Will AITO fare well after Huawei lets go?

On September 15, news came out that Huawei and Seres had adjusted their cooperation model, and both Seres' A-shares and Hong Kong stocks plummeted sharply.

Seres was listed in Hong Kong on November 5 last year, and it has only been more than ten months to date. Calculated at HK$35 as of 11:00 on the day of publication, its Hong Kong stock price has dropped by around 73.4% compared to the issue price of HK$131.50. Estimated based on the Hong Kong stock price and total share capital, its market value has fallen from approximately HK$229.1 billion at the time of issuance to about HK$61 billion.

In the afternoon of the 15th, both parties responded to external speculation about a "breakup". Harmony Intelligent Mobility spoke first, followed by AITO, confirming that AITO remains a member of Harmony Intelligent Mobility. Seres will take the lead in product definition, design, marketing, channels and services, while Huawei Terminal will continue to participate and provide support.

AITO will continue to use Huawei's technologies such as intelligent driving and cockpit systems. However, AITO's past success was also closely related to Huawei's participation in product development, brand promotion, and sales organization. Consumers walking into Huawei's stores may shift from looking at mobile phones to learning about AITO vehicles, or consider buying a car out of trust in Huawei.

Under the new division of responsibilities, how much manpower and promotion resources Harmony Intelligent Mobility stores will invest in AITO still directly affects Seres' order volume. After Seres gains more operational dominance, how much cost it can save and whether it can continue to sell AITO vehicles well are also issues of public concern.

Seres, which took over the business at this time, is facing losses and slowing sales. In the first half of this year, the company's new energy vehicle sales increased by 3.9%, but the group's revenue decreased by 7.9%, with a net loss attributable to shareholders of 1.717 billion yuan. In July and August, Seres Automobile, which mainly produces and sells AITO vehicles, still recorded monthly sales of around 20,000 units, with no obvious rebound.

When AITO was first launched, the two parties could concentrate resources to build one brand well. Now, Seres is eager to restore sales, while Huawei also needs to take into account the products and sales of the other four brands, as well as supply technologies to more automakers. Both sides have the need to readjust their cooperation model.

The re-division of responsibilities gives Seres more room for adjustment, but AITO's previous advantages are also being caught up by competitors. Whether Seres can make good use of its operational dominance will depend on AITO's subsequent market performance.

01. Huawei Continues Cooperation, Seres Takes Lead in Operation

In the clip of the AITO M9 launch event released by Harmony Intelligent Mobility on May 27 this year, the emphasis was still on Huawei's full-process leadership. More than three months later, AITO took the lead in making adjustments, while the other four brands, Luxeed, Stelato, Maextro and Shangjie, still follow the division of labor led by Huawei.

By September 16, dealers had started to sign contracts according to the new division of responsibilities.

According to the channel letter confirmed to Seres by National Business Daily, the signing entity of the comprehensive service cooperation agreement for distribution partners will be changed from Huawei Terminal to the affiliated company of Seres Automobile starting from that day. The relevant comprehensive service fees for orders placed before September 16 will still be settled by Huawei, and new orders placed on and after that day will be the responsibility of Seres. The channel authorization model, business rules and operation standards remain unchanged for the time being.

In 2024, Seres had already purchased AITO-related trademarks and design patents. This time, it further took over the daily management of products and sales. Seres will take the lead in deciding what vehicles AITO makes, what configurations to provide, and how to promote and sell them.

Traditionally, Huawei's cooperation methods with automakers are mainly divided into three categories, the core two of which are the Smart Selection and HI models. The difference mainly lies in which links Huawei participates in, and who takes the lead in product and brand operation.

While AITO is adjusting its division of responsibilities, Huawei's cooperation with some automakers is also deepening. Avatr has been upgraded to HI Plus, GAC's Qijing and Dongfeng's Yijing have introduced Huawei Qiankun to deeply participate in product development, and some cooperatives have even extended to the marketing field.

With this adjustment, AITO is now closer to the HI model in the sense that the automaker takes the lead in operation.

