Huawei's Auto Ambition Confronts Setback

In December 2021, Huawei published AITO M5, a middle-to-high-end EV model that adopts Huawei's in-car operating system HarmonyOS. Some industry insiders say its exterior is a copy of Porsche and thereby can't be viewed as a competitive vehicle. Huawei started its Information and Communications Technology Business Unit (IAS BU) in 2019; it sold around 12,000 cars in 2021. The Chinese tech behemoth is facing a dilemma as it has boasted (link in Chinese) of helping OEMs to sell a projected 300,000 units in 2022. This article will rewind the inception of Huawei's auto business, the issues it is dealing with, and provide its future outlook.

When did Huawei dab in the auto industry?

According to ZAKER (link in Chinese), Huawei launched its smart auto solution unit in May 2019, providing end-to-end ICT (Information and Communications Technology) hardware and solutions with auto companies and Tier 1 suppliers. Their products include HarmonyOS auto version, electric drive system DriveOne, advanced driver-assistance systems, lidar and various solutions and components.

The structure of IAS BU was adjusted in 2021. According to qichezhixin (link in Chinese), Huawei's new organization sets two separate departments managed by Richard Yu: Huawei Intelligent Auto Business Unit and Huawei Consumer and Auto Unit. The former focuses on solution designs, and the latter mixes the consumer business and the auto one.

Huawei cooperates with the downstream in many ways. Based on various demands, Huawei provides tailored solutions. If a car is labeled as 'Huawei Inside,' it adopts Huawei's full-stack solutions. At the same time, Huawei earns license fees. On the other hand, Huawei brands itself as an auto parts supplier like a traditional Tier-one or Tier-two supplier that generates revenue from selling components. Besides, Huawei offers the 'Huawei Zhixuan' collaborating mode to OEMs. In that way, Huawei plays a bigger role in the whole development process, covering concept build up, design, sales of a model and aftermarket services. It also means consumers will see the vehicle in Huawei stores.

Which cars are powered by Huawei?

Huawei has participated in several cars' designs and sales, including

●      Arcfox Alpha S Huawei Inside Version (link in Chinese), a model launched in April 2021, was priced at CNY 390,000 and CNY 430,000 for two Huawei versions, respectively. Both Huawei and BAIC Group designed this product.

●      Seres SF5 (link in Chinese), an EV developed by both Huawei and Sokon Group (601127:SH), was launched in April 2021, priced at CNY 220,000 and CNY 250,000 for two models.

●      Aito M5 (link in Chinese), the latest Huawei-powered model, published in December 2021, is a vehicle equipped Harmony in-car operating system. Its price is between CNY 250,000 and CNY 320,000.

●      Huawei also released a model called Avatar 11 at the same time, which belongs to a high-end brand founded by Changan Auto and CATL. This brand will be 'Huawei Inside' with full-stack solutions.

What about the sales performance of these cars?

According to the China Passenger Car Association, Alpha S was launched in April 2021, with only six units sold in that month, 231 in May, 221 in June, 137 in July, 178 in August, 421 in September, 477 in October, 444 in November and 1186 in December. In 2021, the model sold 4993 units. For unknown reasons, the HI version started to be delivered in the last month of 2021. The average monthly sales did not exceed 500 units. 

Another Huawei-powered vehicle, Seres SF5, saw annual sales reach 7,080 in 2021. According to the data disclosed by the Passenger Association, from April to November 2021, the highest monthly sales volume of SF5 was 1,926 in November.

Judge the sales figure

In total, the annual delivery figure is between 7,080 and 7,780, assuming Huawei Auto only accounts for Arcfox Alpha S HI version and SF5. Compared with the other two newly established brands, Voyah and Zeekr, the results are rather disappointing – they have had more robust sales momentum in recent months than Huawei. Specifically, Voyah started delivery in August, and the annual delivery was 6,791, of which 3,330 were delivered in December. The Zeekr 001 began to be sold in October with 199 units, 2012 in November and 3,796 in December. The annual delivery volume exceeded 6,000 in three months, obviously surpassing Huawei in recent momentum.

What's the reason behind it?

Design: No matter Alpha S, Seres SF5 and M5, all didn't reveal any superb features compared with competitive products of NIO, Li Auto and XPeng.

Production: Arcfox HI version might encounter some troubles in the supply chain, causing its late delivery.

Sales: Both Arcfox and Seres have few venues to display models affecting the product exposure.

 What's Next for Huawei?

●      Designing a hit model: the latest M5 is an improved version from the former SF5 but is far from a successful vehicle. To squash into the top contenders of auto suppliers, Huawei needs a hit product to open market awareness and get rid of the lousy clout. The peers' experience showed that NEV companies such as NIO were labeled a premium market leader through ES6, Li Auto through Li Xiang One, and XPeng through P7.

●      Building trust in the auto sector through more collaborations. By far, middle to large OEMs are unwilling to team up with Huawei as Huawei wants to dominate in many parts while jointly designing a car. Perhaps it's good for Huawei to lower their stance, concentrating on providing OEMs or Tier ones with some sort of services.

●      Although Huawei expressed many times that they had no interest in manufacturing, self-producing vehicles might be a way for Huawei to fulfill itself as it is harvesting the experience of making cars.