The new M7 exceeded 50,000 units in the first month! How many more cars does Huawei's smart car business have to sell to make a profit?

Source: Time Weekly Author: Yang Lingling

After Huawei's full return to the mobile phone business, the smart car business also ushered in a sales trend.

On the last day of the November long holiday, Yu Chengdong, who is the chairman of Huawei's intelligent vehicle solution BU, released a sales report on the new M7 in the circle of friends: On October 6, the new M7 Dading (order with a deposit and high purchase intention) reached 7,000 units, 3,500 vehicles on October 5, and the final two days of the holiday exceeded 10,000 vehicles.

Source: Network

At the same time, data provided by relevant Huawei personnel to the Times reporter shows that since its release on September 12, in just 25 days, the cumulative number of new M7 has exceeded 50,000 vehicles.

"It's not easy to come back to life!" For the explosion of the new M7, Yu Chengdong said. Not long ago, Huawei's intelligent vehicle solution BU (hereinafter referred to as "Automotive BU") has just undergone personnel adjustments, and Jin Yuzhi, President of Huawei's Optical Product Line, has taken over as CEO of Automotive BU, and Yu Chengdong has been changed to the chairman.

Behind the boost in sales and personnel changes is Huawei's desire for profitability. Yu Chengdong has proposed that Huawei car BUs should be profitable in 2025. After "coming back to life", how does Huawei take the next road?

Sales come back to life?

In 2022, Huawei and Cialis (601127. SZ) has successively released three models, the M5, M7 and M5 EV, with a cumulative delivery volume of more than 76,000 units, becoming a "dark horse" in the new energy vehicle market.

In this process, the old M7 was launched in July 2022 as the second model launched in cooperation between Huawei and Cialis. Autohome data shows that in September 2022, sales of the old M7 rose to 4,746 units; In October, it exceeded 5,000 units to 5,226 units, and its monthly sales in the fourth quarter of 2022 exceeded 3,000 units.

However, after entering 2023, affected by Tesla's sharp price cuts, sales of the Qianjie series began to decline continuously. In January, sales of the entire series were only 4,475 units, down 56% month-on-month; Sales in February and March were as low as more than 3,000 units.

By May, the overall sales of the series slowly climbed to more than 5,000 units, but in July~August, when the sales of emerging automakers such as "Wei Xiaoli" rose sharply month-on-month, the sales of the series fell again.

Among them, the sales of the old M7 are even more cold. In January 2023, sales of the old M7 were 1,737 units, down 56% month-on-month, and after April, the sales of the old M7 were continuously below 1,000 units, and the lowest was only 432 units.

In July, Yu Chengdong conducted an internal exchange with channel suppliers and suppliers. When asked how he views the sales of Qianjie, Yu Chengdong said that in the past year or so, Huawei has stepped into a new field and achieved some achievements. At the same time, because of lack of experience and experience, some detours were taken.

"In the face of external shocks, we will improve rapidly, and this year we will comprehensively optimize in retail, service, delivery and other fields, while optimizing the mechanism, increasing unannounced visits to stores and other means to improve the overall service capability and allow users to have a better car purchase and use experience." Yu Chengdong said that sales are only the result of a certain stage of development, and tomorrow's capabilities are based on the accumulation of existing technologies, and Huawei will always maintain high investment in research and development and continuously improve user experience with innovative technologies.

In this context, on September 12, Huawei released the new M7, as the latest model jointly designed by Cialis Automobile and Huawei, the new M7 has high expectations.

Source: Photo courtesy of the company

In terms of price, the guidance price of the new M7 is 249,800~329,800 yuan, which is 40,000 yuan lower than the previous M7 starting price. In addition, the new M7 also launched a limited-time discount of 6,000 yuan, and the starting price was further reduced to 243,800 yuan, which is 46,000 yuan lower than the starting price of the old model.

Not only that, the new model has also received more support from Huawei, such as Huawei's high-end intelligent driving system ADS2.0, Hongmeng cockpit, etc. Before the launch of the new M7, Yu Chengdong repeatedly stood for the new model on Weibo, bluntly saying that the model "spent 500 million new upgrades".

According to Yu Chengdong, the M7 will undertake more than 30% of the sales this year, and at the same time, the flagship model M9 will be released at the end of the year to help the brand and sales to a higher level.

According to Sun Shaojun, founder of Car FANS, who has been focusing on the terminal market for many years, the main competitors of the new M7 are the ideal L7 and L8. Previously, some customers flowed to Li Auto, but due to the influence of intelligent driving ability and cost-effective factors, Li Auto customers began to return to the new M7.

