We believe a $2.8 billion publicly traded company — widely seen as a rising star in the autonomous driving space — is at the center of one of the most brazen deceptions ever seen on a U.S. exchange. On paper, it claims to sell high-margin LiDAR sensors exclusively for civilian applications. In court filings, investor calls, and interviews, it swears — under penalty of perjury — that its products are “impossible” to use for military purposes.But a mountain of evidence, including smoking-gun video footage from Chinese state media, tells a very different story.

We found unmistakable visual confirmation that this company’s LiDAR sensors are equipped on Chinese military combat vehicles — directly contradicting sworn statements made to U.S. federal courts, regulators, and investors. Even more damning, the company appears to have received early support from government-linked industrial parks designed explicitly to accelerate military-civilian tech fusion in China. A cofounder is a known member of the Chinese Communist Party.In our view, this company has not only misled investors — it has lied outright, committing what could amount to securities fraud and perjury.

The fallout is likely to be catastrophic: A likely loss of its lawsuit against the U.S. Department of Defense, cementing its designation as a Chinese Military Company.An exodus of U.S. customers like Amazon (Zoox) and GM (Cruise), who face legal and reputational risk by maintaining ties with a DoD-blacklisted supplier.

Forced divestitures by institutional investors and potential delisting from U.S. exchanges under current national security directives.Worse yet, the company has presented an illusion of profitability while quietly losing its largest customer and laying off up to 30% of its workforce — facts never disclosed to investors.In our opinion, this company is not just untrustworthy. It is uninvestable.

Military Lies and the Perjury Trail

Pandar128 on Military Vehicle Chinese CCTV

For years, this company has forcefully — and repeatedly — told investors, journalists, and U.S. government officials the same story: “Our LiDAR products are designed for civilian use only. We do not sell to any military in any country.”

They’ve said it in press releases.
They’ve said it on earnings calls.
They’ve said it under oath in federal court.

“There is no way that military can use [our] LiDAR on the battlefield.”
— CEO, Bloomberg TV Interview, March 2025

“It is impossible to use [our] products for military purposes.”
— Court Filing, January 2025

But those claims now appear to be categorically false.

We uncovered video footage broadcast by China’s state-owned CCTV showcasing Chinese combat vehicles clearly equipped with the company’s branded LiDAR units — specifically the Pandar128 and Pandar64. These are not vague, low-res images. In multiple clips, the labels are plainly visible. The footage was aired on national television and confirmed by multiple sources online.

At the 15th China International Aviation & Aerospace Exhibition, a Chinese military showcase, the LiDAR was again spotted — this time mounted on a VU-T5 unmanned ground combat vehicle developed by NORINCO, a state-owned defense contractor. Additional footage reveals the same sensors on battlefield-ready vehicles demonstrated at Chinese military expos going back to 2021.

If the technology is truly “impossible” to use in military settings, then how is it already being used on Chinese military hardware?

And if that wasn’t enough: a former Hesai employee confirmed directly to us that he visited the company’s manufacturing facilities in Shanghai and personally witnessed production for military applications. He also stated that the company’s founding team allegedly stole core IP from Silicon Valley firms and received support from Chinese military-aligned development zones.

He ultimately resigned, citing discomfort with the company’s ethics and military ties.

“I believe the company supplies sensors to the Chinese military — even though they strongly deny it publicly… I resigned once I learned some of the above.”
— Former Employee

This is no longer a case of ambiguous claims or gray-zone interpretations. We believe the company has been caught red-handed.

The Legal Fallout Has Already Begun

In January 2024, the Department of Defense placed the company on the Section 1260H list, formally identifying it as a Chinese Military Company. The company responded by filing a lawsuit in federal court seeking to overturn the designation, arguing its technology was “unsuitable” for military use.

But in our view, the images, footage, and corroborated employee testimony are fatal to that argument. The legal standard for upholding DoD classifications is low — and courts give wide deference to national security agencies in matters like this.

We believe the court will rule decisively in favor of the Department of Defense, cementing the company’s designation, and triggering further consequences:

• Immediate reputational damage

• Legal barriers to doing business with U.S. firms

• Accelerated institutional divestiture

• Eventual delisting from U.S. exchanges under executive authority

The company is now trapped in a corner of its own making. It cannot claim ignorance without admitting it lost control of its downstream supply chain — a red flag in itself. And it cannot continue to deny the obvious while its hardware is paraded on Chinese battlefield vehicles.

