Huawei's car business does not change gears: Wang Jun is suspended, and the "HI" mode will not be adjusted for the time being

November 9, 2022, Shanghai, Huawei's HI (HuaweiInside) logo on the body of the Avita 11 electric vehicle in the Joy City Avita (AVATR) store in Jing'an. Visual China infographic

Huawei's car business, which is on the march, has encountered a bit of a headwind. Recently, it has been rumored that Wang Jun, COO of Huawei Automotive BU and President of Intelligent Driving Solution Product Line, has been suspended, and Yu Chengdong, CEO of Huawei Automotive BU, will take over all smart car businesses.

On February 9, The Paper confirmed from multiple sources that Wang Jun had indeed been suspended, but Huawei did not publicly announce the decision internally. In addition, in addition to Wang Jun's personnel change, there are no other signs of adjustment in Huawei's car business, and the HI model that Wang Jun was mainly responsible for will continue to develop.

So far, Huawei has remained silent on rumors of the personnel change and has not commented.

Smart mode is better than HI mode?

As an executive of Huawei's car business, Wang Jun's suspension has aroused widespread attention from the outside world. Some outside analysts believe that this may be related to the fact that the HI model business headed by Wang Jun has not met expectations; Some people also believe that with the suspension of Wang Jun, Huawei will adjust its HI business model and pay more attention to the "smart selection" model in the future.

According to surging news, Wang Jun's suspension occurred in January this year, some time after the rumors fermented. But then Huawei and the partners of the HI model still interact normally.

On February 6, a photo of Huawei's executive director, CEO of Consumer BG, and CEO of Intelligent Vehicle Solution BU Yu and Tan Benhong, chairman and CEO of Avita Technology, visited Avita's new car online, and Huawei's rotating chairman Xu Zhijun also appeared in the photo, which also means that Xu Zhijun and Yu Chengdong, two executives at the director level of Huawei, visited Avita at the same time and attached great importance to the latter. Wang Jun, who had interacted with Tan Benhong regularly, did not appear in the photo.

Public information shows that Avita is a high-end intelligent electric brand jointly created by Changan, Huawei and CATL. The cooperation model between Huawei and Avita is the "HI" model, which indirectly shows that Huawei's HI model is still continuing.

In 2019, Huawei clearly announced its entry into the automotive market, positioning itself as an automotive incremental parts supplier. Subsequently, Huawei established the Intelligent Vehicle Solutions Business Unit to make incremental components of automobiles, namely autonomous driving software, computing, and connectivity technologies. At the subsequent Huawei developer conference, Huawei released HiCar and Hongmeng OS.

Huawei's intelligent vehicle solution BU has three external cooperation modes: Tier1 (traditional component supplier model, which supplies intelligent components for automotive enterprises), HI mode (Huawei Inside mode), and Smart Select mode. Among them, the smart selection model is Huawei's deep participation in empowering car companies, and the smart cars enter Huawei's flagship stores for sales. For example, the Q&A series cooperated by Huawei and Cialis belongs to the smart selection mode.

However, the surging news reporter learned from a number of Huawei insiders that they did not know the exact reason for this personnel adjustment.

"The outside world has over-interpreted, and there is no further news so far." A senior executive of Huawei's car business told The Paper.

As for whether the HI model does not meet expectations? Huawei and BAIC started pre-sales of the first model in the HI cooperation mode, the Beiqi Extreme Fox Alpha S Huawei HI Edition, in April 2021, but the delivery date was repeatedly postponed from the fourth quarter of 2021, and finally began delivery in July 2022. BAIC has not disclosed the sales volume of the Extreme Fox brand, but data from a number of third-party research companies show that its cumulative sales in 2022 are only more than 10,000 vehicles, far less than the annual sales target of 40,000 vehicles previously set. This performance is really not good.

A relevant person from BAIC, Huawei's HI model partner, told the surging news reporter that there are many parties involved within state-owned enterprises, and the inability to sell cars is not entirely the reason for Huawei.

