When will the boots of Huawei cars fall?

Not building a car may be harder than building a car On the current smart electric vehicle track, Huawei is obviously an inescapable existence. But whose opponent is he? There is no clear judgment in the industry.

When will the boots of Huawei cars fall?

At the current stage when it is clearly stated that “do not build complete vehicles”, Huawei may be aiming to become the next Bosch (an international leading automotive supplier). much anticipation. The views represented by GAC Chairman’s “Soul Theory” also reveal the deep vigilance that many OEMs have towards Huawei.

Huawei’s top priority is obviously to maximize its “charm” in building and selling cars in the shortest possible time, so as to gain the trust and cooperation of more OEMs.

The latest data shows that, as two models in which Huawei is deeply involved, the Wenjie M5 first achieved the fastest record of the cumulative delivery of a single model exceeding 10,000 in 87 days, and the Wenjie M5 and Wenjie M7 achieved a single-month record in August this year. New achievement of over 10,000 deliveries.

The rapid growth is a fact. Wenjie has already squeezed into the top ten sales of new energy vehicles in August, but this achievement is still far from Yu Chengdong’s expectation of “selling 300,000 vehicles throughout the year”. In the short term, whether it is Huawei itself or the outside world, I am afraid it is difficult to determine its determination not to build cars.

01. Huawei to the left, Yu Chengdong to the right

On the matter of car building, Yu Chengdong and Huawei rarely conveyed different views.

For a long time, Huawei’s unified caliber has always been “Huawei does not build cars, but will help car companies build good cars”, and Xu Zhijun, who was the rotating director of Huawei in September 2021, revealed at the media communication meeting, “Yu Chengdong once expressed concern about this. If he decides to disagree, he might just want to build a car, but he only has one vote.”

Xu Zhijun also said, “If you don’t make a car, you will make more money if you don’t make a car.” In addition, Wang Jun, the then president of Huawei Auto BU, also publicly stated, “At present, I really don’t consider (building a car), and the parts business does not. It’s good enough, why build a car?”

Behind this is the little-known super earning power of the global Tier 1 (automotive first-tier supplier) giants in the automotive industry hidden behind the OEMs.

The so-called Tier 1 refers to the first-tier suppliers of OEMs. They occupy a considerable voice in the industrial chain in the era of traditional fuel vehicles and directly supply assemblies, modules, etc. to OEMs such as Mercedes-Benz, BMW, and Ford. , and also participate in the R&D and design of OEMs to a certain extent. Representative companies include Bosch, Continental, and ZF in Germany, as well as Aptiv in the UK and Magna in Canada.

In 2021, the Bosch Group’s revenue is 78.8 billion euros (about 551 billion yuan), the profit before interest and tax are 3.2 billion euros (about 22.4 billion yuan), and Magna’s revenue is 36.2 billion US dollars (about 256 billion yuan). The profit of 1.5 billion US dollars (about 10.7 billion yuan) is the representative of the relatively head among Tier 1 manufacturers. 

  In contrast, TeslaAlthough there will be explosive growth in 2021, with revenue of US$53.8 billion (about 343.2 billion yuan) and net profit of US$5.5 billion (about 35.2 billion yuan), before that until 2019, special Sla has experienced losses of more than ten years. 

  In terms of the scope of the domestic market, except for BYD and SAIC, other large-scale traditional car companies have a revenue scale of about 100 billion yuan, and a net profit of 3 billion to 7 billion yuan, which is far less than the international Tier 1. giant. 

  Not to mention the new domestic car-making force-“Weixiaoli”, the revenue scale in 2021 is only 20 to 30 billion yuan, and the net profit is always at a loss. In the first half of 2022 alone, it will total 9.6 billion yuan. 

  Huawei, which is shouting “survive” in 2022, is obviously difficult to enter such a new energy vehicle industry that requires a lot of up-front investment and may continue to lose money for many years. In the first half of 2022, Huawei’s revenue was 301.6 billion yuan, a slight decrease year-on-year. 5.87%, but the net profit was only 15.08 billion yuan, a year-on-year decrease of 51.97%, which was even worse than cutting off the middle. 

In this way, Huawei’s line of “helping companies build good cars” has become a more secure and asset-light option in the short term, and Yu Chengdong, who is not convinced, can only accept the company’s decision.

  In order to demonstrate its determination, Huawei released a document in 2020, referring to the resolution code named [2018] No. 139. The content includes “Huawei does not build complete vehicles, focuses on ICT technology, and helps car companies build good cars”, and also The stern wording said that “who will make a car in the future, interfere with the company, be transferred out of the post, and look for another post.” 

