What happened

Shares of Chinese autonomous air taxi manufacturer EHang Holdings (EH -9.05%) fell more than 10% at the open Wednesday following the company's second-quarter earnings report. The stock has recovered somewhat from those lows, but still remains down on the day.

So what

EHang has a number of products under development, but most of the attention is on its EH216 flagship autonomous aerial vehicle. The company envisions fleets of its flying taxis shuttling passengers in the years to come.

Illustration of air taxis in flight.

Image source: Getty Images.

But the company's earnings report served as a reminder that we are still years away from that dream becoming a reality. EHang lost 74.6 million renminbi ($11.6 million) in the quarter, down from a loss of RMB19.7 million in the same quarter a year ago. Revenue fell 65.9% year over year to RMB12.2 million ($1.9 million).

But EHang said it is seeing progress in getting its aircraft airborne. The EH216 is progressing through certification trials with the Civil Aviation Administration of China, and in June the aircraft made its first flight in Japan.

"We made meaningful progresses toward the certification process and trial operations for our existing AAV products such as the EHang 216 and the EHang 216F, and further made our product and solution portfolio well-rounded for urban air mobility by introducing the new model VT-30," founder and CEO Huazhi Hu said in a statement. "We are confident in maintaining our leadership position and competitiveness among our industry peers in the burgeoning UAM market."

Now what

There's a solid business case for these small, helicopter-like air taxis as a way to reduce the use of less-green options like small planes to connect regional airports to major hubs, and to bypass congested urban streets. But there is no shortage of companies developing e-taxis, and no real clear framework for how quickly they will be approved in Western markets.

For now, EHang remains a company with some promise but is trading at a rich 45 times sales and 30 times book value. Until the company begins to show it is turning that promise into revenue, investors would be wise to remain cautious on the stock.