Seres takes the lead in AITO's product and brand operation, and Huawei Terminal continues to provide support. Technologies and products such as intelligent driving and cockpit systems are supplied by Huawei's wholly-owned subsidiary Yinwang, and Seres Automobile and Avatr are also shareholders of Yinwang. Seres' own R&D work on vehicle platforms and range-extender systems will also continue.

Seres already has its own team in AITO's sales and after-sales system. By the end of 2025, AITO had 380 operating user centers covering 218 cities. These outlets not only undertake orders imported from Huawei experience stores, but also can acquire customers independently, providing sales, delivery and after-sales services.

Ryan, a person working in the distribution channel, said that the "exclusive franchise" proposed under the new model can be operated by dealers or directly by the brand. It remains to be further observed which original Harmony Intelligent Mobility stores will continue to sell AITO vehicles and how long the adjustment will take. The two parties have promised that the rights and interests of existing users and subsequent services will not be affected.

Luxeed and Stelato were also building their own exclusive brand networks before, but their products and marketing are still led by Huawei. This time, AITO has also adjusted the dominance of these two tasks, covering a wider scope.

According to Ryan's observation, one of the urgent reasons for Seres to make adjustments is the "internal product cannibalization". Adding configurations or lowering the entry threshold for the AITO M6 (starting price of 229,800 yuan) may win customers from external brands, but it may also attract consumers who originally considered the Luxeed R7 (starting price of 249,800 yuan).

For Huawei, this kind of internal competition makes it more difficult to operate five brands in a unified manner. Seres hopes to increase AITO's sales by adjusting configurations and prices, and Luxeed has the same demand. With Seres taking the lead, there is more room to arrange products and promotions according to AITO's cost and sales performance.

02. Technology Purchase Remains, Revenue Sharing Mechanism is Restructured

With marketing and channels led by Seres, the service fees originally paid to partners and the expenses of organizing sales independently in the future all need to be recalculated.

In the first half of this year, Seres Group's sales expenses reached 8.471 billion yuan, down 5.3% year-on-year; revenue decreased by 7.9%. As revenue fell faster, the sales expense ratio rose from 14.33% to 14.73%. For every 100 yuan of revenue, the expenditure on sales increased from 14.3 yuan to 14.7 yuan instead.

In the same period, the group's gross profit margin dropped from 28.9% to 23.3%. For every 100 yuan of revenue, the gross profit left after deducting operating costs decreased from about 28.9 yuan to 23.3 yuan. This 23.3 yuan also needs to cover about 14.7 yuan of sales expenses, as well as R&D and management expenses.

The reasons listed in the semi-annual report include the update of main models, changes in sales structure, insufficient production capacity and sales scale, as well as rising prices of batteries and chips. Asset impairment further expanded the loss.

On June 12, Zhang Xinghai, Chairman of Seres Group, estimated at the China Automobile Chongqing Forum that the rising prices of memory chips and lithium carbonate increased the cost of each AITO vehicle by 15,000 to 20,000 yuan. No matter who manages the stores, this part of supply chain pressure will exist in the short term.

To judge how many problems the new division of responsibilities can solve, the money Seres pays to the Huawei system needs to be split into two parts for analysis.

One part is used to purchase intelligent software, hardware and related services. In the first half of this year, the amount of goods purchased and labor services received by Seres from Yinwang was 9.84 billion yuan, compared with 5.6 billion yuan in the same period of last year, representing a year-on-year increase of 75.6%, which is significantly faster than the 3.9% increase in new energy vehicle sales in the same period.

Ken, an investor focusing on new car-making forces, said that in the future, the cooperation on intelligent driving and cockpit systems will continue, so this purchase payment still needs to be made. To save costs, Seres still needs to negotiate the purchase price, adjust configurations and usage volume specifically.

Source / AITO Official Website

After Seres Automobile spent 11.5 billion yuan to acquire a 10% stake in Yinwang, it can share the profits earned by Yinwang. In the first half of this year, this shareholding brought Seres a book investment income of about 58 million yuan. As Yinwang expands its customer base and increases profits, Seres also has the opportunity to benefit. However, this small income is not enough to make up for the losses of the vehicle manufacturing business.

The other part is used for brand promotion, channels and sales services. This division of responsibility adjustment directly involves this part.

