Huawei saves a new bureau, and most of the car circle queues up to send money?

The Chinese version of "Bosch" is about to be born"

Author: Wang Lei, Truman

This may be a landmark turning point in the history of new energy vehicle development.

Part of Huawei's car BU business will develop independently and become a new company.

However, the shrewdness lies in the fact that the new company is no longer Huawei's own, but through the way of equity openness, to attract car companies to join.

The first car company to take a stake was Changan Automobile. In the future, perhaps more than one car company will join the new company.

This means that Huawei's car BU will be deeply tied to car companies, and the existing business will also have actual benefits, and the car BU has also removed one of the biggest obstacles.

The most feared concern of car companies about "losing their souls" has been erased.

For car companies, joining Huawei's circle of friends will be the best solution, if they don't join, they will be left far behind by their opponents.

The "Bosch" of the era of intelligent cars is gradually growing.

01 

The national intelligent technology platform was born

The market has always been bound to rise when the market hears the wind about Huawei's concept stocks.

Today's A-share market opened, and Changan Automobile directly rose to the limit. Guolian Securities also issued a research report and gave Changan Automobile a buy rating.

According to the Memorandum of Understanding (MOU), the most important part of this cooperation is the establishment of a new joint venture company to focus on the R&D, production, sales, and service of intelligent driving systems and incremental components for intelligent and connected vehicles, and to integrate the core technologies and resources of the intelligent vehicle solution business into the new company.

Changan Automobile and its affiliates will intend to invest in the company and work with Huawei to support the future development of the new company.

According to the statement issued by Changan, Party A is Huawei Technologies Co., Ltd., and Party B is Chongqing Changan Automobile Co., Ltd.

The new company's business scope includes automotive intelligent driving solutions, automotive intelligent cockpit, intelligent vehicle digital platform, intelligent vehicle cloud, AR-HUD and intelligent car lights. In addition, Huawei will inject relevant technologies, assets, and personnel dedicated to the new company's business scope into the new company.

This purpose is very clear - Huawei wants to implement its smart car strength on a large scale.

As Party B, Changan Automobile and its affiliates will invest in the equity of the new company, with a maximum proportion of 40%.

To put it simply, Huawei is responsible for providing technology and people, and Changan is responsible for paying for it.

In addition, Changan's announcement specifically mentions that the new joint venture will operate independently based on market principles, and Huawei will not engage in business that competes with the new company's business scope in principle.

In fact, a few days before the official announcement of the two parties, the news of "Changan Automobile's stake in Huawei car BU" spread on the Internet, and the rumors that Huawei's intelligent car solution BU will be stripped from Huawei's system have intensified, and even the valuation has - 250 billion, and the largest shareholder after the change of hands is the Chongqing State-owned Assets Supervision and Administration Commission, and Changan is the only car company to participate in the acquisition.

At that time, Chang'an responded that the news of the online stake in Huawei's car BU was untrue, and Huawei also said that it was not clear about the matter.

As it turns out, the rumors have never been groundless.

At present, the specific shareholding ratio of each party in the new company has not been announced, but judging from the upper limit of Changan's shareholding of no more than 40%, the new company is still controlled by Huawei, and in addition to Changan, the major shareholder, the new company will gradually open its equity to investors such as existing strategic partner car companies and car companies with strategic value, and become a company with diversified equity.

This means that Changan will not be the only shareholder in the future, and the products and achievements of the new company will not be limited to Changan as a car company, which will also leave room for other car companies that want to cooperate in the future.

According to the first financial report, the specific cooperation between the two sides is still under negotiation and is expected to be completed within 6 months. Changan Automobile said that Huawei's proposed new company will only provide technical support such as solutions, and will not build cars.

02 

Why Changan Automobile?

Changan Automobile, one of the four major group enterprises of China Automobile, is headquartered in Chongqing.

Although it belongs to the national team, its valuation has not been high.

As of November 9, Changan Automobile's 1 times P/S ratio is much lower than that of Xpeng Motors (3.3 times), Li Auto (2.6 times), and Great Wall Motor's (1.4 times) P/S ratio.

As its neighbor, Cialis, the market value was once close to that of this century-old car company, and after the close of trading on November 26, the market value of the two sides was 114.6 billion yuan and 176.4 billion yuan respectively.

As early as last Thursday, Chang'an Automobile once rose to the limit on the same day, and the volume of transactions reached 13.7 billion yuan throughout the day, and it continued to hit a new high on Friday, with a turnover of nearly 10 billion.

Holding hands with Huawei is undoubtedly an important driver of the stock price, and it is not the first time that Changan has cooperated with Huawei.

In 2019, Changan Automobile and Huawei signed a strategic cooperation agreement on intelligent driving and cockpit in Chongqing, which is also the prototype of AVATAR.

In August this year, with the second alliance between Changan and Huawei after the AVATR brand, Chang'an sub-brand Deep Blue signed a cooperation framework agreement with Huawei, and then Changan Automobile and Huawei signed a comprehensive and continuous deepening strategic cooperation framework agreement, and the cooperation was further deepened.

This participation in the creation of Huawei's new company is of great significance to Changan Automobile.

On the one hand, it can leverage Huawei's technological advantages in the fields of automotive intelligent driving solutions, automotive intelligent cockpits, and intelligent vehicle digital platforms to achieve its own intelligent transformation.

