Correspondence 0001628280-24-040720 from ECARX Holdings Inc. (ECX)
ECARX Holdings Inc.
Date: Sept. 18, 2024 · CIK: 0001861974 · Accession: 0001628280-24-040720
AI Filing Summary & Sentiment
Reasoning
Referenced dates: September 4, 2024
Letter
VIA EDGAR Division of Corporation Finance Office of Technology Securities and Exchange Commission 100 F Street, N.E. Washington, D.C. 20549 Re: ECARX Holdings Inc. (the “Company”) Form 20-F for the Year Ended December 31, 2023
Dear Ms. Claire DeLabar and Mr. Robert Littlepage,
This letter sets forth the Company’s responses to the comments contained in the letter dated September 4, 2024 from the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”) regarding the Company’s annual report on Form 20-F for the year ended December 31, 2023 filed with the Commission on April 3, 2024 (the “2023 Form 20-F”). The Staff’s comments are repeated below in bold and followed by the Company’s responses thereto. All capitalized terms used but not defined in this letter shall have the meaning ascribed to such terms in the 2023 Form 20-F.
Form 20-F for the Year Ended December 31, 2023
Item 3. Key Information
Our Holding Company Structure and China Operations, page 5
1.Please expand the disclosure to include a detailed description of contractual agreements between Zhejiang Huanfu Technology Co. Ltd. and Holdings and other subsidiaries and how they may affect investors. Disclose the methodology used to determine financial obligations to Zhejiang Huanfu Technology Co. Ltd. in accordance with the agreements for mapping data and other technology related data and ICP licenses. Also disclose any relationships other than the agreements, such as common ownership and/or control between Holdings and its subsidiaries and Zhejiang Huanfu Technology Co. Ltd. Please expand the disclosure in Risks Relating to Doing Business in China accordingly.
The Company respectfully submits that, as disclosed in the 2023 20-F, it used to provide surveying and mapping services and conduct ICP businesses (“Mapping and ICP Businesses”) through its former VIE, Hubei ECARX Technology Co., Ltd. (“Hubei ECARX”). In early 2022, the Company implemented a series of transactions
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to restructure its organization and business operations as a result of which the contractual arrangements that required the Company to consolidate Hubei ECARX were terminated, and Hubei ECARX retained the Mapping and ICP Business. The Company has divested and has not engaged in the Mapping and ICP Businesses and has not been in possession of any surveying or mapping qualification or ICP license since then. Neither the Company nor any of its subsidiaries has any subsisting agreement with Hubei ECARX with respect to mapping data and other technology related data and ICP licenses.
In addition, the Company’s subsidiaries and Hubei ECARX previously possessed the right to access and process certain personal data relevant to their respective business operations (“Right to Data”). As disclosed in the 2023 20-F, the Company initiated the process to transfer the Right to Data to Zhejiang Huanfu Technology Co., Ltd. (“Zhejiang Huanfu”) in September 2021 and the transfer was completed in December 2021. The change was made in response to the move by PRC government authorities to tighten the regulatory framework governing data security, cybersecurity and privacy. Since then, the Company’s mainland China subsidiaries have not had any right to access or process any personal data other than certain employee personal data and certain vehicle identification numbers provided by automotive OEMs in association with the provision by the Company of product repair and maintenance services.
Both Zhejiang Huanfu and Hubei ECARX are entities controlled by the controlling shareholder of the Company. Each of them operates independently of the Company and there is no arrangement which allows the Company to exercise control or consolidate Zhejiang Huanfu or Hubei ECARX.
In January 2022, the Company entered into a procurement framework agreement with Zhejiang Huanfu and thereafter concluded several procurement-related contracts pursuant to the procurement framework agreement for the sole purpose of contracting Zhejiang Huanfu to discharge the Company’s outstanding obligations to provide certain data-related services to its PRC customers. There is no agreement between the Company or its subsidiaries with Zhejiang Huanfu pertaining to mapping data or ICP licenses. All of the Company and its consolidated subsidiaries’ payments to Zhejiang Huanfu were determined based on the arm’s length commercial terms of the agreements with Zhejiang Huanfu. The Company concluded that the amounts of its transactions in 2023 and account balances as of December 31, 2023 with Zhejiang Huanfu were not material warranting specific disclosure or discussion.