Coincidentally, when the old M7 was listed, Li Xiang, CEO of Ideal Auto, said: "In the third quarter of 2022, the release and operation of the M7 directly crippled Ideal ONE, we have never encountered such a strong opponent, and we have no way to fight back for a long time." ”

Now, as Huawei completes the sales breakthrough and transformation in the early stage, the pressure has been given to Cialis, which needs to complete the order delivery as soon as possible.

A screenshot of a supplier circulated on the Internet shows that Cialis is contacting major supplier partners to improve the supply capacity of the new M7. By October 5, the new M7 will complete the first phase of capacity building for the supply of 450 vehicles per day.

At the same time, according to market demand, Cialis Plant 2 will produce 750 vehicles per day on November 1, requiring the supply capacity of the entire supply chain to be upgraded to the same level by October 30.

In response to the authenticity of the above-mentioned supplier's screenshot content, the Times reporter contacted the relevant person in charge of Cialis, but did not receive a response as of press time.

Profitability remains a challenge

Sales of the new M7 have attracted much attention, and smart cars have also emerged as one of Huawei's important business units.

Shortly before the release of the new M7, Huawei just issued an internal document, Huawei Optical Product Line President Jin Yuzhi took over as CEO of Chebu, while the former CEO Yu Chengdong was transferred to the chairman of Chebu.

After the adjustment, Jin Yuzhi became the third CEO of Che BU since its establishment in May 2019, after Wang Jun and Yu Chengdong. In this adjustment, Yu Chengdong was promoted to the chairman of Che BU, and Wang Jun was appointed as the chief strategy officer of Che BU.

According to the data, Jin Yuzhi is currently the vice president of Huawei Technologies Co., Ltd., the president of Huawei optical product line, and the alternate director of Huawei, and its intelligent vehicle optical business products include AR HUD, smart lights, etc., and have business intersection with Huawei car BU.

Industry insiders close to Huawei said that the optical product line led by Jin Yuzhi is one of Huawei's star businesses, and its achievements are quite recognized internally. Its optical network and access broadband services maintained the first place in the global market share. In Huawei's board election held in March this year, Jin Yuzhi was also selected as an alternate director.

At the same time, a Huawei insider told the Times reporter that this change is a normal adjustment based on the current business and is not a major change. With the return of Huawei's mobile phone business, Yu Chengdong will focus more on the mobile phone business. At the same time, some internal voices proposed that after this adjustment, Huawei will increase business investment in smart cars-related fields to further help car BUs achieve commercial success.

For the new CEO, the most important task at hand is profitability.

In July last year, Yu Chengdong publicly stated that Huawei Car BU is currently the only loss-making project under Huawei, spending more than a billion US dollars a year, directly investing 7,000 people and indirectly investing more than 10,000 people. At Huawei's internal meeting at the end of last year, Yu Chengdong also said that Huawei car BUs should be profitable in 2025.

According to the performance report released by Huawei, the revenue of the smart car business will be 2.1 billion yuan in 2022 and 1 billion yuan in the first half of 2023, but there is no mention of profitability.

"To achieve profitability, [it means] that Huawei has to help car companies sell 1 million vehicles, which is a lot of pressure, but we are confident that it will happen." I hope that the amount of smart selection and HI mode can be up, and the amount of smart selection may be larger. Either way, we can do it. Yu Chengdong said in a previous interview with the media.

At present, Huawei's cooperation with car companies is mainly divided into three categories, vertical parts supply, HI (Huawei Inside) mode, and Huawei Smart Selection mode. Among them, HI mode has been equipped on the Alpha SHI version of the Extreme Fox and Avita 11; Huawei's smart selection model, the most well-known to the outside world is the AITO brand, and now, Chery, JAC and BAIC and other car companies have also joined.

Source: Photo by a reporter from Time Weekly

At Huawei's autumn all-scenario new product launch conference held on September 25, Yu Chengdong announced that he would release the first sedan Zhijie S7 in November, and introduced that the Zhijie S7 is the first pure electric coupe jointly created by Huawei Smart Car and Chery. In December, Huawei will also release the M9, Yu Chengdong said that "the M9 will not only be the best SUV within 10 million, but also the best SUV that can be seen on the road"; In addition, Guo Mingxi, an analyst at Tianfeng International Securities, previously issued a document saying that Huawei is cooperating with Jianghuai Automobile to develop an MPV model priced at about 1 million yuan, which is expected to be mass-produced in the second quarter of 2024, with a sales target of 50,000 units in the first year of listing.

It is not easy for Huawei car BUs to achieve profitability, and with the intensive launch of new products, it still takes time to test whether car BUs can really get out of the sales dilemma and achieve the profit target.