The Avita also adopted the HI mode, and its first model, the Avita 11, was officially launched in August 2022 and began delivery in December of that year. On February 6, Avita announced that as of February 5, Avita 11 had delivered a total of 2,000 vehicles. Changan Automobile mentioned in its research report disclosed on September 30, 2022, "Avita is also actively implementing preparations for channel sales in its stores with Huawei. ”

"The HI model will not be adjusted, it will continue to be done, and the outside world has exaggerated the interpretation, saying that Mr. Yu monopolized the car business, and originally Wang Jun reported to Mr. Yu." A Huawei insider told The Paper that there may be new people to replace Wang Jun next.

Huawei's smart selection model is personally responsible for Yu Chengdong. He personally launched the new car and promoted it on different occasions. There are currently two models in the Horizon series. In 2022, the brand achieved sales of 76,200 units within nine months of its launch.

In comparison, Huawei's smart car business has a strong label, thanks to Huawei's extensive user base and brand accumulation, the smart car business has certain advantages in volume.

Huawei's expectations for the car business and Yu Chengdong's pressure

At present, Huawei's mobile phone business is sanctioned and cannot be scaled up on a large scale, so the car business is pinned on high hopes, hoping to gradually make up for the revenue lost by the cliff-like decline of the mobile phone business.

At that time, Yu Chengdong was in charge of Huawei's consumer business, and in a few years, Huawei's mobile phone business grew by leaps and bounds, once becoming the highest proportion of Huawei's three major businesses. However, the advancement of Huawei's automotive business field is still quite small in terms of revenue contribution alone.

Huawei's 2022 interim results show that Huawei achieved sales revenue of 301.6 billion yuan and a net profit margin of 5.0%. Among them, the revenue of operator business was 142.7 billion yuan, the revenue of enterprise business was 54.7 billion yuan, and the revenue of terminal business was 101.3 billion yuan, and the revenue data of vehicle business was not disclosed separately. However, compared with the 2021 interim results, Huawei's terminal business revenue decreased by 34.4 billion, down 25%, dragging down the overall revenue by 5 points year-on-year.

At the same time, in the face of an uncertain future environment, in August 2022, Huawei founder Ren Zhengfei mentioned in his speech "The entire company's business policy should shift from the pursuit of scale to the pursuit of profit and cash flow" that the global economy will continue to decline and consumption capacity will decline, and Huawei should change its thinking and business policy from pursuing scale to pursuing profit and cash flow to ensure that it survives the crisis in the next three years. Huawei must take "surviving" as the most important program, maintain a reasonable pace in the 2023 budget, blindly expand, and blindly invest in businesses to shrink or close.

These pressures are undoubtedly transmitted to Huawei's car business and to Yu Chengdong. In July 2022, Yu Chengdong mentioned the high investment in Huawei car BU in a public speech, "Huawei invests a lot in the automotive business, spending more than one billion US dollars a year. Cars are Huawei's only loss-making business, definitely a 'money-burning' business, and definitely a difficult business. ”

However, with the adjustment of Huawei's general policy, on December 8 last year, Yu Chengdong said at Huawei's internal meeting that Huawei car BU will be profitable in 2025.

For Huawei, regardless of the contribution of smart selection and HI models to Huawei's revenue, the outside world has been speculating that Huawei will personally build cars, and Yu Chengdong himself is a "car maker", but so far Huawei has not broken through the "no car building" self-limit.

Xu Zhijun has publicly stated many times: "Yu Chengdong, he wants to build a car." However, in the view of Huawei's senior management, we must be clear about what is appropriate and what is not appropriate for us in the stage of survival. ”

However, Xu Zhijun said in his New Year's speech this year that 2022 is a year in which Huawei gradually changes from a wartime state in response to constant sanctions from the United States to a normal operation of sanctions, and it is also a year of gradual turning crisis into safety.

As Huawei's operations turn around and Huawei's "not to build cars" resolution expires in 2023, will Huawei personally build cars?