Unter der Schatten von Huawei: SERES' Millionenschwerter "Jungfernsprung"

The 1,000,000th vehicle of the AITO model has rolled off the production line.

At the completion ceremony, Zhang Xinghai, Chairman of Seres, attributed this success to the "cross - sector fusion" model and especially thanked its partner Huawei.

Nevertheless, Yu Chengdong, Chairman of Huawei and Head of the Consumer Business Group, was not present at AITO's "coming - of - age party", but dominated the headlines of the technology press with his slogan "way ahead". Instead, there was a polite and disciplined congratulatory video.

Five years ago, the partnership with Huawei brought a turning point in Seres' fate. This Chinese automaker from Chongqing, which was once struggling for survival, suddenly transformed into a capital star in the field of electric mobility. The successful sales of models like the AITO M9 have enabled it to turn losses into profits, and the market value has exceeded 200 billion yuan.

But as Huawei's "circle of friends" expanded from one "realm" to five "realms", Seres' capital story was diluted, and it had to shift from "lying flat" to independence.

Independent development and overseas expansion are Seres' two main strategies to mitigate Huawei's influence, and also the main use of the funds from its IPO on the Hong Kong Stock Exchange in November last year. However, the continuous decline in the stock price is a silent referendum.

Huawei's "departure" and the worse - than - expected results have prompted several investment institutions to lower their profit forecasts for Seres in the next 2 - 3 years. Citigroup even claims in its report that "Seres' golden product cycles are coming to an end soon".

Production for Huawei: The stock price "plummets"

Before handing over the "soul" to Huawei, Seres repeatedly faced setbacks on the road to electric mobility and suffered consecutive losses for two years.

The strategic model SF5 sold only 732 units in 2020, and the net loss was 1.73 billion yuan. Thus, it lost all the profits from oil - vehicle production in the past five years again, and the stock price fell to a low of 7.2 yuan.

Huawei's automotive business also did not run smoothly. Xu Zhijun, the rotating chairman, initiated the partnership in the HI (Huawei Insight) model with BAIC and Changan. That is, Huawei offers a comprehensive solution for intelligent vehicles as a supplier. However, the project encountered many difficulties, and the sales figures of the models after entering the market were also disappointing. The business development stagnated, and this route gradually came under pressure within Huawei.

At the end of 2020, Huawei moved the Business Unit Automobile (Car BU) from the ICT - Business Management Committee led by Xu Zhijun to the Consumer Business Management Committee led by Yu Chengdong and restructured the Investment Review Board (IRB) for intelligent end - devices and intelligent automotive components. Yu Chengdong was appointed the new head of the IRB. In May 2021, Yu Chengdong additionally took over the position of CEO of the Car BU and fully took over the automotive business.

After Yu Chengdong took over Huawei's Car BU, he promoted the "Intelligent Selection" model, which means a close bond with automakers. That is, Huawei is deeply involved in all processes from product definition, design, development, production to marketing and "helps automakers build good vehicles and sell them well".

At that time, some automakers were arrogant and only regarded Huawei as a supplier. Others generally feared Huawei and were afraid of becoming a contract manufacturer for Huawei.

Seres, which was in a difficult situation, accepted Yu Chengdong's olive branch. With the strong support of Zhang Xinghai, the chairman, Seres actively handed over the reins to Huawei, developed products according to Huawei's requirements, and continuously improved the R & D and production standards. This gave rise to the partnership brand "AITO".

At the end of 2021, the AITO M5 was presented as the finale act at Huawei's autumn product presentation. Yu Chengdong described it as "an intelligent end - device on wheels".

Previously, Huawei had already installed its DriveONE triple - motor, the HiCar vehicle system, and the HUAWEI SOUND speakers on the "Huawei Smart Selection Edition" of the Seres SF5 and sold it in its offline channels. The M5 is an upgrade of the SF5 and additionally features Huawei's Hongmeng cockpit, AR - HUD, and cameras.

In mid - 2022, AITO presented its second model, the six - seat series - hybrid SUV AITO M7, which is targeted at the Li ONE.

After these three models entered the market, the sales figures and reputation were disappointing. But Huawei deepened its understanding of automobile production, and Seres continuously improved its capabilities in product development, production, and supply - chain management with Huawei's encouragement.

More important than the reaction of the consumer market was that of the capital market. After the news of the partnership between the two companies became known in November 2020, Seres' stock price hit the daily limit seven times in eight trading days and increased by 150% within a month. After the SF5 entered the market, Seres' stock price more than tripled in three months.

By June 2021, Seres' market value had risen from less than 10 billion yuan to over 100 billion yuan.

Seres Super - Factory

The difficult turn

Production for Huawei has enabled Seres to achieve an astonishing capital increase, but it has also firmly tied its story to Huawei.

After the market value exceeded the 100 - billion - yuan mark, Seres' stock price could not maintain stability. Due to the mediocre market reaction to the first two models and the emerging doubts about the contract - manufacturing company and the Huawei concept bubble, the stock price declined from its peak and fell below 33 yuan by April 2022. The presentation of the AITO M7 briefly boosted the stock price again, but the monthly deliveries of a few thousand units were obviously not enough to support the market value.