The Profitability Mirage — How a Break Fee Was Disguised as Operational Growth

In late 2024, the stock quadrupled on what looked like a breakthrough moment: after five years of consistent net losses, management announced the company had finally turned a profit. The narrative was simple and seductive:“We’ve turned the corner. Our business is scaling. The future is profitable.” But that storyline is, in our opinion, a complete mirage.The truth? The company didn’t turn a profit. It was handed one.Based on interviews with multiple former executives — one from the company itself and one from its now-former largest customer — the company received a one-time $20 million break fee from a terminated contract. That break fee conveniently aligned with a sudden quarterly net profit of… you guessed it: $20 million.

This wasn’t disclosed.
This wasn’t mentioned in the earnings call.
And this wasn’t called out in the investor materials.

Instead, the company told investors that it received “additional payments from a leading global customer.” The implication was that this was a reward for good performance — not a consolation prize for a terminated partnership.

And it gets worse. That “leading customer” was none other than GM’s Cruise, a once-flagship autonomous vehicle project that had accounted for nearly 28% of the company’s revenue in 2023. But Cruise was abruptly shut down by GM in late 2024 following a high-profile robotaxi accident and growing scrutiny.

One executive familiar with the contract confirmed to us:

“GM cancelled the orders in Q4 and gave the company a penalty fee for USD $20 million.”

That break fee created the illusion of profitability — just long enough for insiders to ride the stock up. In the weeks that followed the announcement, the company’s founders dumped 3 million shares, pocketing nearly $69 million.Meanwhile, the company quietly began laying off up to 30% of its workforce. This mass downsizing was never disclosed via press release, 8-K filing, or earnings call. Instead, it trickled out via Chinese employment platforms and local news sources, citing Maimai (China’s version of LinkedIn) and verified employee posts.

Layoffs of this magnitude are not the sign of a company entering a new growth phase. They are the unmistakable signal of a business in distress — bleeding revenue from the loss of its most profitable customer, and attempting to mask the damage.Yet none of this was communicated to investors. No disclosures. No warnings. Just a vague comment on “efficiency optimization” and “focusing on margins.”In our opinion, the company engaged in willful omission and misrepresentation, propping up its share price while insiders cashed out.

Inflated Revenues, Impossible Margins — The Financial Physics Don’t Add Up

Figure: Contradictory Margin Trends
As low-margin ADAS products grew from 35% to 62% of total revenue between 2022 and 2024, reported gross margins inexplicably increased from 33% to 45.6%. This defies fundamental financial logic and raises serious questions about the accuracy of reported profitability.

If the military deception and hidden customer loss weren’t enough, the company’s financials raise serious red flags. In our view, they defy the basic laws of accounting — and reality.

Let’s start with revenue.

From 2019 to 2023, the company reported RMB 949 million (≈$130 million) in sales to its largest customer: GM’s Cruise. That figure would make Cruise not only the top customer across a five-year span, but also a cornerstone of the company’s credibility in the U.S. market.

But there’s a major problem: the numbers don’t add up.

Cruise had around 1,000 autonomous vehicles by the end of 2023, each using a configuration of 5 LiDAR sensors. That puts total LiDAR units in the ballpark of 5,000 sensors — and that’s being generous. Even if we assume over-ordering or spares, industry insiders estimate this only accounts for 6,000–7,000 units.

At the company’s publicly disclosed average selling prices (ASPs), those volumes would yield RMB 300–490 million in total revenue — not RMB 949 million. That’s a 48% to 67% discrepancy between reported sales and what the vehicle volumes can reasonably support.

In plain English: either Cruise bought thousands of phantom LiDAR units — or the company is masking sales to undisclosed buyers, potentially including military-linked intermediaries. Neither explanation inspires investor confidence.

Then There’s the Margin Illusion

Despite fierce price wars and negative-to-single-digit gross margins across the industry, this company has consistently claimed industry-leading gross margins around 41%. That alone is eyebrow-raising.

But what’s truly inexplicable is what happened last year.

In 2024, the company’s product mix shifted dramatically. Low-margin ADAS LiDAR — think mass-produced units for Chinese EVs — jumped from 40% to 62% of revenue. Normally, such a shift would drag overall gross margins down.

Instead? Gross margins mysteriously expanded by 856 basis points.

Let’s be clear: the company itself admits that its high-end “robotics” LiDAR has 5x higher gross margins than its low-end ADAS products. So how does increasing sales of low-margin units result in higher overall margins?

When analysts asked this on the earnings call, the response was evasive. No breakdown, no reconciliation, no explanation.

In our opinion, the only plausible explanation is that the margin expansion is manipulated, misrepresented, or entirely fabricated.

At best, this is creative accounting.
At worst, it’s engineered fiction.

The Mercedes Mirage — How a Phantom Partnership Fueled a 50% Spike

On March 10, 2025, the company reported weak earnings. The stock tanked 17% in after-hours trading. It looked like the narrative was cracking — until something miraculous happened.