In light of the foregoing, the Company proposes to revise the disclosure under “Item 3. Key Information – Our Holding Company Structure and China Operations” in its future Form 20-F filings, as shown in the blackline below (with deletions shown in strikethrough and additions in underline), subject to such updates and adjustments to be made in connection with any material developments of the subject matter being disclosed:
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“Prior to 2022, we conducted our operations in China through our PRC subsidiaries and through Hubei ECARX Technology Co., Ltd., the former VIE, with which we, our subsidiary, and the nominee shareholders of the former VIE entered into certain contractual arrangement. PRC laws, regulations, and rules restrict and impose conditions on foreign investment in certain types of businesses, and we operated certain businesses, including businesses that were subject to such restrictions and conditions in China such as surveying and mapping services and ICP businesses, through the former VIE. We did not own any equity interest in the former VIEs and relied on the contractual arrangements to direct their business operations. Such structure enables investors to invest in China-based companies in sectors where foreign direct investment is prohibited or restricted under PRC laws and regulations. We effected the Restructuring in 2022 and terminated the VIE corporate structure. The termination was due to the increased regulatory scrutiny over such structure and because the businesses and assets relating to surveying and mapping services and ICP businesses held by Hubei ECARX, the former VIE, were inconsequential to our operations in 2020 and 2021 and which we believe have not had and will not have any material impact on our business operations or financial results. Following the Restructuring in 2022, the contractual arrangement of the VIE structure was terminated and currently we do not have any VIE in China.”
The Company also proposes to revise the disclosure under “Item 3. Key Information – Arrangements with Respect to Certain Personal Data” in its future Form 20-F filings, as shown in the blackline below (with deletions shown in strikethrough and additions in underline), subject to such updates and adjustments to be made in connection with any material developments of the subject matter being disclosed:
“In response to the move by PRC government authorities to tighten the regulatory framework governing data security, cybersecurity and privacy, in September 2021 we initiated the an internal process to transfer the rights of our mainland China subsidiaries and of the former VIE to access and process personal data relevant to their respective business operations to Zhejiang Huanfu Technology Co., Ltd., or Zhejiang Huanfu, an entity controlled by our controlling shareholder. The transfer was completed in December 2021 and as of the date of this annual report, our mainland China subsidiaries do not have any right to access or process any personal data other than certain employee personal data and certain vehicle identification numbers provided by automotive OEMs in association with our provision of product repair and maintenance services. In January 2022, we entered into a procurement framework agreement with Zhejiang Huanfu and thereafter concluded several procurement-related contracts pursuant to the procurement framework agreement for the sole purpose of contracting Zhejiang Huanfu to discharge our outstanding obligations to provide certain data-related services to our PRC customers. Under these contracts, we purchased vehicle-mounted mobile terminal and other related products from Zhejiang Huanfu and engaged
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Zhejiang Huanfu to provide telematics service provider services relating to vehicle information management, system maintenance and support services, services relating to the management of mobile network and other services that concern or require the use of data. We also license certain intellectual property to Zhejiang Huanfu to enable it to perform its services as contracted. These contracts are governed by terms that we typically enter into with our suppliers.”