In 2023, Tesla triggered a price war, and the entire industry was caught in fierce competition. Li Auto successively presented the L9 and L8, which directly affected the AITO M7. In the entire first half of 2023, the AITO series sold only 28,000 vehicles, which corresponds to a monthly average of less than 4,000 vehicles. In the same period, Li Auto delivered 139,000 vehicles, representing a 130% increase compared to the previous year.

Seres, which did not sell many vehicles, also did not make money. From 2020 to 2022, Seres suffered consecutive losses of 1.729 billion yuan, 1.824 billion yuan, and 3.832 billion yuan respectively.

But there were even bigger negative news later. In April 2023, Huawei officially announced that it would launch the brand "Luxeed" together with Chery. News about the partnerships with BAIC and Jianghuai also spread in the market.

In the foreseeable future, several "realms" will compete with AITO for internal resources, technologies, and user attention. The market believes that Seres' growth ceiling and profit margin will be limited due to internal competition, and the high scarcity premium will be lost. There are even voices claiming that Seres' "moat" has been leveled.

As a result, Seres' stock price entered a downward trend and fell by more than 70% in less than a year.

However, a turn was unexpected. In September 2023, Huawei's 5G chip overcame the blockade, and the flagship models Mate 60 Pro+ and the folding phone Mate X5 were launched ahead of schedule. The story of the "strong comeback" ignited the market sentiment. At the same time, the new AITO M7 re - entered the market with the strategy of "lowering the price and expanding the equipment" and quickly became a hit. It received 50,000 firm orders within 25 days. Yu Chengdong described this difficult turn as a "revival".

Subsequently, the luxury flagship SUV AITO M9 brought even greater surprises at the end of the year. This vehicle is equipped with all the then - mass - producible technologies of Huawei's Car BU and was described by Yu Chengdong as "the best SUV under 10 million yuan". After entering the market, its monthly sales quickly exceeded the 10,000 mark, and it sold between 10,000 and 20,000 units per month over a long period. It not only outperformed the M7 and became AITO's most popular product but also the most popular electric vehicle in the 500,000 - yuan segment.

Seres' stock price then experienced an intraday increase. Due to the significant short - term increase, Seres warned in a trading risk notice that the company's stock price had risen by 110.42% since August 28, 2023. In the same period, the Shenwan Automobile Index rose by 7.28%, and the Shanghai Stock Exchange Composite Index rose by 0.36%. The short - term increase in the stock is higher than that of the sector and the Shanghai Index, and there is a risk of over - heated market sentiment.

AITO M9

Integration into Inwant, Acquisition of the AITO Brand

The successful sales of the new AITO M7 and M9 have restored the market's confidence in Seres, but the concern about internal competition in Huawei's automotive circle of friends has not disappeared. This is also the main source of pressure for the high - level fluctuation of the stock price.

In November 2023, Huawei officially announced that it would upgrade the "Intelligent Selection - Automobile" model to the "HarmonyOS Smart Mobility" model and transfer the partnership model with Seres to Chery, BAIC, Jianghuai, and SAIC to form the five brands AITO, Luxeed, Enjoy, Honor, and Shang.

Zhang Xinghai responded amicably: "It's good that the circle of friends is growing. In this way, the influence will really explode." But the market did not agree.

The conflict between two technological routes within Huawei has exacerbated this problem. While Yu Chengdong strongly promotes the Intelligent Selection model, Xu Zhijun, the rotating chairman of Huawei, has promoted the split of the Car BU and introduced Changan Automobile as a shareholder of the joint - venture company.

At the end of November, Changan Automobile issued an announcement stating that it had signed an "Investment Cooperation Memorandum" with Huawei. Huawei will establish a new company (later named "Inwant") and transfer the core activities and employees of the Car BU to this company. Changan Automobile will invest in this company, and its share will not exceed 40%.

On the evening of the news release, Seres quickly issued a statement saying that it was also invited to invest in the target company and is currently actively examining the participation in the investment. It also emphasizes that the partnership with Huawei will not be affected and that Seres remains "Huawei's Car BU's closest, most far - reaching, and most vehicle - equipped automotive partnership partner".

This statement did not dispel the market's concerns. On November 27, 2023, Seres' stock price fell by 8.7%, while that of Changan Automobile rose sharply and hit the daily limit.

As a strong advocate of the Hi model, Changan Automobile launched the premium brand "Avatr" together with Huawei and CATL in 2021. By 2023, it had delivered a total of about 28,000 vehicles. Zhu Huarong, Chairman of Changan Automobile, has publicly questioned the Intelligent Selection model led by Yu Chengdong several times, saying that it does not comply with the rules of the automotive industry, national industrial policies, and the protection of consumer rights. He has also implicitly criticized Yu Chengdong's aggressive marketing style: "If you're at the front, you're at the front, but you should do it moderately." "A car worth hundreds of thousands of yuan should not be presented as a million - yuan car!"

At the beginning of its participation in the Car BU, Changan Automobile sought more power. At the beginning of 2024, Zhu Huarong used the proverb "Two monks carry water, three monks have no water" at the partnership conference, which was interpreted externally as opposition to Huawei's tie - up with Seres and other automakers in an attempt to get Huawei to focus more resources on itself.