  It is worth noting that  in this 2020 document, another intriguing organizational structure adjustment has also been carried out  – the business jurisdiction relationship of the smart car solution BU (hereinafter referred to as “car BU”) has been adjusted from the ICT Business Management Committee to the consumer At the same time, the Consumer Business Management Committee was reorganized, and Yu Chengdong was appointed to be in charge of the smart terminal and smart auto parts business.

Why intriguing? Because the car BU is positioned as “helping car companies build good cars”, it is the same as the operator business and enterprise business in the original ICT business segment, which is the positioning of To B. 

  However, after the adjustment of the structure, Yu Chengdong is responsible for both the car BU and the smart terminal business, and Yu Chengdong’s desire to build a car has been more obvious. The resources invested by M7 are far beyond the scope usually involved by Tier 1 manufacturers, and it is more like “screaming” for their own products. 

  Industry insiders told the market that  Tier 1 manufacturers in the era of smart electric vehicles are usually relatively low-key and difficult to promote to customers because customers do not want to make it appear that they need to rely on other people’s technology.

  In this sense, Huawei is obviously not a low-key Tier 1 manufacturer or even a Tier 1 manufacturer in the usual sense. 

  02. How to make it?

  Huawei currently has three modes of car building, each with its own emphasis and advantages and disadvantages. 

The first is the component supplier model,  which refers to Huawei’s provision of software and hardware including Hongmeng OS and domain controllers to car companies. Its 2021 annual report shows that Huawei has established in-depth relationships with more than 30 mainstream car companies. Cooperation, HiCar supports more than 100 models, and the cumulative number of supported vehicles exceeds 10 million. 

  Although this model has a wide range of coverage, it is also the most traditional. Huawei’s room for development is relatively limited. Yu Chengdong once said at the 2022 Guangdong-Hong Kong-Macao Auto Show, “The traditional sales model of parts and components can no longer adapt to today’s intelligent network connection. requirements of the era of the motor vehicle”. 

  Interesting is the latter two. 

The second is the HUAWEI Inside mode,  which means that Huawei provides auto companies with autonomous driving solutions including smart cockpit, smart driving, and lidar. It has cooperated with Huawei in this mode, and the representative models are BAIC Polar Fox Alpha S Huawei HI Edition, Changan Avita 11, and GAC Aian. 

 In this mode, Huawei has come up with a series of technologies centered on self-driving car solutions. The technology is the most in-depth and the most core. However, it is conceivable that Huawei and traditional car manufacturers will inevitably experience a period of running-in in this process, and the final delivery time of the product will be It will also take longer. 

  Taking the BAIC Polar Fox Alpha S Huawei HI version as an example, pre-sale started in April 2021, and it was unveiled in September of that year, but the delivery date was repeatedly delayed from the fourth quarter of 2021, and finally the actual delivery was in July 2022. The version of the assisted driving function will not be seen until the fourth quarter of 2022. 

  At that time, some media quoted the internal staff of BAIC Blue Valley to explain that “the ‘seamless flow’ function of the Hongmeng vehicle system cannot be realized, which is the main reason for the delayed delivery of this model.” 

The third is Huawei’s smart selection model,  which refers to Huawei’s in-depth participation in product definition, vehicle design and providing sales channels. The representative car company currently only has Celis (formerly Xiaokang Co., Ltd.), and its models include Celis SF5, Wenjie M5 and Wenjie. The Jie M7 model has now entered Huawei’s more than 600 stores and 122 user centers. 

  Compared with the “procrastinating” polar fox, Wenjie M5 will be released at the end of 2021, and delivery will start in March 2022, and Wenjie M7 will start the first batch of deliveries in just 51 days after its release on July 4, 2022. Described as the fastest delivery record among new energy vehicles. 

  It is worth noting that, in terms of appearance, interior, seats, fuel consumption and sales channels, the two models in the world are full of “Huawei feeling”, and their efforts in intelligence actually only stay on the Hongmeng operating system. The smart cockpit car-machine experience brought by it does not involve the autonomous driving solution covered by the second cooperation mode (HUAWEI Inside). As for the ability of intelligent driving, Yu Chengdong only described it as “enough” at the press conference. 

A simpler understanding is that Huawei has put different capabilities in different “baskets”, and different cooperation models are also verifying the liquidity of different baskets.

  Among them, the second basket contains the ultimate killer of intelligent driving solutions, which car companies are likely to buy on demand. The third basket contains Huawei’s design, brand, and channel capabilities. Jie Huawei earns about 10%. 