The Company further proposes to revise the disclosure under “Item 3. Key Information – D. Risk Factors – Risks Relating to Doing Business in China – Our business is subject to complex and evolving laws and regulations regarding cybersecurity, privacy, data protection and information security in China and elsewhere. Any privacy or data security breach or any failure to comply with these laws and regulations could damage our reputation and brand, result in negative publicity, legal proceedings, increased cost of operations, warnings, fines, service or business suspension, or otherwise harm our business and results of operations” in its future Form 20-F filings, as shown in the blackline below (with deletions shown in strikethrough and additions in underline), subject to such updates and adjustments to be made in connection with any material developments of the subject matter being disclosed:
“[…]
In response to the tightening of regulatory framework in China governing data security, cybersecurity, and privacy, in September 2021 we initiated the an internal process to transfer the rights of our mainland China subsidiaries and Hubei ECARX to access and process personal data relevant to their respective business operations to Zhejiang Huanfu Technology Co., Ltd., or Zhejiang Huanfu. The transfer was completed in December 2021 and as of the date of this annual report, our mainland China subsidiaries do not have any right to access or process any personal data other than certain employee personal data and certain vehicle identification numbers provided by automotive OEMs in association with our provision of maintenance and repair services. In January 2022, we entered into a procurement framework agreement with Zhejiang Huanfu and thereafter concluded several procurement-related contracts pursuant to the procurement framework agreement for the sole purpose of contracting Zhejiang Huanfu to discharge our outstanding obligations to provide certain data-related services to our PRC customers. There is no assurance that we will continue to maintain the same collaborative arrangements with or receive the same level of services from Zhejiang Huanfu. If any agreement between us and Zhejiang Huanfu is terminated or expires without renewal, or if Zhejiang Huanfu fails to perform its obligations under such arrangement, becomes unable to provide its services timely and effectively, or at all, or decides to conduct its business or operate in a way that is detrimental to our business interests, our business may be severely
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interrupted and there would be a material adverse effect on our business, results of operations, financial condition, and prospects.
[…]”
Risk Factors
Summary of Risk Factors, page 16
2.In your summary of risk factors, disclose the risks that your corporate structure and being based in or having the majority of the company’s operations in China poses to investors. In particular, describe the significant regulatory, liquidity, and enforcement risks with cross-references to the more detailed discussion of these risks in your Form 20-F. For example, specifically discuss risks arising from the legal system in China, including risks and uncertainties regarding the enforcement of laws and that rules and regulations in China can change quickly with little advance notice; and the risk that the Chinese government may intervene or influence your operations at any time, or may exert more control over offerings conducted overseas and/or foreign investment in China-based issuers, which could result in a material change in your operations and/or the value of the securities you are registering for sale. Acknowledge any risks that any actions by the Chinese government to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers could significantly limit or completely hinder your ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless.
In response to the Staff’s comment, the Company respectfully proposes to revise the disclosure under “Item 3. Key Information – D. Risk Factors – Summary of Risk Factors – Risks Relating to Doing Business in China” in its future Form 20-F filings, as shown in the blackline below (with deletions shown in strikethrough and additions in underline), subject to such updates and adjustments to be made in connection with any material developments of the subject matter being disclosed:
“Risks Relating to Doing Business in China
•ECARX Holdings is not an operating company but a Cayman Islands holding company. We conduct operations through our subsidiaries, with our operations in China currently being conducted by our PRC subsidiaries. This holding company structure involves unique risks to investors. As a holding company, ECARX Holdings may rely on dividends from its subsidiaries for cash requirements, including any payment of dividends to its shareholders. The ability of our subsidiaries to pay dividends or make distributions to ECARX Holdings may be restricted by laws and regulations applicable to them or the debt they incur on their own behalf or the instruments governing their debt. In addition, PRC regulatory authorities could disallow this