On the other hand, for Chang'an, which urgently needs to get a ticket for the second half of the game, its rich experience in building cars for many years and 72 billion yuan in cash are its advantages, and intelligence is precisely its shortcoming.

In the case of separate operations, the cost-effectiveness is not high, and spending huge sums of money on research and development is a situation that Changan Automobile does not want to see.

And it is not difficult to imagine that even after the establishment of the new joint venture, AVATR 12 under the HI model is a model of the cooperation model. Even if other car companies join in the future, AVATR will still be one of the brands with the most comprehensive technical support and the most complete intelligent driving experience from Huawei.

In addition, Huawei actually has no clear cooperative car companies for models below 200,000, and Changan's advantages in this price range are very obvious.

As Chang'an once again boarded Huawei's big ship, some people felt the crisis.

On the same day that the news of the establishment of a new company by Huawei and Changan Automobile was swiped, Cialis released a statement overnight, seemingly emphasizing that he was Huawei's Britney.

In the statement, Cialis once again emphasized that it is the vehicle partner with the deepest cooperation, the widest range and the largest installed volume of Huawei car BU, and has used several "no influences" to stabilize its position.

He also said that he had received an invitation to jointly invest in the target company and jointly participate in the creation of an electrified and intelligent open platform, and the company is actively discussing matters related to participation in investment and cooperation.

03

The birth of the "Chinese version" of Bosch

With the hot sales of the new M7 and the arrival of the new car in cooperation with Chery, the first sedan of Huawei's smart car business, the Zhijie S7, it can be said that Huawei's car BU has ushered in the highlight moment since its establishment.

At this time, it is considering a new company, what big game is Huawei playing next?

Previously, Yu Chengdong revealed that the automobile business is the only loss-making business under Huawei. He also said that Huawei's investment in the automotive business is very large, reaching more than one billion dollars every year. In addition to the huge capital investment, Huawei is also unambiguous in terms of human resources, Yu Chengdong said that Huawei's intelligent car solution BU has directly invested 7,000 people and indirectly invested more than 10,000 people.

According to Huawei's financial report for the first three quarters of 2023, its revenue was 456.6 billion yuan, up only 2.4% from 445.8 billion yuan in 2022.

The net profit in the first three quarters was 79.8 billion, but this also included 52.7 billion from the sale of Glory, and the "balance of cash and cash equivalents at the end of the period" was 223.9 billion, although it increased by 76.6 billion from 147.3 billion at the end of 2022, but if the 91.5 billion in financing borrowings is subtracted, the cash flow from operating activities is actually -32 billion.

Although Huawei's car BU business is booming, it is actually constantly consuming Huawei's cash flow and driving down profit margins.

In addition, in addition to breaking the internal friction, Huawei's car BU has a greater goal.

"We have always believed that 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 said such a sentence at the signing site.

Huawei's car BU business was officially established in 2019, with the slogan of "Bosch in the era of smart electric vehicles".

In May 2019, Ren Zhengfei, the head of Huawei, issued a document confirming the establishment of the Intelligent Vehicle Solution BU department. At the same time, Huawei has made a clear positioning for its role in the automotive industry: Huawei does not build cars, but focuses on ICT technologies to help enterprises build good cars and become a provider of incremental automotive components.

And in the following years, he repeatedly reiterated his attitude of not building cars.

Just because you don't make a car doesn't mean you don't want to do things in the automotive industry.

Not long ago, at the Guangzhou Auto Show, the "Hongmeng Zhixing" brand was officially unveiled in the form of an independent booth. And with the increasing maturity of the Wenjie series, it has proved to the market the success of Huawei's model, which also means that this only loss-making business has "grown up", and it is time to make money for the family.

In fact, it is not common for a leading technology player like Huawei to open up its equity and become a shareholder of an automaker. A similar success story in China is the establishment of "United Electronics", which was led by Bosch as a Tier 1 company, and then SAIC Motor followed the capital injection.

Li Xiang also publicly stated on Weibo that this cooperation compares Huawei to Bosch, and Changan to SAIC.

Previously, Huawei's car BU was a technology and packaging solution provider, but the establishment of a new company with open equity will transform from a simple supply side to a demand + supply integration community, that is, its official positioning of "an intelligent open platform for the automotive industry to participate".

After all, some car companies have been resistant to the cooperation model with Huawei, worried about losing their "soul", but this time, Huawei will operate the car BU business independently in the market and realize equity diversification, which has greatly alleviated the "soul theory" of some car companies.

In addition, Huawei's willingness to accept the way of various car companies to obtain the "soul" will allow Huawei's supply chain to obtain a greater scale effect than the current one, which not only saves the cost of building a platform for other car companies involved, but also can share the dividends of large-scale cost reduction and dividends from shares.

In addition, the introduction of Changan as a partner with a state-owned background in the car BU business will also be able to eliminate the doubts of other OEMs and promote more active cooperation. This initiative will also maximize Huawei's smart car technology capabilities, which can be widely used and promoted by other brands, and even alleviate overseas market access problems.

Therefore, the first task of the car BU now is to increase the base of cooperation, after all, only the formation of scale, can amortize the cost.

Next, it depends on which car companies have joined in.