Before markets reopened the next morning, a Reuters article citing an anonymous source claimed that the company had just landed a multi-year “exclusive” partnership with Mercedes-Benz. The stock reversed violently, rallying over 50% in a single trading day, erasing losses and then some.

But here’s the problem: Mercedes never confirmed the deal.

There was no press release from Stuttgart. No statement. No mention on Mercedes’ own earnings call. The only source? A “person with direct knowledge of the matter.”

If this were a transformational OEM deal, why wouldn’t Mercedes want to take a victory lap?

Worse, just weeks earlier, Mercedes’ CTO told investors the company would stop using LiDAR in its upcoming models in China, citing algorithmic advances and cost savings. He stated clearly that:

“Advanced automated driving systems will be delivered without LiDAR in the China market.”

So why would Mercedes suddenly ink an exclusive LiDAR deal — especially with a company tied to the Chinese military, under active litigation with the U.S. government, and reportedly inflating its numbers?

Even if a deal exists, it’s almost certainly not exclusive.

Mercedes has a longstanding partnership with Luminar Technologies (NASDAQ: LAZR), another LiDAR supplier. Mercedes is not only a Luminar customer — it’s also a shareholder, having acquired 1.5 million shares in 2022. In fact, Luminar was featured prominently in recent Mercedes investor presentations as part of its L2/L3 automation strategy.

So what’s really going on?

We suspect the answer lies in a much smaller corner of the Mercedes ecosystem: a joint venture with Geely, known as Smart Automobile Co. This JV produces compact EVs for niche international markets and has recently partnered with DeepRoute.ai — a startup known to use our company’s LiDAR.

If this “exclusive Mercedes deal” is actually a second-hand supply arrangement through a minor JV selling ~130,000 units globally… that’s not a game-changing contract. It’s stock promotion masquerading as strategy.

The market didn’t know this. And insiders cashed in.

Following the explosive rally, company insiders sold 3 million shares, unloading $68.6 million worth of stock into retail enthusiasm driven by a headline that may never materialize into meaningful revenue.

Let’s recap what happened:

• Earnings disappoint → stock tanks

• Anonymous Reuters leak → stock spikes

• No confirmation from Mercedes

• Longstanding ties to rival supplier (Luminar)

• Insiders dump nearly $70 million in stock

In our opinion, this was an opportunistic media play designed to mislead, inflate valuation, and enrich insiders. And it worked — temporarily.

But the music always stops.

Delisting on the Horizon — Regulatory, Legal, and Geopolitical Dominoes Lined Up to Fall

Everything we’ve laid out so far leads to one unavoidable conclusion:
This company is on a collision course with U.S. regulators, and its time on American capital markets may be running out.

Let’s be clear — this isn’t speculation. The wheels are already in motion.In January 2024, the Department of Defense designated the company a “Chinese Military Company” under Section 1260H, citing its contribution to military-civil fusion and the use of its dual-use LiDAR technology by China’s armed forces.The company sued. The court case is now in its final stages. But in our view, the outcome is inevitable.

The legal standard for overturning a national security designation is extremely low — and courts give wide deference to the Executive Branch on foreign affairs. Add to that the new video and photographic evidence of the company’s hardware mounted on Chinese combat vehicles, and we believe the court has no choice but to rule decisively in favor of the DoD.And when that happens?U.S. government contracts evaporate. GM (Cruise) and Amazon (Zoox) can’t legally maintain supply chain links to a DoD-blacklisted entity without jeopardizing their own federal businessInstitutional investors will be forced to divest. Under Trump’s February 2025 memorandum — the America First Investment Policy — any U.S. person or entity investing in Chinese military-industrial firms can be barred or penalized.

The company could be delisted. Just like TuSimple, China Telecom, and China Unicom before it.And let’s not forget: this company already pulled its planned IPO in China in 2023, shortly after Beijing passed new laws criminalizing financial fraud. Apparently, it wasn’t good enough for Shanghai — but it was just fine for Nasdaq?If past precedent is any indication, it’s not a matter of if this stock will be delisted. It’s a matter of when.

Conclusion:

The Clock Is TickingIn our opinion, the evidence is overwhelming. This company has:

Lied to investors, regulators, and a federal judge about its military ties.

Masked a one-time contract termination payment as recurring profit.Inflated revenue figures far beyond what any customer data supports.

Pushed a likely-illusory OEM deal to ignite a stock spike and insider selloff.

And faces imminent delisting risk under both legal and executive orders.We believe this company is a textbook case of deception wrapped in tech hype — one that is rapidly running out of road. Investors beware. The crash is coming.

*At The Time Of Writing $HSAI is Trading At $22.30*