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Liu Xiaolin, reporter of Economic Observer The shoe has dropped.

August 20,Changan AutomobileUnderAvitaThe agreement on technology investment in Yinwang, a subsidiary of Huawei, was officially signed. Avita acquired 10% of Yinwang's shares for 11.5 billion yuan, making the latter worth 115 billion yuan, and also providing the most intuitive display of the new industrial chain value system in the era of smart cars.

Changan Automobile announced the signing of the contract on the evening of August 19. The next day, Changan Automobile fell as soon as it opened, and "nearly 10 billion yuan to buy 10% of the shares" became the biggest topic of discussion among shareholders. The capital market expressed multiple doubts about the transaction and waited and saw whether Changan, the first to take the plunge, would gain the greatest benefits.

However, this does not affect Yinwang from becoming a super catfish in the automotive industry. Yinwang was established in January this year and exists as an independent operating entity of Huawei's Intelligent Automotive Solutions BU (Car BU). It does not want to be an ordinary smart technology company, but to be "a technology open platform with diversified equity." Since then, Yu Chengdong, Huawei's executive director, chairman of the Terminal BG, and chairman of the Intelligent Automotive Solutions BU, publicly called out the two central enterprises, FAW and Dongfeng, and also sent invitations to auto companies with business cooperation.

Avita's investment became the real founding ceremony of Yinwang. This subsidiary of China's most valuable "rich second generation" has been waiting for partners to join since it completed registration 8 months ago. It is reported that after Changan Avita became the first car company shareholder of Yinwang as promised, the signing of the agreement for another car company, Seres, to invest in Yinwang has also entered the countdown.

According to the agreement, when the first round of funding from Avita arrives, Huawei's automotive BU assets will be loaded into Yinwang. Huawei, which has been working in the automotive industry for 10 years, has officially influenced the direction of China's automotive industry in a way that is infinitely close to car manufacturing, and this influence goes far beyond the technical level.

More importantly, this seemingly ordinary equity transaction is a pioneering attempt by leading enterprises in the fields of industry and capital under the existing economic system. In short, Huawei is the host and has joined hands with mainstream automakers including large central auto enterprises to jointly invest in a new platform-level smart car supplier to create the shortest path from technology research and development to commercialization. The complexity of the cooperation and the potential boost of the top-level will have made a new technology trend emerge.

"If you want to be a great company, you have to reconstruct the architecture of the car," said Wang Yanmin, president of Huawei's Terminal BG Smart Car Business Unit, in an interview with the media in early 2024. Today, Yinwang is not only reconstructing the architecture of the car, but also trying to reconstruct the entire ecosystem of the automotive industry.

From a higher perspective, at a time when the strategic significance of the automotive industry is constantly increasing and the industry is in a state of internal turmoil, the emergence of a technology and capital alliance is a "ark" that can help both Huawei and automakers get what they need. The transformation has just begun, and who will get the ticket?

Beyond car manufacturing

"We also want to know when the cut will be made, but this is an industry precedent and the actual implementation is complicated." At the end of July, after SERES announced that it would become the second automaker to invest in Yinwang, Chen Hua half-jokingly told reporters. As employees of Huawei's Automotive BU, he and his colleagues are more anxious than the outside world. They are more eager to know when the Automotive BU will be loaded into Yinwang.

The promotion of cooperation with Yinwang was all handled by Huawei Group, and the Automotive BU, as the party involved, including its management, was in a "evasive" state. This also explains why the senior management of Huawei's Automotive BU was very secretive about the progress of the Automotive BU's integration into Yinwang at the Beijing Auto Show in April this year.

Ren Zhengfei personally promoted the launch of Yinwang, which fully demonstrated the identity of this new company. Huawei's automotive business has been developing for ten years since it started with the research and development of the Internet of Vehicles in 2013. In May 2019, Huawei's Intelligent Automotive Solutions BU (Automotive BU) was established, and Huawei's positioning of "empowering the automotive industry" was concretized, and it officially entered the field of intelligent vehicles as an automotive parts supplier.

The establishment of the Automotive BU has opened up space for Huawei to explore the automotive industry and has also become the starting point for Huawei to "reconstruct" the automotive industry. In 2020, Huawei officially launched the smart car solution brand HI. In 2021, Huawei andWell-offThe first smart models SF5 and M5 were jointly launched. The three major modes of cooperation between Huawei and automakers have taken shape.

In the famous exhibition hall of Huawei Research Institute in Beijing, on the display screen of the automotive business, the positioning of Huawei's automotive business is divided into three levels: TIER2, TIER1, and TIER0.5, which correspond to the three cooperation modes of providing software and hardware module mode, providing intelligent solutions (Huawei INSIDE mode, such as Changan Avita brand), and providing full-stack solutions (Smart Car mode, including four brands). In the Smart Car business, Huawei participates in every aspect such as vehicle definition, styling design, marketing, and user experience.

