Huawei's "Light Boat" and "Heavy Mountain"

After Xiaomi Auto entered the market in a high-profile manner, Huawei's automotive business has also "seen the sun". On March 30, Yu Chengdong, Executive Director of Huawei, CEO of Device Business, and Chairman of Intelligent Vehicle Solution BU, announced that the Zhijie S7 has started large-scale delivery. At the same time, the smart car business, which has been "lagging behind" in recent years, has become the "most beautiful boy", and its revenue has directly doubled. Huawei's smart car business also seems to have a posture of "a light boat has crossed a thousand mountains".

Image source: Huawei's official website

Deliver at scale

"A large number of new Zhijie S7 has left the production line and is on the way to be delivered to users. On March 30, Yu Chengdong announced the news on social media. The day before, Huawei released its 2023 annual report, and Huawei's rotating chairman Ken Hu also mentioned that the intelligent vehicle solution business has begun to enter the stage of large-scale delivery.

In November last year, Zhijie S7 made a high-profile appearance and opened pre-sale. It is reported that the Zhijie S7 is the first sedan in Huawei's smart car business, which is jointly built by Huawei and Chery. At that time, Yu Chengdong once commented that Zhijie S7 was deeply empowered by Huawei in the fields of product definition, ID design, and user experience, "debuting a number of Huawei black technologies, opening a new chapter in smart travel".

But then, Zhijie S7 encountered delivery problems. On the black cat complaint, some consumers also reported that the initial estimated delivery time was 4-6 weeks, but "now three months have passed, and there is no follow-up".

On March 16, Yu Chengdong also said at the 2024 China Electric Vehicle 100 Forum that Zhijie S7 has delayed the listing and mass production due to the shortage of chips and the relocation of the factory, but he also mentioned that it is expected to return to normal from April.

It was also at that forum that Huawei's smart car business already had a signal of double happiness. At that time, Yu Chengdong revealed that Huawei's car BU would probably be able to turn losses into profits this year.

According to reports, in the first three months of this year, Huawei's smart car business turned losses into profits, and Huawei's car BU business is close to the edge of breakeven, "I expect that from April, it should be able to turn losses into profits and achieve benign positive development."

Founded in 2019, Huawei's Intelligent Vehicle Solution Business Unit sells components and provides full-stack integrated solutions for car companies. In 2022, Yu Chengdong revealed that the car BU business was Huawei's only loss-making business at that time. According to Huawei's 2022 annual report, the revenue of the intelligent vehicle solution business was 2.1 billion yuan.

On March 29 this year, Huawei released its 2023 financial report. According to the data, in 2023, Huawei's intelligent vehicle solution business will achieve sales revenue of 4.7 billion yuan, a year-on-year increase of 128.1%, ranking first in terms of growth rate.

In February 2023, Yu Chengdong revealed that Huawei's car BU will achieve its goal of profitability by 2025.

Car BU "stands up"

Wenjie may be a major contributor to Huawei's smart car business. According to the data, in February 2024, Hongmeng AITO delivered 21,142 new cars, winning the sales champion of new power brands in the Chinese market for a second time.

Among them, the monthly delivery volume of the new M7 exceeded 18,479 units, with a cumulative delivery of more than 100,000 units, and the cumulative delivery of the M7 exceeded 150,000 units, leading the monthly sales list of new forces in the Chinese market with an absolute advantage. In addition, the cumulative number of units in the 62 days of the launch of the M9 exceeded 50,000 units, and the nationwide large-scale delivery was officially launched on February 26.

"It's not easy to come back to life. In October last year, the new M7 was launched for a full month, and Yu Chengdong sighed. Previously, under the influence of the "price war" of car companies, the sales of the Wenjie series had been declining. While the new M7 was expected to be high, the M9 also became a rising star. It is reported that the sales volume of the M9 reached 60,000 units in the first month after its launch, far exceeding expectations.

On March 31, there were also media reports that Huawei plans to re-release the Zhijie S7 in April, and the product details may be adjusted. In this regard, a reporter from Beijing Business Daily contacted Huawei, but did not receive a reply as of press time.