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holding company structure and limit or hinder our ability to conduct our business through, receive dividends or distributions from, or transfer funds to, the operating companies or list on a U.S. or other foreign exchange, which could cause the value of our securities to significantly decline or become worthless. See “Item 3. Key Information – Our Holding Company Structure and China Operations” and “Item 3. Key Information – D. Risk Factors – Risks Relating to Doing Business in China – We may rely on dividends and other distributions on equity paid by our subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our mainland China subsidiaries to make payments to us could have a material and adverse effect on our ability to conduct our business” for details;
•The PRC government has significant oversight and discretion over our business operations, and it may intervene or influence on our operations at any time as part of its efforts to enforce PRC law, which could result in a material adverse change in our operations and the value of our securities. In addition, the PRC government may exert more control over offerings conducted outside of China and foreign investment in China-based companies, which could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of our securities to significantly decline or be worthless. See “Item 3. Key Inform
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CORRESP 1 filename1.htm Document September 18, 2024 Page 1 September 18, 2024 VIA EDGAR Ms. Claire DeLabar Mr. Robert Littlepage Division of Corporation Finance Office of Technology Securities and Exchange Commission 100 F Street, N.E. Washington, D.C. 20549 Re: ECARX Holdings Inc. (the “Company”) Form 20-F for the Year Ended December 31, 2023 Dear Ms. Claire DeLabar and Mr. Robert Littlepage, This letter sets forth the Company’s responses to the comments contained in the letter dated September 4, 2024 from the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”) regarding the Company’s annual report on Form 20-F for the year ended December 31, 2023 filed with the Commission on April 3, 2024 (the “2023 Form 20-F”). The Staff’s comments are repeated below in bold and followed by the Company’s responses thereto. All capitalized terms used but not defined in this letter shall have the meaning ascribed to such terms in the 2023 Form 20-F. Form 20-F for the Year Ended December 31, 2023 Item 3. Key Information Our Holding Company Structure and China Operations, page 5 1.Please expand the disclosure to include a detailed description of contractual agreements between Zhejiang Huanfu Technology Co. Ltd. and Holdings and other subsidiaries and how they may affect investors. Disclose the methodology used to determine financial obligations to Zhejiang Huanfu Technology Co. Ltd. in accordance with the agreements for mapping data and other technology related data and ICP licenses. Also disclose any relationships other than the agreements, such as common ownership and/or control between Holdings and its subsidiaries and Zhejiang Huanfu Technology Co. Ltd. Please expand the disclosure in Risks Relating to Doing Business in China accordingly. The Company respectfully submits that, as disclosed in the 2023 20-F, it used to provide surveying and mapping services and conduct ICP businesses (“Mapping and ICP Businesses”) through its former VIE, Hubei ECARX Technology Co., Ltd. (“Hubei ECARX”). In early 2022, the Company implemented a series of transactions 175377.01H-BEISR01A - MSW September 18, 2024 Page 2 to restructure its organization and business operations as a result of which the contractual arrangements that required the Company to consolidate Hubei ECARX were terminated, and Hubei ECARX retained the Mapping and ICP Business. The Company has divested and has not engaged in the Mapping and ICP Businesses and has not been in possession of any surveying or mapping qualification or ICP license since then. Neither the Company nor any of its subsidiaries has any subsisting agreement with Hubei ECARX with respect to mapping data and other technology related data and ICP licenses. In addition, the Company’s subsidiaries and Hubei ECARX previously possessed the right to access and process certain personal data relevant to their respective business operations (“Right to Data”). As disclosed in the 2023 20-F, the Company initiated the process to transfer the Right to Data to Zhejiang Huanfu Technology Co., Ltd. (“Zhejiang Huanfu”) in September 2021 and the transfer was completed in December 2021. The change was made in response to the move by PRC government authorities to tighten the regulatory framework governing data security, cybersecurity and privacy. Since then, the Company’s mainland China subsidiaries have not had any right to access or process any personal data other than certain employee personal data and certain vehicle identification numbers provided by automotive OEMs in association with the provision by the Company of product repair and maintenance services. Both Zhejiang Huanfu and Hubei ECARX are entities controlled by the controlling shareholder of the Company. Each of them operates independently of the Company and there is no arrangement which allows the Company to exercise control or consolidate Zhejiang Huanfu or Hubei ECARX. In January 2022, the Company entered into a procurement framework agreement with Zhejiang Huanfu and thereafter concluded several procurement-related contracts pursuant to the procurement framework agreement for the sole purpose of contracting Zhejiang Huanfu to discharge the Company’s outstanding obligations to provide certain data-related services to its PRC customers. There is no agreement between the Company or its subsidiaries with Zhejiang Huanfu pertaining to mapping data or ICP licenses. All of the Company and its consolidated subsidiaries’ payments to Zhejiang Huanfu were