Among the sales expenses in the first half of the year, advertising, image store construction and service fees amounted to 7.894 billion yuan, including advertising, store construction and various service expenditures. The financial report does not break down the fees by payee, nor does it list all Huawei's service fees separately.

Ken said, The next thing to pay attention to is the actual investment and effect of Seres organizing marketing, managing stores and launching advertisements on its own. After Seres directly manages the sales network, it can re-clarify the commission for each link of customer recommendation, transaction and delivery, so as to make the collaboration between stores more smooth.

Theoretically, having Seres take the lead in both product and sales work can reduce the disconnection between product development and sales. Consumers' willingness to pay extra for certain features and configurations that are rarely selected can be used for subsequent model updates; the launch time of new models also needs to be arranged together with the production scheduling and inventory of old models.

If AITO wants to reduce some models' dependence on price cuts, it needs to deal with these problems in advance.

03. Beyond the M9, AITO Needs More Sales Volume

Prior to this cooperation adjustment, AITO had already experienced several months of slowing growth.

According to the "Seres Automobile" caliber in the company's production and sales express, the sales volume in the first half of the year was 160,800 units, a year-on-year increase of 5.6%; by the first eight months, the cumulative sales volume reached 201,900 units, turning to a year-on-year decrease of 14.07%. Both July and August saw sales of just over 20,000 units, with August down 50% year-on-year.

The high-priced M9 sells well. Harmony Intelligent Mobility announced on September 4 that the new generation M9 has accumulated more than 30,000 units delivered in 12 weeks since launch, with an average transaction price of over 600,000 yuan. The M6 priced at more than 200,000 yuan has also brought in additional sales, with cumulative deliveries of over 45,000 units in four months since its launch by the end of August.

New cars are being delivered one after another, but AITO's total sales have not yet resumed growth. Next, Seres needs to manage the entire product line well to allow models such as the M7 and M8 to bring more orders and profits.

Ryan mentioned to "Focus One", "Between the top-spec M8 and the entry-level M9, many people choose to pay extra for the new M9." The high-spec M8 and entry-level M9 differ by only about 20,000 yuan. To increase its brand sales, the M8 still needs to attract family users whose budget is not enough for the M9 and are comparing brands such as Li Auto.

The M6 has already added low-priced versions to win orders. In June, AITO added two new lower-priced pure electric versions for it. Ryan told "Focus One", "The 250,000-yuan SUV market is so competitive that we have to cut prices."

Competitors are already striving for more family users. After Li Auto completed the generation update of its L series, the group's deliveries rebounded to 37,700 units in August, up 23.7% month-on-month; XPeng GX delivered 7,338 units that month, recording month-on-month growth for three consecutive months.

The number of models using Huawei's technology is also increasing. The Luxeed V9 was delivered 8,312 units in August, with an official starting price of 389,800 yuan. It belongs to the MPV category while the M8 and M9 are SUVs, which will attract some family users with similar budgets. SUVs such as Avatr 07, Voyah FREE+ and Deepal S09 cover the price range of some AITO models.

After the channel handover, in the short term we will first see whether the test drive appointments and recommended orders brought by Huawei stores can continue to be fulfilled. AITO already has 1.2 million users, and referrals from existing owners and trade-in purchases can also provide part of the customer base.

Product adjustments will take longer. The models delivered recently usually entered the development stage long ago, and the choices Seres makes after taking over will only gradually become clear in subsequent model updates.

As the M6's sales proportion increases, even if the M9's transaction price does not drop, AITO's overall brand average price may decrease. Therefore, to judge whether the operation has improved, we need to separate each model and look at the actual transaction price and sales volume under similar configurations.

Huawei needs to provide technology to more automakers to expand its automotive business, which means AITO is facing more competitors with similar technologies. When consumers compare several vehicles equipped with Huawei's intelligent driving and cockpit systems, Seres still needs to attract them with space, driving experience and pricing.

This adjustment gives Seres more space to decide on products and sales. How to differentiate models, which configurations are worth investing in, and how to win consumers from competitors will pose greater challenges to Seres.

This article is from the WeChat public account "Dingjiao" (ID: dingjiaoone), written by JIN Yufan, edited by WEI Jia, published with authorization from 36Kr.