In an interview with a reporter from Beijing Business Daily, Zhan Junhao, a well-known strategic positioning expert and founder of Fujian Great Aim Brand Positioning Consulting, said that Huawei's profound technology accumulation in the fields of communications, chips, artificial intelligence, and cloud computing has provided a solid foundation for the intelligent, connected, and electrified automotive business. Huawei's close cooperation with automakers has also contributed to its business growth.

Huawei's intelligent vehicle business has three business models: component model, solution model, and smart car model. Huawei's highest level of participation is in the Smart Car model, in which Huawei provides parts and solution support to OEMs, including intelligent driving and intelligent cockpits, and is deeply involved in product and vehicle design, as well as providing sales network channel support. Huawei's cooperation with Thalys and Zhijie with Chery both belong to this model.

Zhu Keli, executive director of the China Information Association and founding president of the National Research Institute of New Economy, also told Beijing Business Daily that one of the keys to Huawei's achievements in the smart car business is its unswerving investment in technology research and development. In 2022, Yu Chengdong mentioned that Huawei invests more than one billion dollars in R&D every year, with 10,000 direct and indirect R&D personnel, of which 70% are developing intelligent assisted driving.

Competition in the era of Automotive 3.0

Around Huawei's cooperation model, there is a famous "soul battle" in the automotive industry.

In 2021, when asked whether he would consider cooperating with a third party such as Huawei in autonomous driving, Chen Hong, chairman of SAIC, said: "It's like having a company that provides us with a holistic solution, so that it becomes the soul and SAIC becomes the body." Chen Hong said that SAIC should take the soul into its own hands.

This may also be the other side of Huawei's smart car business, and the delivery turmoil of Zhijie S7 can also be seen as one of the concrete manifestations of the problems that this integration may face.

Zhan Junhao said that the delivery difficulty of the Zhijie S7 may reflect the excessive integration and dependence of the smart car model, which may lead to an increase in the complexity of the supply chain, which will affect the delivery efficiency. In addition, whether the smart car model can meet the individual needs of different car companies is also a question worth considering.

Yuan Shuai, deputy secretary-general of the Zhongguancun Internet of Things Industry Alliance and executive director of the high-quality development promotion project of specialized and special new enterprises, also mentioned to the Beijing Business Daily reporter that although the smart car model provides car companies with full-stack solutions and resources such as brands and channels, it may also lead to some complexity and uncertainty in the production and delivery process due to the collaboration of multiple aspects.

However, Yuan Shuai also mentioned that this does not mean that the smart car model itself is flawed. Each cooperation model has its own applicable scenarios and advantages, and the key is how to flexibly adjust and optimize the cooperation model according to market changes and the needs of car companies.

In 2023, Yu Chengdong made a prediction, which may be seen as an answer to the "soul dispute" after the verification of time.

Yu Chengdong said that in the next 5-10 years, only a few car manufacturers will survive, and BYD will become one of the few giants that can survive in the future.

Competition is also an inevitable situation for Huawei. The night before the release of Huawei's annual report, the first Xiaomi car was officially released. Lei Jun, founder of Xiaomi Group, said that the number of Xiaomi cars SU7 exceeded 88,898 after one day of launch.

"At present, the three OS systems created by Huawei, Meizu and Xiaomi represent players in the automotive 3.0 era. Previously, Shen Ziyu, chairman and CEO of Xingji Meizu Group, had said so.

In October last year, Xiaomi's surging OS was officially released. More than a month later, Meizu officially announced that it would build a car and is expected to launch the DreamCar co-creation plan in the first quarter of 2024. In 2022, Meizu was officially acquired by Geely. In February this year, Meizu announced that it would abandon its traditional smartphone business and devote itself to the AI field.

Zhu Keli said that the overall future development trend of Huawei's automotive business is inevitably to move towards more intelligent, connected, and electrified vehicles. However, Huawei also faces many challenges in the process of development. For example, how to coordinate R&D, production, channel resource allocation and other issues between different brands to ensure that various cooperation projects can be carried out efficiently, and how to cope with the increasingly competitive market environment to maintain its leading position in the field of smart cars.

Beijing Business Daily reporter Yang Yuehan