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BusinessHuawei Executive Defends Automobile Business Strategy

Huawei Executive Defends Automobile Business Strategy

Recent rumors about Huawei’s expansion into the smart car industry, including alleged severed partnerships and plans for factory construction, have once again cast the Chinese tech giant’s most concerned business segment into the spotlight.

On February 18, Richard Yu, head of Huawei’s smart car division, responded to misconceptions regarding Huawei’s partnership with Chinese automaker Seres. He also shared the rationale behind Huawei’s current automobile business strategy and his personal opinion on the EV industry.

Huawei’s automobile division comprises of three business models: auto parts manufacturing, HI (Huawei Inside), and Smart Selection. The main difference between the latter two forms of partnership models is that the Smart Selection model is led by Huawei, while the HI model is headed by Huawei’s car manufacturing partners.

Yu asserted that “Huawei does not need to build its own cars.” To this end, Huawei will no longer build factories or buy production lines. Huawei has no vehicle production qualifications and personnel, but it can provide software, design, and quality control.

As for the question of why Huawei does not partner with world-class car manufacturers such as Mercedes-Benz, BMW, Audi, or Toyota, Yu said that times are changing–if Huawei follows the requirements of these traditional giants, it will not be able to outcompete other industry disruptors.

Seres was first car company to partner with Huawei. Seres witnessed improvement of its product quality as well as growth of its revenue, sales volume, and reputation after receiving support from Huawei. However, for a long time, Seres was considered to be Huawei’s foundry.

Yu denied the speculation and emphasized that under the Smart Selection partnership model, Seres benefits the most. “Huawei and Seres are jointly developing vehicles and our partnership model allows for Seres to obtain most of the profits. Huawei wants to help car companies sell more cars so that Huawei can supply more auto parts.”

Recently, headlines emerged that “Huawei’s R&D personnel withdrew from Seres”, “Huawei contacted other car factories”, and “the logo of AITO, an EV brand co-developed by Huawei and Seres, changed to Huawei,” suggesting that the partnership between the two parties may disintegrate.

“Huawei is not downsizing R&D personnel. Our investment in Seres is increasing,” Yu explicitly denied these rumors. The AITO brand has released three models: the M5, the M7 and the M5 EV. In 2022, AITO delivered more than 75,000 vehicles.

During the Shanghai Auto Show in 2021, Huawei announced that it would help Seres sell cars. At that time, Yu said that Huawei had more than 5,000 experiential stores and 60,000 offline retail outlets, which are resources that traditional car companies can not match. In the past two years, Huawei’s sales network all over the country has been transformed to prepare for selling cars.

Next, Huawei plans to improve its sales strategy. “We used to think too simply,” Yu said. “Many salespeople are not competent in selling cars, which can lead to problems in the retail sector. This year, Huawei will not blindly expand its sales network. Instead, we will enrich our sales capabilities. We will even close some stores.”

Yu did not set a 2023 sales target for AITO. A term Yu frequently mentions is net promoter score (NPS), a common metric used in market research as a measure of brand loyalty. The average NPS in the automobile industry is about 40%, while that of AITO approaches 70%.

At the end of last year, Yu proposed that the smart car business unit of Huawei should be profitable by 2025. To achieve this goal, Huawei needs to help its auto partners sell 1 million cars. Huawei will mainly focus on high-end products, not involving models priced below 200,000 yuan ($29,011).

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