This is the first time that the definition of TIER0.5 has appeared in the automotive industry. In the past few decades, TIER1 has always been the highest-level supplier in the automotive field. Even a company as important as Bosch has never tried to cooperate so deeply with automakers. The self-identification of TIER0.5 represents the infinite closeness between Huawei and vehicle manufacturers, and is a projection of Huawei's desire to deeply influence the Chinese automotive industry.

So far, brands using Huawei's intelligent solutions include Changan Avita and BAIC Arcfox. Huawei Smart Car's brands includeAsk the world, Zhijie, Xiangjie and Zunjie, respectively with Seres,Chery、BAICIt was created in cooperation with JAC. Among them, Wenjie has become a phenomenal brand in the new energy field.

From the moment the SERES SF5 entered Huawei's flagship store in 2021, Huawei has firmly embarked on the path of breaking the inherent business model of the automotive industry. With the irreplaceable nature of technology and deep ties with automakers, Huawei has quickly implemented a new business model in the era of smart cars.

Under the bottom line of "not making cars" set by Ren Zhengfei, Huawei is committed to becoming the standard-bearer of China's smart car industry. In the past ten years, Huawei has declared seven times that it will not make cars, and some of Yu Chengdong's "cross-border behaviors" have been publicly criticized many times. How to exert influence on the automotive industry with a "sense of boundaries" has always been Huawei's biggest issue.

On the basis of the three existing cooperation models, Yinwang has become a breakthrough point for Huawei to further reshape the value chain of the automotive industry. In November 2023, Huawei and Changan Automobile signed a memorandum of investment cooperation, announcing that the two parties plan to establish a new company. In January 2024, the new company Yinwang was registered and established in Shenzhen.

According to the Investment Cooperation Memorandum, Yinwang will be a company engaged in the research and development, design, production, sales and service of automotive intelligent systems and component solutions. Its business scope includes automotive intelligent driving solutions, automotive intelligent cockpits, intelligent automotive digital platforms, intelligent car clouds, AR-HUD and intelligent car lights, etc. Huawei will inject the relevant technologies, assets and personnel of the automotive BU into Yinwang, and in principle, the components and solutions within the business scope of the cooperating vehicle companies will be provided by Yinwang. "Yinwang will gradually open up equity to existing strategic partners and strategically valuable car companies and other investors to become a company with diversified equity."

Old business models and new species

Reshaping the automotive industry ecosystem through the intelligent track is Huawei's biggest ambition. Although the concept of "software determines the automotive industry" has deeply rewritten the automotive industry ecosystem, how to achieve a win-win situation with the current automotive industry leaders - vehicle manufacturers is still Huawei's biggest challenge. "China needs to build an open platform for electrification and intelligence with the participation of the automotive industry, an open platform with a 'locomotive'." Yu Chengdong explained the significance of Yinwang. Focusing on automotive intelligent systems and component solutions, and involving R&D, design, production, sales and service, Yinwang's positioning determines that it is a new species in the automotive industry chain.

The second half of intelligence is intelligent driving. Since the beginning of this year, the technical competition in the field of intelligent driving has been escalating on a monthly basis. At the Beijing Auto Show in April, Huawei's Automotive Business Unit launched a new brand of intelligent car solutions - Huawei Qiankun. The brand is a new technology architecture consisting of Qiankun ADS3.0 intelligent driving system, the new generation of Hongmeng cockpit, intelligent car digital platform and cloud service 3.0, which has been quickly installed on Zhijie and Xiangjie models.

Although Huawei is a supplier to many mainstream car companies, and its Hongmeng intelligent cockpit and intelligent driving system have been installed in many new power brands and high-end electric car brands of traditional car companies, the high technology costs, the increasingly fierce price war, and the reality of widespread losses of car companies have gradually exposed the severity of the automotive industry. Whether technology can reduce costs is a matter of life and death. In this case, Yinwang, as an "Ark" built by the gathering of everyone's strength, may become the key straw.

In November 2023, Huawei upgraded its smart car business to the Hongmeng Intelligent Driving business brand, and announced that it will focus on the four existing brands in the short term. Due to high resource investment and long R&D cycle, the smart car business will not continue to expand for the time being. Excessive investment is also the reason why Huawei's smart car business did not start to make a profit until March of this year. Yinwang's equity open platform will solve Huawei's financial pressure in the automotive business, achieve higher joint development efficiency, and break through the bottleneck of market space, so that the latest technology can cover more models at a lower cost and faster speed. "The development of new energy vehicles by state-owned automakers is not fast enough, it is better toTeslaandBYDTherefore, the SASAC will adjust the assessment policy and conduct separate assessments on the new energy vehicles of the three major automobile central enterprises (FAW, Dongfeng, and Changan). "The new attitude of the SASAC at this year's National People's Congress means that it is urgent for mainstream traditional automobile companies, including the three major automobile central enterprises, to get rid of the suppression from new car companies through new energy and intelligence. And the innovative combination of resources through investment attraction is a favorable attempt for automobile companies to improve their competitiveness. Automobile companies use capital to exchange time, technology, and the competitive window period of emerging strategic industries, and at the same time they can also share Huawei's channels.

