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Written by: Ma Jianyu

Reviewer: Kan Erjie

Editor: Xiao Xiao

[Text/Caiquanshe & Daogeshuoche Ma Jianyu] On August 25, Seres announced that it would purchase Huawei's 10% equity in Shenzhen Yinwang Intelligent Technology Co., Ltd. in cash for RMB 11.5 billion. Including the RMB 2.5 billion spent on acquiring trademarks including "Wenjie" from Huawei, Seres has "given" Huawei RMB 14 billion in two transactions in the first half of the year.

Of course, thanks to its deep connection with Huawei, AITO has been selling well, which has made Seres shine in the new energy vehicle market. It is understandable that Seres is clinging to Huawei. But that is 14 billion yuan. You know, in the past few years, Seres was still in the red, and 14 billion yuan is equivalent to half of the net profit of BYD, the leader of domestic new energy vehicles, in 2023. How did Seres bear the cost of "giving"?

Perhaps only after reading Seres' financial report for the first half of this year, you will understand Seres's cleverness. According to the financial report, Seres' revenue in the first half of the year reached 65.044 billion yuan, a year-on-year increase of 489.58%, and it directly turned losses into profits of 1.625 billion yuan, a year-on-year increase of 220.85%. What's more "terrifying" is that Seres' gross profit margin is as high as 27.47%, and this data is worthy of being "far ahead"...

With such a huge gross profit margin, how could SERES be reluctant to give up the business?

"The year-on-year growth in revenue and net profit in the first half of the year was mainly due to the increase in sales of new energy vehicles," said Seres in its financial report. In the first half of 2024, Seres' production and sales of new energy vehicles were 203,900 and 200,900, respectively, up 349.24% and 348.55% year-on-year, respectively.

Its sales growth is mainly due to the AITO brand. In the first half of 2024, a total of 181,153 new cars were delivered. According to SERES, the company ranked sixth in sales of luxury brands in the Chinese market in the first half of this year. As a brand created by SERES and Huawei in-depth cooperation, SERES has benefited from Huawei's huge traffic and smart driving and smart cabin technologies, and has now become the "vanguard" among new car-making forces.

This is also the main source of revenue and profit growth for Seres. However, compared with the revenue and profit growth brought by sales, Seres' gross profit margin data is "terrifying". Data shows that in the first half of this year, Seres' gross profit margin was 25.04%, and the gross profit margin in the second quarter was as high as 27.47%. This data is enough to be called "far ahead" among domestic new energy vehicle companies.

For reference, Tesla's overall gross profit margin in the second quarter of this year was 18%, and its automobile gross profit margin was 13.9%; Ideal Auto's overall gross profit margin in the first quarter was 20.6%, and its vehicle gross profit margin was 19.3%; BYD's gross profit margin in the first quarter of this year was 21.88%, and its automobile (including battery business) gross profit margin was as high as 28.1%.

In other words, from the perspective of gross profit margin, only BYD, which sells batteries, can beat it. And companies with large gross profit margins, including Ideal Auto and Tesla, have lost to Seres at this time. As we all know, gross profit margin reflects the profitability of a company. Seres' "far-ahead" gross profit margin naturally determines that Seres must be willing to "give money" to deepen its cooperation with Huawei...

11.5 billion yuan investment leads to hope that Seres will achieve annual sales of one million

While announcing its first-half financial report, Seres also became the second shareholder of Shenzhen Yinwang Intelligent Technology Co., Ltd. (Huawei Yinwang) after Avita, exchanging 11.5 billion yuan for 10% of the shares. It is worth mentioning that according to the "Major Asset Purchase Report (Draft)" released by Seres, the performance of Huawei Yinwang and other related information were also disclosed for the first time.

In 2022 and 2023, Huawei Yinwang (Huawei Automotive BU) suffered a lot of losses, 7.587 billion and 5.597 billion respectively, and the corresponding revenue was only 2.097 billion and 4.700 billion. However, in the first half of 2024, the total revenue exceeded 10.435 billion, and the net profit reached 2.231 billion, with a net profit margin of 21.38%, directly turning losses into profits.

According to the information disclosed in the announcement, Huawei's largest customer contributed 6.614 billion yuan in revenue in the first half of 2024, accounting for more than 50% and 63.38% of the total revenue. As for the largest customer, it is also easy to guess that it is the AITO Question World jointly created by SERES and Huawei. Then here comes an even more terrifying data. For every Question World car sold by SERES, Huawei's car BU charges about 36,700 yuan in technical fees.

However, under such circumstances, Seres can still achieve a gross profit margin of more than 27%... This shows that Seres may not be that "weak". Of course, this is also because the sales of the Wenjie series are mainly luxury cars. From the sales structure, Seres' sales of new energy vehicles in the second quarter were 106,124 units, a year-on-year increase of 316.3%. Among them, the sales volume of Wenjie M9 was 46,507 units, accounting for 45% of the total deliveries. Previously, Yu Chengdong revealed that 80% of M9 owners purchased the top-end model of 550,000 yuan, which directly raised the average price of the Wenjie brand to 390,000 yuan.

When investing in Yinwang, SERES Chairman (founder) Zhang Xinghai said, “SERES will firmly support Yinwang in becoming an intelligent and open platform for the automotive industry, strive to achieve the annual production and sales target of one million units in the three-year plan, drive the supply of one million units in Yinwang, and achieve a win-win situation.” SERES took off strongly with sales of 200,000 units in half a year. After annual sales of one million units, how “good-looking” will SERES’ financial report be?