  In the process of verifying the ability of the third basket, it is not so important who the partner is. The reason for choosing Celis is that on the one hand, the other party is willing, and on the other hand, the relatively limited popularity of Xiaokang actually has an advantage, that is, it will not Become an interference item when verifying Huawei’s related capabilities. 

  This is well-founded—“pulling the car logo” is not uncommon in the circle of car friends, and it is often the name of the party in the joint venture or cooperation that the car owner does not want to see, such as Brilliance in BMW Brilliance. Now, there are already Huawei car logos for sale on Taobao. From the buyer’s show, most customers have cut out the “Celes” car logo and replaced it with HUAWEI. 

To a certain extent, this should be the result of a game between Huawei’s two viewpoints of “not building a complete vehicle” and “building a complete vehicle”. An explanation for the partners who adopt the HUAWEI Inside mode. On the other hand, Huawei does need time to verify whether the second mode is feasible. 

  At this stage of the transition from traditional fuel vehicles to smart electric vehicles, Tier 1 giants such as Bosch have more or less encountered their own difficulties, of which brain drain is a more significant problem. 

  For example, the founders of Horizon, Zhixing Technology, Heduo Technology, and other companies in the field of smart electric vehicles in China are all from the original management and technical team of Bosch. They know the strengths and weaknesses of Tier 1 giants and hope to seize the huge domestic smart electric vehicle. The automotive market created the next era of Bosch, Continental, or Aptiv. 

  In this case, Huawei’s deep technical accumulation has certain advantages, and there are actually many solutions that can be exported to OEMs. If more OEMs can be persuaded to cooperate, then it will become a Tier 1 giant in the era of smart electric vehicles. , is not impossible. 

  The question is, what if the OEM doesn’t pay for it? That might be another story. 

  03. Huawei’s Plan B

In fact, Ren Zhengfei once said unequivocally that “Huawei does not make mobile phones”, which is the original words recorded in “The Complete Biography of Ren Zhengfei”.

  But after that, after the success of GSM, Huawei started to develop 3G, and the development of 3G business must have mobile terminals, Huawei does not, and no manufacturer is willing to sell terminals to Huawei. In the words of Ren Zhengfei,  “We were forced to start our own . to do it”.

  History is always strikingly similar – today Huawei still says that it does not build cars, even more, decisive than at the time. In addition to the official documents mentioned above, Ren Zhengfei also publicly stated that “Huawei will never build cars.” 

However, the document will expire, and the validity period is only until 2023. From the date of issuance (October 26, 2020), it will expire in less than 400 days, and Ren Zhengfei’s attitude may also change.

  Just as it once made up its mind to build mobile phones because it couldn’t sell its own 3G network equipment, now Huawei’s first choice is still the identity of a “supplier”. However, if you cannot sell the basket of technologies you have accumulated, or if you cannot cooperate with OEMs smoothly, you cannot fully release your own technologies to realize monetization. In the future, it will be an inevitable path to extend from upstream to downstream and get involved in the vehicle business. 

  If there is a day when it will end up building a complete vehicle, what will Huawei’s strength be? 

  The three-electric system including battery motor electronic control and intelligent solutions including intelligent driving, intelligent cockpit, and intelligent power is undoubtedly the most important part of intelligent electric vehicles besides the body structure. 

  Looking at Huawei’s existing layout, you will find an interesting phenomenon – the car BU has launched products such as HarmonyOS intelligent cockpit, an integrated intelligent thermal management system, and an intelligent driving computing platform based on the Hongxing operating system. With the cooperation of the factory, this part of the ability is gradually being tested by the market. 

  The digital energy business segment leveraged years of technical accumulation in power systems and launched the industry’s first all-in-one electric drive system, DriveONE, which has been installed in Wenjie M5 and Wenjie M7, which is also a major core of Wenjie. selling point. 

  In addition, Huawei’s cloud computing department can provide technical support for the Internet of Vehicles, HiSilicon provides chip support for Huawei’s intelligent driving computing platform MDC, and terminal BG can provide resource inclination in sales channels. 

In general, in addition to the three sectors involved in the ICT infrastructure business, Huawei’s other five existing business sectors can deliver different energy to Huawei’s car manufacturing. 

  Of course, Huawei also needs a body that handles and builds the whole vehicle. There is a view that if the Wenjie model goes well, Huawei may participate in or even acquire Celis in the follow-up. 

  Although this possibility cannot be verified by Huawei, investors of Celis clearly have this expectation-its stock price has soared from a low of 8 yuan per share at the end of 2020 to 90.5 yuan on the eve of the release of Wenjie M7. At the highest point of yuan/share, the market value has also risen from about 12 billion yuan to 135.5 billion yuan (currently down to about 100 billion yuan), more than tenfold.

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