Huawei Intelligent Automotive: In a strategic move, Huawei, the Chinese technology giant, is poised to spin off its Intelligent Automotive Solution (IAS) business unit, aiming for a valuation reaching up to $34.67 billion. This unusual step for Huawei involves selling stakes to various investors, with Changan Auto being a significant player in the venture.
The plan, disclosed on Sunday, involves the creation of a new company that will inherit the core technologies and resources of the IAS unit. Changan Auto, a major automobile partner, along with other relevant parties, is anticipated to own up to 40% of the new firm, according to a statement from Changan Auto. The financial details of the deal, however, have not been officially disclosed by either Huawei or Changan Auto.
Sources suggest that Changan Auto and its parent company, China South Industries Group, are contemplating acquiring approximately 35% and 5% of the new firm, respectively. This potential valuation of the new company is estimated to be in the range of 200 billion to 250 billion yuan.
Furthermore, state-owned automakers, FAW Group and Dongfeng Motor Group, are reportedly in advanced talks with Huawei to acquire up to 5% each, enhancing the diversified ownership structure of the new entity. While Huawei is expected to retain the largest single shareholding, ranging from 40% to 50%, for at least the next two-to-three years, deal details remain in flux. The ownership split and valuation are still subject to negotiation and regulatory approval.
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This move by Huawei is somewhat unconventional, considering the company’s historical trend of retaining ownership of its business units. However, insiders reveal that Huawei’s smart car business has faced challenges in achieving substantial growth, prompting the need to recoup capital for ongoing research and development (R&D) endeavors.
Initially, Huawei’s senior executives, including founder Ren Zhengfei, held high hopes for the smart car unit to become a significant growth driver. However, despite investments totaling $3 billion and a team of 7,000 in its R&D division, the IAS unit emerged as the only money-losing entity among Huawei’s primary six units.
The new firm, as outlined by Huawei, is expected to engage in the research and development, production, sales, and service of intelligent automotive systems and component solutions. Additionally, it will absorb Huawei’s other auto-related assets and resources outside the IAS business unit. As part of the strategic shift, Huawei is considering relocating the new firm’s headquarters from Shanghai to Chongqing, where Changan Auto is based. The proposed deal is also seen as paving the way for the business’s eventual listing, aligning with Huawei’s earlier plans.
Richard Yu, the head of Huawei’s consumer business, who has overseen the smart car unit for years, is speculated not to lead the new firm, although further details on leadership remain undisclosed. The spin-off aligns with Huawei’s adaptive strategy as it navigates challenges in the dynamic smart car industry.
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Who makes the Huawei car?
While Huawei has made it clear that it doesn’t manufacture cars independently, the company has been actively collaborating with various automakers to improve the quality of their vehicles. One of its notable partnerships is with Changan, and it has also teamed up with Seres Group (601127. SS) to produce Aito branded cars, such as the M7 model. By working together, Huawei and Seres are able to leverage their respective strengths to create innovative and high-performing vehicles.