It is worth mentioning that "breaking the old business model" is Huawei's primary principle for entering the automotive industry. After the establishment of Hongmeng Zhixing, Huawei decisively terminated its cooperation with the three major automotive traffic portals and accelerated the construction of its own Hongmeng Zhixing automotive direct sales network.

However, the pioneering and difficult aspects mirror each other in the process of Yinwang's advancement. Compared with the "Investment Memorandum" signed in November last year, the agreement on Avita's acquisition of Yinwang's equity signed on August 20 has two core elements changed: first, the acquirer has changed from Changan Automobile to Changan's high-end electric vehicle platform Avita Technology; second, the shareholding ratio has dropped from the previously estimated no less than 40% to only 10%. This is also the main reason for the decline in Changan Automobile's stock price that day.

The automotive industry has different views on this. Some believe that under the premise of Huawei's controlling stake, it is unlikely that a single vehicle manufacturer will monopolize too much equity. Although Huawei and Changan have cooperated for the second time as shareholders of Avita, it is also the vehicle manufacturer that is most closely tied to Huawei among all vehicle manufacturers.

Another analysis pointed out that the signing of the agreement three months later than expected was enough to show the due diligence of Yinwang's valuation and the complexity of investing tens of billions of yuan in Changan as a central enterprise. The final Avita acquisition plan should be the result of bargaining and responsibility assessment among all parties.

Yinwang has emerged with a market value of hundreds of billions. The breakthrough of the joint venture model brought about by the indirect investment of the central enterprise Changan has also attracted the attention of the domestic macroeconomic research field. Some studies believe that, especially in strategic emerging industries, it may become a new trend for leading private enterprises to introduce state-owned central enterprises to jointly build an open technology platform with diversified equity.

There are still a few tickets

According to the agreement signed between Avita and Huawei, the 11.5 billion yuan acquisition payment will be paid in three installments. After the first installment is paid, Huawei's automotive BU will start the process of loading it into Yinwang. This practice is believed to give Avita time to raise funds while waiting for more vehicle manufacturers to join.

At present, the equity structure of Yinwang is Huawei holding 90% and Avita holding 10%. How much shares will Huawei leave for the vehicle manufacturer in the future? After signing the agreement, Huawei said, "In the future, Yinwang will continue to open up equity to strategic partners and work together to promote the rise of the automotive industry and the comprehensive development of intelligence. At the same time, Yinwang will operate based on market principles in the future and provide products and services to all customers in accordance with the principles of fairness, openness and win-win."

The Economic Observer reporter learned that after Avita, Seres' investment in Yinwang will also be implemented quickly. As a shareholder of Seres, Dongfeng will also be indirectly associated with Yinwang.

In November 2023, when Huawei revealed that it would join hands with Changan to form a new company, Yu Chengdong had publicly issued equity opening invitations to companies such as BAIC, JAC, Seres, and Chery that cooperated with Huawei in the smart car business, and called on FAW Group to join the joint venture platform. In March of this year, You Zheng, deputy general manager of Dongfeng Motor Group Co., Ltd., responded that he was actively promoting the participation of FAW Group in Huawei's smart car solution business. So far, neither FAW nor Dongfeng has made a new response to the investment in Yinwang. Whether the two major central enterprises will follow up at the group level, and whether the further shareholding ratio and voice distribution are still unknown factors in Yinwang's open ecology.

However, in the eight months from the registration to the signing of the contract with Changan Avita, Huawei's automotive business has undergone fundamental changes. First, the 2023 fourth quarter will be launched.QJM7andQJM9, driving Huawei's automotive business to achieve a major turnaround. The latest data shows that as of now, the M5 has a total order of 150,000 units, the M7 has a total order of 230,000 units, and the M9 has a total order of 120,000 units in 7 months since its launch. Secondly, Huawei's automotive business began to make profits in March this year, among which Zhixuanche made a profit in March, and the car BU turned from loss to profit in April.

These factors have caused the value of Huawei's car business to skyrocket before it became independent. Since April this year, Huawei has begun to keep a low profile in its promotion of Yinwang Investment, focusing more on the improvement of its smart car business. The industry believes that this is a sign that Yinwang Investment is beginning to turn from a buyer's market to a seller's market.

Regarding Yinwang's right to speak, a research report publicly released by legal professionals believes that it is difficult to say whether Huawei is willing to give up its absolute controlling rights. With the subsequent participation of automobile companies, Huawei will continue to release equity, but it will definitely insist on the right to consolidate Yinwang and dominate Yinwang's market-oriented operations as the largest shareholder.

Just as the capital market still finds it difficult to judge the pros and cons of Avita's investment in Yinwang, the impact of this new company on the automotive industry ecosystem has exceeded the imagination of the existing industry. The more realistic question is whether the vehicle companies can still afford the tickets once the value of Yinwang rises. For Huawei, how to be the new captain of the smart car era is already a new issue on the table.

(At the request of the interviewee, Chen Hua is a pseudonym)