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author: pan lei

editor丨hai yao

image source: midjourney

"thank you great huawei."

this was the feeling expressed by he liyang, president of seres, at the launch of the new m5 at the end of april this year.

seres became famous for its cooperation with huawei's hongmeng intelligent driving to launch the "wenjie" brand in 2021, and as a result, it became very popular in the capital market, with its market value once exceeding 150 billion yuan (the latest market value is 115.5 billion as of the close of august 30).

this has transformed seres from a small car manufacturer that used to produce vans and was mired in losses (cumulative losses of 3.3 billion from 2018 to 2020) into a benchmark for the transformation of the "new four modernizations" of automobiles (electrification, networking, intelligence, and sharing).

the 2024 interim report shows that in the first half of this year, seres made a net profit of 1.625 billion yuan, turning losses into profits year-on-year.

but now seres wants to tie up with huawei at the equity level.

at the end of august, seres announced that it planned to acquire a stake in huawei's subsidiary shenzhen yinwang intelligent technology co., ltd. (hereinafter referred to as "yinwang") for 11.5 billion yuan in cash in exchange for a 10% stake in the latter and one board seat.

image source: celis official website

less than a week before this, avita technologies, of which changan automobile is the largest shareholder, also announced a similar plan.

according to data from ruishou analysis, yinwang was registered on january 16 this year with a registered capital of 1 billion yuan and is 100% owned by huawei technologies co., ltd.

with avita and seres planning to acquire shares, it means that yinwang’s valuation has reached 115 billion just less than 8 months after its establishment.

according to the "top 100 global automotive parts suppliers 2024" list released by automotive news at the end of june, yinwang's valuation has exceeded yanfeng's revenue last year (approximately us$15.5 billion), which ranked 15th.

on this list, bosch, ranked first, had revenue of us$55.89 billion (approximately rmb 406 billion) in 2023, and catl, ranked fourth, had revenue of us$41.365 billion.

compared with these parts suppliers, yinwang's business model is also unique.

if the shareholdings of avita and seres are successfully completed, yinwang will become one of the few suppliers with equity held by multiple different automakers.

valuation of 115 billion is not expensive

information provided by ruishou analysis shows that yinwang is a new company established by huawei auto bu (i.e. huawei's intelligent automotive solutions business unit), which is mainly engaged in businesses related to automotive intelligent systems and component solutions.

this shows that yinwang is basically based on the assets of huawei's automotive bu, and by injecting the assets, personnel and intellectual property rights of huawei's automotive bu, it will become a new entity for cooperation with major automakers.

with seres officially announcing its investment of 11.5 billion yuan in yinwang, and this investment has exceeded its net assets in 2023, it constitutes a major asset reorganization and needs to be submitted to the shareholders' meeting for deliberation.

as a result, some operating conditions of yinwang (huawei automotive bu) were also disclosed.

before this, the outside world could only learn about the financial situation of the automotive bu from the few words revealed by huawei executives.

for example, at the china electric vehicle 100 forum at the beginning of the year, yu chengdong, chairman of huawei's terminal bg and intelligent automotive solutions bu, revealed that huawei's automotive bu once lost 10 billion yuan a year, but later reduced the losses.

image source: china electric vehicle hundred people forum official account

but yu chengdong also said that the company will turn losses into profits this year.

this is confirmed by the "major asset acquisition report (draft)" released by seres.

the asset report shows that from 2022 to 2023, huawei's automotive bu suffered losses of 7.587 billion and 5.597 billion respectively.

in the first half of this year, huawei's automotive bu's revenue reached 10.435 billion yuan, with a net profit of 2.231 billion yuan and a net profit margin of 21.38%.

based on this data, the net profit forecast is conservatively estimated that huawei's automotive bu's full-year net profit will exceed rmb 5 billion, corresponding to a valuation of rmb 115 billion and a price-to-earnings ratio of 23 times.

according to wind data, the price-to-earnings ratio of the chinext will be 46.54 times at the end of 2023, and the science and technology innovation board will even exceed 80 times.

considering huawei's huge influence, a valuation of 115 billion is a good deal for investors.

in addition, huawei will transfer 6,838 patents (and patent applications), 1,603 trademarks (and trademark applications) and related technologies to yinwang.

at the same time, no less than 5,500 employees will be transferred to guiwang.

these patents and employees are exactly what automakers need to advance intelligence.

another important point is that huawei's automotive bu has made a net profit of more than 2 billion in the first half of the year.

in other words, with the guidance of huawei's automotive bu, its future performance is expected to have great growth potential.

specifically for seres, it has clearly stated that it aims to achieve sales of 1 million units within three years (107,000 units in 2023, 279,000 units from january to august this year).

in addition to seres, hongmeng intelligent driving also has brands such as xiangjie, zhijie, and zunjie.

together with customers such as byd, gac, deepblue auto, and dongfeng, yinwang's future shipments and performance will increase significantly.

there were few partners in the early days, but now car companies are scrambling to find partners

"now many car manufacturers are willing to cooperate with huawei, but i don’t have the resources now and my manpower is limited, so i can only take on four companies (namely, seres, chery, jac, and baic)."

in mid-june this year, yu chengdong revealed in a speech that huawei's automotive bu now has many car companies seeking cooperation.

this is a stark difference from the situation just over a year ago.

at the 2023 china electric vehicle 100 forum, yu chengdong said that new car manufacturers are unlikely to choose to cooperate with huawei in intelligence due to reasons such as market value.

