Chinese tech giant Huawei’s automotive business unit has been valued at around RMB 115 billion ($16 billion), after it struck a deal to sell a 10% stake to Changan Automobile for RMB 11.5 billion, the two companies announced on Tuesday.
Why it matters: Changan shares fell by 4.3% on Tuesday as the deal will see it own a smaller than expected stake in Huawei’s car unit. Huawei will retain its control of the business and pursue a diversified ownership structure to deepen its links with multiple automakers.
Details: Changan issued a statement (in Chinese) on Monday evening saying that its subsidiary Avatr was set to sign a deal with Huawei the next day to take a 10% stake in Shenzhen Yinwang Intelligent Technology Co., Ltd. (also called Newcool) for about RMB 11.5 billion. Avatr will nominate a director to sit on the company’s seven-person board.
- The signing ceremony, which also took place on Tuesday morning, was attended by Eric Xu, rotating chairman of Huawei, and Richard Yu, chairman of the board of directors of Huawei’s Intelligent Automotive Solution (IAS) business unit, as well as Changan’s president Zhu Huarong, according to an image posted by Avatr on microblogging platform Weibo.
- The size of the deal was significantly smaller than expected– Changan had revealed plans to acquire a stake of up to 40% stake in the joint venture in November. Meanwhile, Seres, another manufacturing partner of Huawei, said (in Chinese) on July 28 that it has been in talks with the smartphone maker to buy parts of the company.
- Huawei is also in early-stage talks with state-owned automaker FAW to sell a minor stake in its auto business, although no significant progress has yet been made. Peers Dongfeng Motor, BAIC, and JAC are among the potential investors in the business as well, with these firms all having developed or about to launch new electric vehicles that feature Huawei’s assisted driving technology.
- Huawei in 2020 co-established Avatr with Changan and Chinese battery maker CATL by providing technological know-how without direct investment in the luxury electric vehicle brand. Changan and CATL are the largest shareholders in Avatr with stakes of roughly 41% and 15%, respectively.
Context: Huawei expanded its consumer electronics business into the booming Chinese EV industry with the establishment of its IAS business unit in mid-2019, just as the US banned the supply of semiconductors and operating systems to the Chinese tech giant. It began selling EVs for partners via its retail network in early 2021 and has stressed repeatedly it has no intention to build vehicles itself, but instead aims to help automakers make better cars.
- Huawei has since faced pushback from some traditional Chinese automakers amid concerns that they could lose out on customers if the company makes its own cars. Some traditional automakers have also looked to retain more ownership of in-car technologies through partnerships with smaller suppliers.
- The situation improved last year when the redesigned Aito M7 crossover and premium M9 sports utility vehicle produced by Seres became hits. Legacy automakers have also been pressured by a ferocious price war and have struggled with their own autonomous vehicle efforts.
- Huawei estimated that around 500,000 cars equipped with its technology will be on the roads by year-end, Reuters reported in April, saying it expected its car business to break even this year compared with the RMB 6 billion losses it recorded in 2023. It is also partnering with global majors including Toyota and Audi.
READ MORE: Huawei creates separate car division, open to Changan and other outside investors
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