determined based on the arm’s length commercial terms of the agreements with Zhejiang Huanfu. The Company concluded that the amounts of its transactions in 2023 and account balances as of December 31, 2023 with Zhejiang Huanfu were not material warranting specific disclosure or discussion. In light of the foregoing, the Company proposes to revise the disclosure under “Item 3. Key Information – Our Holding Company Structure and China Operations” in its future Form 20-F filings, as shown in the blackline below (with deletions shown in strikethrough and additions in underline), subject to such updates and adjustments to be made in connection with any material developments of the subject matter being disclosed: 175377.01F-BEISR01A - MSW September 18, 2024 Page 3 “Prior to 2022, we conducted our operations in China through our PRC subsidiaries and through Hubei ECARX Technology Co., Ltd., the former VIE, with which we, our subsidiary, and the nominee shareholders of the former VIE entered into certain contractual arrangement. PRC laws, regulations, and rules restrict and impose conditions on foreign investment in certain types of businesses, and we operated certain businesses, including businesses that were subject to such restrictions and conditions in China such as surveying and mapping services and ICP businesses, through the former VIE. We did not own any equity interest in the former VIEs and relied on the contractual arrangements to direct their business operations. Such structure enables investors to invest in China-based companies in sectors where foreign direct investment is prohibited or restricted under PRC laws and regulations. We effected the Restructuring in 2022 and terminated the VIE corporate structure. The termination was due to the increased regulatory scrutiny over such structure and because the businesses and assets relating to surveying and mapping services and ICP businesses held by Hubei ECARX, the former VIE, were inconsequential to our operations in 2020 and 2021 and which we believe have not had and will not have any material impact on our business operations or financial results. Following the Restructuring in 2022, the contractual arrangement of the VIE structure was terminated and currently we do not have any VIE in China.” The Company also proposes to revise the disclosure under “Item 3. Key Information – Arrangements with Respect to Certain Personal Data” in its future Form 20-F filings, as shown in the blackline below (with deletions shown in strikethrough and additions in underline), subject to such updates and adjustments to be made in connection with any material developments of the subject matter being disclosed: “In response to the move by PRC government authorities to tighten the regulatory framework governing data security, cybersecurity and privacy, in September 2021 we initiated the an internal process to transfer the rights of our mainland China subsidiaries and of the former VIE to access and process personal data relevant to their respective business operations to Zhejiang Huanfu Technology Co., Ltd., or Zhejiang Huanfu, an entity controlled by our controlling shareholder. The transfer was completed in December 2021 and as of the date of this annual report, our mainland China subsidiaries do not have any right to access or process any personal data other than certain employee personal data and certain vehicle identification numbers provided by automotive OEMs in association with our provision of product repair and maintenance services. In January 2022, we entered into a procurement framework agreement with Zhejiang Huanfu and thereafter concluded several procurement-related contracts pursuant to the procurement framework agreement for the sole purpose of contracting Zhejiang Huanfu to discharge our outstanding obligations to provide certain data-related services to our PRC customers. Under these contracts, we purchased vehicle-mounted mobile terminal and other related products from Zhejiang Huanfu and engaged 175377.01F-BEISR01A - MSW September 18, 2024 Page 4 Zhejiang Huanfu to provide telematics service provider services relating to vehicle information management, system maintenance and support services, services relating to the management of mobile network and other services that concern or require the use of data. We also license certain intellectual property to Zhejiang Huanfu to enable it to perform its services as contracted. These contracts are governed by terms that we typically enter into with our suppliers.” The Company further proposes to revise the disclosure under “Item 3. Key Information – D. Risk Factors – Risks Relating to Doing Business in China – Our business is subject to complex and evolving laws and regulations regarding cybersecurity, privacy, data protection and information security in China and elsewhere. Any privacy or data security breach or any failure to comply with these laws and regulations could damage our reputation and brand, result in negative publicity, legal proceedings, increased cost of operations, warnings, fines, service or business suspension, or otherwise harm our business and results of operations” in its future Form 20-F filings, as shown in the blackline below (with deletions shown in strikethrough and additions in underline), subject to such updates and adjustments to be made in connection with any material developments of the subject matter being disclosed: “[…] In response to the tightening of regulatory framework in China governing data security, cybersecurity, and privacy, in September 