US-sanctioned Huawei forms smart-vehicle joint venture with state-owned Changan Automobile amid effort to diversify business
- The new venture will absorb Huawei’s smart-car system business, with Changan Automobile holding up to 40 per cent of the equity
- Huawei says it is open to selling equity in the venture to other partners in the car industry, with Seres saying it has been invited to invest
Huawei Technologies has surprised the Chinese electric vehicle (EV) industry with a new joint venture, as the US-sanctioned telecommunications equipment giant makes a deeper foray into the car business to diversify its revenue sources.
Huawei has repeatedly played down suggestions that it plans to manufacture its own vehicles, describing itself as just a partner to carmakers, including in its current project with Seres Group. But the Shenzhen-based company on Sunday night said it had signed a memorandum of cooperation with Changan Automobile, a major state-owned carmaker based in the southwestern city Chongqing.
The move marks a solid step by Huawei towards establishing a smart-vehicle operation.
Under the partnership, Huawei said it plans to transfer its smart-car system business to a new unit with investments from Changan Automobile and “integrate the core technologies and resources of [Huawei’s] smart car solutions into the new company”.
With Changan Automobile expected to hold up to 40 per cent of equity in the venture, it appears that Huawei could play the leading role in the project, which will cover “research and development, production and sales of smart-vehicle systems and components”.
The planned marriage between Huawei and Changan Automobile comes as China’s EV industry undergoes rapid changes amid fierce competition among Tesla and dozens of local brands including BYD and Li Auto.
These companies are fighting for a slice of a growing market in which Aito, a Huawei-Seres brand, currently holds a tiny share.
Huawei said it is open to selling equity in its joint venture with Changan Automobile to other strategic partners in the car industry.
“We have deepened our cooperation with Changan Automobile, and will also work with more strategic-partner car companies to continuously explore new, open and win-win business models,” Richard Yu Chengdong, chairman of Huawei’s Intelligent Automotive Solution business, said in the company’s statement.
Huawei will not produce cars, rotating chairman Xu Zhijun insisted on Sunday, reiterating that it only wants to help carmakers build better vehicles.
The move has solidified Huawei’s role as a “tier-one” supplier in the industry, and lessened concerns from existing players that the company could become a rival carmaker, according to a research note by GF Securities on Sunday.
“It can reduce the resistance in the automotive industry against Huawei to some extent,” analyst Liu Xuefeng wrote.
However, it remains to be seen how much impact the new venture will have on the sector, depending on the competitiveness of its products and whether other mainstream carmakers are willing to join the new company, the note said.
The Huawei-Changan venture is expected to cover intelligent automotive solutions, smart cockpits, digital platforms, cloud services and augmented-reality heads-up display, among other areas, according to a statement from Changan Automobile filed to the Shenzhen Stock Exchange on Sunday.
Huawei will no longer compete in those categories after transferring its technologies and staff to the new unit, the statement said.
Changan Automobile’s stock price rose by the maximum 10 per cent daily limit on Monday.
Seres on Sunday also issued a statement, welcoming Huawei’s new venture while stating that its current partnership with Huawei remains unchanged. Seres also revealed that it received an invitation to invest in the new unit and is in active discussion over potential investments and cooperation.
Huawei has placed high hopes on its nascent car business, which forms part of the company’s diversification efforts after US sanctions hobbled its once-lucrative smartphone segment.