"among traditional car companies, those who are afraid of losing their 'soul' will not choose us."

yu chengdong's speech caused laughter at that time.

but what he said was indeed the truth.

up to now, there has been no news of cooperation between nio, li auto, and xpeng and huawei.

the two parties may cooperate on some hardware, but it will basically not involve the system level.

at the end of 2023, he xiaopeng even had a debate with yu chengdong on the topic of aeb (autonomous emergency braking) through social media.

at that time, he xiaopeng believed that 99% of competitors' aeb was fake and there were too many cases of accidental braking on the road.

this aroused yu chengdong's dissatisfaction.

he said in his circle of friends that some car company executives don’t understand aeb at all.

a confrontation broke out between the two sides, but in the end he xiaopeng posted a message to "thank" yu chengdong and shook hands to make peace.

this year, li xiang, ceo of ideal auto, pointed out in the latest earnings call that hongmeng intelligent driving is the strongest competitor.

nio is promoting full-stack self-research and even released its own intelligent driving chip.

however, contrary to outside expectations, the new forces' choice not to cooperate and some car companies' choice to downgrade their cooperation with huawei did not affect huawei's automotive bu's turnaround.

the experience of seres shows that cooperation with huawei can transform an unknown small car manufacturer into a high-end car manufacturer.

especially the wenjie m9 under seres, which is priced as high as 469,800-569,800 yuan, and has received orders exceeding 120,000 units in just 7 months after its launch.

based on the entry-level price of 469,800 yuan alone, these orders alone can contribute 56.38 billion yuan in revenue to seres.

this is a huge temptation for chinese car companies that have long been unable to enter the high-end market.

in fact, this is also the main reason why changan, chery, baic, and jac are accelerating their approach to huawei.

among these car companies, changan and chery have both tried to move upmarket (ds and qoros, etc.), but both failed.

in the ranking of domestic automobile companies, baic and jac are basically in the second or even third tier, with a clear trend of marginalization.

however, huawei's process of revitalizing seres and making the latter high-end has obviously allowed these car companies to see the opportunity to achieve a counterattack through intelligence.

in this context, spending money to invest in yinwang is not even a thought.

chery chairman yin tongyue even said at the chengdu auto show recently that he hopes yu chengdong will give him more projects.

huawei's smart car business has also opened up a new model that is different from most tier 1 (first-tier suppliers) in the world.

smartization: either huawei or others

before the introduction of wangwang, huawei's automotive bu generally promoted cooperation with car companies through three forms.

the first one is the common tier 1 model.that is, car companies purchase parts or software services from huawei.

the second is hi mode (huawei inside),automakers purchase full-stack solutions including smart driving and smart cockpits from huawei's automotive bu.

avita falls into this pattern.

the third is the current hongmeng intelligent driving (formerly known as the smart car selection mode).huawei is deeply involved in the product definition of specific models, as well as marketing channels, etc., which is similar to providing one-stop cooperation.

under this model, huawei's automotive bu's revenue comes from the share of car sales (said to be 10%, of which 2% is technology licensing fees and 8% is channel fees).

however, the emergence of yinwang has elevated this model to the level of equity cooperation.

this is very different from the previous partnership between tier 1 and car companies.

generally speaking, auto parts giants like bosch, despite their astonishing annual revenue (91.6 billion euros in 2023, or about 101.25 billion u.s. dollars), have not sold equity to car companies.

the world's largest tier 1 wrote on its official website: bosch's (equity) structure ensures entrepreneurial independence, enables the company to make long-term plans and make large advance payments for future investments.

a charitable foundation named after founder robert bosch holds 94% of bosch shares, with the remainder held by the bosch family of companies and robert bosch gmbh.

another relationship between tier 1 and car companies is cross-holding.

this is especially common among japanese parts companies.

for example, toyota motor holds corresponding shares in parts companies denso, aisin, and toyota industries. at the same time, denso also holds shares in aisin, toyota industries, and hino motors, creating a complex network of relationships.

but this situation has actually changed a long time ago.

for example, as early as 2016, nissan motor sold 41% of the shares of its auto parts company calsonic kansei to the us private equity firm kkr.

toyota is also currently pushing for the unbundling of cross-holdings with the aim of enhancing independence, shifting from capital cooperation to technological cooperation, and raising funds for technological transformation.

the supply chain model pioneered by yinwang is different from the cross-holdings in the japanese automotive industry chain.

currently, yinwang has only opened up equity cooperation to automakers such as avita and seres, and it does not hold shares in any automakers or other suppliers.

this makes yinwang similar to providing an "android" platform (now hongmeng), which drives car companies to become smarter and build better cars.

this may affect the intelligent route of automakers - either leading or something else.