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Our reporter Lu Xiao (chinatimes.net.cn) reports from Beijing

With the first investor confirmed, Huawei's automotive BU's solo operation has entered the countdown.

On the evening of August 19, Changan Automobile announced that its joint venture Avita Technology (Chongqing) Co., Ltd. (hereinafter referred to as "Avita") intends to purchase 10% of the shares of Shenzhen Yinwang Intelligent Technology Co., Ltd. (hereinafter referred to as "Yinwang"), which is wholly owned by Huawei, for 11.5 billion yuan, and will occupy a seat on Yinwang's 7-member board of directors. On August 20, the signing ceremony of the comprehensive strategic cooperation between Huawei and Changan Automobile and Avita's investment in Yinwang was held in Chongqing. Huawei's rotating chairman Xu Zhijun, Huawei's terminal BG chairman and intelligent car solution BU chairman Yu Chengdong, Changan Automobile chairman and party secretary Zhu Huarong and other senior executives from both sides attended the event.

Not only Avita, but also Seres, another OEM that has deep cooperation with Huawei, recently announced that it intends to invest in Yinwang, but the investment amount and shareholding ratio are still uncertain. Behind this, Huawei, which insists on not making cars, hopes to use an open platform to let more OEMs that need "soul" let down their guard, and the entry of investors also means that Huawei's automotive BU will soon independently fight in the automotive industry.

The first investor landed

Yinwang is currently 100% owned by Huawei Technologies Co., Ltd. It was registered in January this year with a registered capital of 1 billion yuan and is engaged in the research and development, design, production, sales and service of automotive intelligent systems and component solutions. Avita, which plans to hold a 10% stake, is the first confirmed external investor of Yinwang. Tianyancha shows that Changan Automobile is the largest shareholder of Avita, holding nearly 41% of the shares. In addition, the second largest shareholder, CATL, holds about 14% of the shares.

Interestingly, the investment entity and shareholding ratio announced by Changan Automobile on August 19 have changed significantly compared to when it signed the "Memorandum of Investment Cooperation" with Huawei in November last year.

At that time, the two parties agreed that Huawei intended to set up a company to engage in the above-mentioned automotive intelligence-related businesses and to integrate the core technologies and resources of its intelligent automotive solutions business into the new company. Changan Automobile and its affiliates planned to hold no more than 40% of the shares in the new company. At that time, Xu Zhijun, Richard Yu, Zhu Huarong and other senior executives of both parties were also present.

Regarding this change, an industry insider told the reporter of China Times that one of the reasons may be that the hot-selling models such as the Wenjie and Zhijie launched by Huawei in cooperation with automobile manufacturers have pushed up the potential market valuation of Yinwang. Take ‌Seres as an example. Its production and sales report for June this year shows that the cumulative production and sales of Seres in the first half of this year increased by more than 600% year-on-year.

Based on the transaction price of 11.5 billion yuan for Avita, the current valuation of Invoice has reached 115 billion yuan, almost equivalent to that of an OEM. In comparison, the market value of Changan Automobile was about 123.1 billion yuan during trading on August 20, and the market value of Seres was close to 127.5 billion yuan.

On the other hand, compared with the smart car selection model adopted by manufacturers such as SERES and Chery in cooperation with Huawei, that is, in addition to providing smart car solutions, Huawei also provides car companies with the brand, channel, retail, and marketing experience accumulated in its TO C transformation. At present, Changan, Avita and Huawei adopt the relatively shallower HI (Huawei Inside) cooperation model, that is, Huawei only provides full-stack smart car solutions to car companies.

Regarding the changes in the investment entity, Jiang Han, a senior researcher at Pangu Think Tank, also told the China Times reporter that this may mean that Avita strategically attaches more importance to cooperation with Huawei and hopes to deepen the business binding and synergy between the two parties through direct shareholding. He also believes that this time the investment ratio has been adjusted from no more than 40% to 10%, which also reflects the new considerations of both parties on cooperation model and profit distribution.

It is worth mentioning that Changan Automobile's latest announcement mentioned that Yinwang has not yet completed the business loading. Many industry insiders believed when communicating with reporters that this means that Huawei's automotive BU business has not yet been fully loaded into Yinwang. However, Changan Automobile also stated in the announcement that when Huawei receives the first transfer price, it will start the specific activities of this loading. But Changan Automobile did not mention the expected arrival time of the first transfer price.

Who are the subsequent investors?

According to the reporter, Huawei's Automotive BU, or Intelligent Automotive Solutions Division, was officially established in May 2019. It is on par with the four major BGs such as the terminal, and is a first-level department under the management of the ICT Management Committee. In April 2021, Yu Chengdong became the CEO of the Automotive BU, and in September 2023, Yu Chengdong became the chairman of the business.

Behind its desire to go solo, Huawei's automotive BU has been facing the task of accelerating commercialization.

In March this year, Yu Chengdong said at the China Electric Vehicle 100 Forum (2024) that Huawei's car BU once lost 10 billion yuan a year, but the loss was reduced to 6 billion yuan last year, and it is expected to turn losses into profits this year. He also said at the time that in the first three months of this year, Huawei's smart car business turned losses into profits, and Huawei's car BU business was close to breaking even, and it is expected to turn losses into profits starting in April.

Earlier, industry sources said that Huawei's automotive BU's revenue in the first half of this year was about 10 billion yuan. If this figure is true, it will be more than twice Huawei's automotive BU's annual revenue last year. According to the financial report, Huawei's automotive BU's revenue last year was 4.7 billion yuan, of which only 1 billion yuan was in the first half of the year.

In his speech, Yu Chengdong attributed the turnaround of Huawei's automotive BU to the hot sales of high-end models created by it and its partners. According to reporters, since the second half of last year, Huawei and its partners have successively launched models such as the new M7, M9, S7, and S9. In August this year, Yu Chengdong also stated on social platforms that all models under Hongmeng Zhixing will be equipped with Huawei Zhijia as standard.

Hongmeng Intelligent Driving is an upgrade of the intelligent car selection business of Huawei's automotive BU. This upgrade also sends a signal that Huawei hopes to turn the automotive BU, which wants to fly solo, into an open platform. In addition to SERES's announcement of its intention to invest in Yinwang, BAIC, Chery and JAC, which have cooperated with Huawei to launch the "Xiangjie", "Zhijie" and "Zunjie" brands respectively, are also considered potential investors of Yinwang. In addition, when the Zhijie S7 was released on November 28 last year, Yu Chengdong also expressed his welcome to partners and more powerful car manufacturers such as FAW to build together. Dongfeng responded in March this year that it was actively promoting its stake in Huawei's smart car solution business with FAW.

When communicating with a reporter from the China Times, Jiang Han believed that Huawei established a new automotive BU company and attracted car companies to invest in it because competition in the automotive market is becoming increasingly fierce and traditional car companies need to find new growth points and market opportunities. Secondly, Huawei's technology and resources in 5G, AI and other fields can provide important technical support and innovation for the automotive field; in addition, through cooperation with car companies, Huawei can better promote the intelligent and digital transformation of automobiles.

It will take time to see which investors will flock to the company in the future. But what is certain is that Huawei's automotive BU will soon make some moves to go it alone.

Editor-in-charge: Huang Xingli Editor-in-chief: Han Feng