	)		—			—			—			—			—			—			—			—			—			—			—			—
Net loss attributable to ordinary shareholders		(75,793	)		(47,151	)		(43,603	)		1,660			89,094			(75,793	)		(87,619	)		(86,938	)		(80,960	)		30,081			137,817			(87,619	)		(313,959	)		(308,305	)		(306,807	)		(8,902	)		624,014			(313,959	)

10

Selected Condensed Consolidated Balance Sheets Data

	For the year ended December 31,
	2020														2021
	Parent		Other subsidiaries		WFOE		VIE and VIE’s subsidiaries			Eliminating adjustments			Consolidated totals		Parent		Other subsidiaries		WFOE			VIE and VIE’s subsidiaries			Eliminating adjustments			Consolidated totals
	(RMB in thousands)
Cash and cash equivalents		10,801		84,095		35,576		7,368			—			137,840		72,998		137,200		28,651			8,014			—			246,863
Restricted cash		—		—		2,327		6			—			2,333		—		—		160			—			—			160
Short-term investments		—		49,271		—		—			—			49,271		—		65,108		—			—			—			65,108
Accounts receivable, net		—		183		125,382		37,581			—			163,146		—		66		45,164			10,959			—			56,189
Inventories		—		2,190		45,461		837			(1,394	)		47,094		—		1,729		76,836			839			(1,329	)		78,075
Prepayments and other current assets		—		578		15,293		5,550			—			21,421		—		1,529		23,564			4,302			—			29,395
Amount due from a related party		—		—		—		2,639			—			2,639		—		—		1,360			—			—			1,360
Amounts due from subsidiaries and VIEs(3)		—		98,464		26,792		11,319			(136,575	)		—		—		98,375		10,550			25,774			(134,699	)		—
Property and equipment, net and intangible assets, net		—		520		18,862		2,772			(223	)		21,931		—		350		32,158			2,109			(51	)		34,566
Investment in subsidiaries and VIEs(2)		268,331		51,439		—		—			(319,770	)		—		263,347		—		—			—			(263,347	)		—
Others		—		4,869		33,133		872			—			38,874		—		4,784		18,837			97			—			23,718
Total assets		279,132		291,609		302,826		68,944			(457,962	)		484,549		336,345		309,141		237,280			52,094			(399,426	)		535,434
Short-term bank loans		—		—		10,000		5,000			—			15,000		—		—		10,000			—			—			10,000
Amounts due to subsidiaries and VIEs(3)		—		13,978		63,796		58,801			(136,575	)		—		—		10,419		78,289			45,991			(134,699	)		—
Accounts payables		—		—		46,895		6,252			—			53,147		—		—		42,535			3,025			—			45,560
Accrued expenses and other liabilities		2,814		467		62,902		15,395			—			81,578		3,744		1,040		39,014			18,053			—			61,851
Contract liabilities		—		—		5,878		1,614			—			7,492		—		906		12,248			1,677			—			14,831
Long-term loans		—		—		—		—			—			—		—		—		8,000			9,000			—			17,000
Deficit in subsidiaries and VIEs(2)		—		—		18,385		—			(18,385	)		—		—		25,172		27,115			—			(52,287	)		—
Others		—		8,904		40,140		588			—			49,632		—		8,498		42,060			1,588			—			52,146
Total liabilities		2,814		23,349		247,996		87,650			(154,960	)		206,849		3,744		46,035		259,261			79,334			(186,986	)		201,388
Total shareholders’ equity(2)		276,318		268,260		54,830		(18,706	)		(303,002	)		277,700		332,601		263,106		(21,981	)		(27,240	)		(212,440	)		334,046

11

Selected Condensed Consolidated Cash Flows Data

	For the year ended December 31,
	2019																		2020																		2021
	Parent			Other subsidiaries			WFOE			VIE and VIE’s subsidiaries			Eliminating adjustments			Consolidated totals			Parent			Other subsidiaries			WFOE			VIE and VIE’s subsidiaries			Eliminating adjustments			Consolidated totals			Parent			Other subsidiaries			WFOE			VIE and VIE’s subsidiaries			Eliminating adjustments			Consolidated totals
	(RMB in thousands)
Net cash (used in) provided by operating activities(4)		(1,394	)		17,596			(64,898	)		(6,822	)		—			(55,518	)		(681	)		2,331			(148,228	)		(5,118	)		—			(151,696	)		(4,874	)		(5,792	)		(107,481	)		(3,482	)		—			(121,629	)
Cash flows from investing activities
Capital contribution		(219,248	)		(87,000	)		—			—			306,248			—			(66,599	)		(90,000	)		—			—			156,599			—			(190,026	)		(109,000	)		—			—			299,026			—
Proceeds from maturities of short-term investments		—			—			—			—			—			—			—			18,596			32,200			21,200			—			71,996			—			—			—			—			—			—
Purchase of short-term investments		—			—			—			—			—			—			—			(61,964	)		(32,200	)		(21,200	)		—			(115,364	)		—			—			—			—			—			—
Loans to third parties		—			—			—			—			—			—			—			(1,900	)		(52,000	)		—			—			(53,900	)		—			—			—			—			—			—
Repayment of loan to a third party		—			—			—			—			—			—			—			—			40,000			—			—			40,000			—			—			—			—			—			—
Other investing activities		—			(7,444	)		(2,825	)		(719	)		—			(10,988	)		(484	)		(1,538	)		(6,812	)		(107	)		—			(8,941	)		150			(17,062	)		(15,611	)		(878	)		—			(33,401	)
Net cash (used in) provided by investing activities		(219,248	)		(94,444	)		(2,825	)		(719	)		306,248			(10,988	)		(67,083	)		(136,806	)		(18,812	)		(107	)		156,599			(66,209	)		(189,876	)		(126,062	)		(15,611	)		(878	)		299,026			(33,401	)
Cash flows from financing activities
Capital contribution		—			219,248			87,000			—			(306,248	)		—			—			66,599			90,000			—			(156,599	)		—			—			190,026			109,000			—			(299,026	)		—
Proceeds from initial public offering		252,861			—			—			—			—			252,861			—			—			—			—			—						—			—			—			—			—			—
Proceeds from issuance of redeemable and convertible preferred shares		47,436			—			—			—			—			47,436			—			—			—			—			—			—			—			—			—			—			—			—
Proceeds from mandatorily redeemable non- controlling interests of a subsidiary		—			—			—			—			—			—			—			—			40,000			—			—			40,000			—			—			—			—			—			—
Proceeds from short-term bank loans		—			—			—			—			—			—			—			—			15,000