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editor of every economic report: du yu

on the evening of september 20,seres(sh601127, share price 75.55 yuan, market value 114.06 billion yuan)the draft report on major asset purchase was released, and the wholly-owned subsidiary seres automotive plans to purchase the 10% equity of shenzhen yinwang intelligent technology co., ltd. (hereinafter referred to as "shenzhen yinwang") held by huawei technologies by paying cash. after consultation among all parties to the transaction, the transaction price of the target equity was determined to be 11.5 billion yuan.

image source: photo by huang xinxu, reporter of china business network

seres said that through this transaction, it will further strengthen its cooperation with huawei and enhance the company's technical strength and market competitiveness. the transaction is still subject to approval by the company's shareholders' meeting. shenzhen yinwang intends to carry out substantial loading according to the loading plan and principles determined by both parties before the transfer price of this transaction is paid. after the loading is completed, shenzhen yinwang will take over huawei's original core business of smart car solutions.

image source: seres announcement

shenzhen yinwang mainly engages in intelligent vehicle solutions business, focusing onintelligent connected vehiclesthe company will provide customers with products and solutions such as intelligent driving, intelligent cockpit, intelligent vehicle control, intelligent vehicle cloud, and intelligent vehicle light. the draft disclosed by seres shows that shenzhen yinwang's team size, technical level, product maturity, commercial scale, and process system capabilities are leading in the industry, and it has the ability to independently develop and continuously innovate full-stack core technologies. at the same time, shenzhen yinwang is also one of the very few automotive intelligent solution companies in the world that has achieved scale revenue and profitability.

in this transaction, seres intends to purchase 10.00% of the equity of shenzhen yinwang by paying cash, and the transaction price is rmb 11.5 billionthe source of funds is self-raised funds, including but not limited to self-owned funds from the operation of seres automobile, equity financing methods such as shareholder capital increase, bank loans or other methods. seres said that the company has actively and steadily promoted fund raising work, and the source of self-raised funds is sufficient to effectively guarantee the payment of the transaction price, and will not have a significant adverse impact on the financial status of the listed company.

during the reporting period, the net cash flow generated by seres' operating activities was -1.169 billion yuan, 6.398 billion yuan and 16.36 billion yuan, respectively. during the reporting period, as the sales proceeds of the listed company's new energy vehicles increased, the net cash flow from operating activities increased rapidly, and stable and large-scale operating cash inflows could be obtained through daily operations. at the same time, the listed company has sufficient self-owned funds, which provides full guarantee for the company's daily operations after this transaction. "if the final source of self-raised funds for this transaction includes debt financing such as bank loans, the net cash flow from operating activities of the listed company will be sufficient to cover the excess and will not have a significant adverse impact on the listed company's debt repayment ability."

seres said that through this investment, the company will seize the trend of intelligent driving technology iteration, further strengthen the forward-looking layout of smart car technology, comprehensively enhance the company's advancedness in automotive intelligent electrification technology and smart car products, and achieve dual leadership in technology and products.

according to china securities journal, huawei's rotating chairmanxu zhijunin a recent interview with the media, he said that in april 2019, he first proposed that huawei should become an "incremental component provider" for new energy vehicles, but there were still differences within huawei at that time about this positioning. "at present, based on its deep accumulation in the field of information and communication technology, huawei has gradually formed a consensus: focus on "three intelligences" - smart cockpit, smart driving, and smart vehicle control. from the earliest establishment of the internet of vehicles laboratory, to the later smart car solutions bu, to the current establishment of yinwang, huawei has been working in this direction."

"at present, yinwang has invested more than 40 billion yuan in research and development costs, and the number of intelligent driving software engineers has reached more than 4,000. during the most difficult period, we lost more than 8 billion yuan a year. but after hard work, huawei's automotive bu can achieve profitability this year," revealed xu zhijun.

last month,changan automobileits two automobile companies, avita technologies and seres, have successively invested 11.5 billion yuan each to acquire shares in yinwang company. currently, the two automobile companies each hold 10% of the shares of yinwang company, and the remaining 80% of the shares are held by huawei.

image source: daily economic news photo by liu guomei

in the announcement that seres plans to invest rmb 11.5 billion in yinwang, huawei’s automotive bu independence plan was publicly exposed for the first time.

according to the announcement at that time, as of the announcement date, yinwang had not yet completed the loading of its business. huawei and yinwang planned to complete the substantive loading before the transfer price of this transaction was paid in full according to the loading plan and principles determined by the two parties to the transaction. after the loading is completed, yinwang will take over huawei's original core business of smart car solutions. according to the loading plan and principles, huawei plans to load assets, personnel, intellectual property rights, etc. to yinwang.

as of july 31, 2024, huawei plans to transfer a total of 6,838 patents and patent applications. the patents to be licensed include other patents required for the loading business; the technologies to be transferred and licensed include technical assets such as loading business-related software, codes, documents and data; the trademarks and trademark applications to be transferred totaling 1,603, and the trademarks and trademark applications to be licensed totaling 1,600.

based on yinwang's audited simulation report of planned loading business, from january to june 2024, yinwang's operating income was 10.435 billion yuan and its net profit was 2.231 billion yuan.

according to china securities,in the latest interview, xu zhijun publicly talked about the specific timetable for yinwang's independence for the first time.

"we hope to transfer all the assets and personnel of huawei's automotive bu to yinwang by the end of this year, so that yinwang can operate independently.there is no clear plan for when the second batch of investment partners will come in. we hope that yinwang will become an independent company with diversified equity. in the short term, there will be no upper limit on the number of partners of yinwang, and yinwang will continue to open equity to strategic partners. "xu zhijun said.

as for the situation after yinwang becomes independent, xu zhijun said that the independence of huawei's automotive bu as yinwang will not bring about changes in the business model. yinwang will operate independently and will receive long-term support from huawei.the new company will continue to use its two core brands - qiankun intelligent driving and hongmeng cockpit, and work with its partners to lead the second half of the intelligent automotive industry.

according to the securities times,xu zhijun emphasized that after the opening of its equity, the principle of "huawei does not make cars" will be more firm. "if huawei makes cars, they can only be huawei-branded cars, which at best will be like huawei mobile phones, accounting for 10%-20% of the market share.but after that, yinwang can only serve itself, and it may have to build a car manufacturing plant, which is tantamount to duplication of construction for the chinese auto industry. as yinwang, we can participate in the development of the entire auto industry, do the most core part of smart cars, and move forward together with the chinese auto industry."

daily economic news comprehensive brokerage china, securities times, seres announcement

daily economic news