2021 we initiated the an internal process to transfer the rights of our mainland China subsidiaries and Hubei ECARX to access and process personal data relevant to their respective business operations to Zhejiang Huanfu Technology Co., Ltd., or Zhejiang Huanfu. The transfer was completed in December 2021 and as of the date of this annual report, our mainland China subsidiaries do not have any right to access or process any personal data other than certain employee personal data and certain vehicle identification numbers provided by automotive OEMs in association with our provision of maintenance and repair services. In January 2022, we entered into a procurement framework agreement with Zhejiang Huanfu and thereafter concluded several procurement-related contracts pursuant to the procurement framework agreement for the sole purpose of contracting Zhejiang Huanfu to discharge our outstanding obligations to provide certain data-related services to our PRC customers. There is no assurance that we will continue to maintain the same collaborative arrangements with or receive the same level of services from Zhejiang Huanfu. If any agreement between us and Zhejiang Huanfu is terminated or expires without renewal, or if Zhejiang Huanfu fails to perform its obligations under such arrangement, becomes unable to provide its services timely and effectively, or at all, or decides to conduct its business or operate in a way that is detrimental to our business interests, our business may be severely 175377.01F-BEISR01A - MSW September 18, 2024 Page 5 interrupted and there would be a material adverse effect on our business, results of operations, financial condition, and prospects. […]” Risk Factors Summary of Risk Factors, page 16 2.In your summary of risk factors, disclose the risks that your corporate structure and being based in or having the majority of the company’s operations in China poses to investors. In particular, describe the significant regulatory, liquidity, and enforcement risks with cross-references to the more detailed discussion of these risks in your Form 20-F. For example, specifically discuss risks arising from the legal system in China, including risks and uncertainties regarding the enforcement of laws and that rules and regulations in China can change quickly with little advance notice; and the risk that the Chinese government may intervene or influence your operations at any time, or may exert more control over offerings conducted overseas and/or foreign investment in China-based issuers, which could result in a material change in your operations and/or the value of the securities you are registering for sale. Acknowledge any risks that any actions by the Chinese government to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers could significantly limit or completely hinder your ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless. In response to the Staff’s comment, the Company respectfully proposes to revise the disclosure under “Item 3. Key Information – D. Risk Factors – Summary of Risk Factors – Risks Relating to Doing Business in China” in its future Form 20-F filings, as shown in the blackline below (with deletions shown in strikethrough and additions in underline), subject to such updates and adjustments to be made in connection with any material developments of the subject matter being disclosed: “Risks Relating to Doing Business in China •ECARX Holdings is not an operating company but a Cayman Islands holding company. We conduct operations through our subsidiaries, with our operations in China currently being conducted by our PRC subsidiaries. This holding company structure involves unique risks to investors. As a holding company, ECARX Holdings may rely on dividends from its subsidiaries for cash requirements, including any payment of dividends to its shareholders. The ability of our subsidiaries to pay dividends or make distributions to ECARX Holdings may be restricted by laws and regulations applicable to them or the debt they incur on their own behalf or the instruments governing their debt. In addition, PRC regulatory authorities could disallow this 175377.01F-BEISR01A - MSW September 18, 2024 Page 6 holding company structure and limit or hinder our ability to conduct our business through, receive dividends or distributions from, or transfer funds to, the operating companies or list on a U.S. or other foreign exchange, which could cause the value of our securities to significantly decline or become worthless. See “Item 3. Key Information – Our Holding Company Structure and China Operations” and “Item 3. Key Information – D. Risk Factors – Risks Relating to Doing Business in China – We may rely on dividends and other distributions on equity paid by our subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our mainland China subsidiaries to make payments to us could have a material and adverse effect on our ability to conduct our business” for details; •The PRC government has significant oversight and discretion over our business operations, and it may intervene or influence on our operations at any time as part of its efforts to enforce PRC law, which could result in a material adverse change in our operations and the value of our securities. In addition, the PRC government may exert more control over offerings conducted outside of China and foreign investment in China-based companies, which could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of our securities to significantly decline or be worthless. See “Item 3. Key Inform