Chongqing - As Bosch cements its position as the leading supplier of parts and comprehensive solutions in the global automotive industry, Chinese tech giant Huawei is emerging as a formidable player, eager to carve out a similar role in the rapidly evolving era of smart cars.

Avatr 12 is empowered by Huawei's smart driving solution. (Photo/Avatr)

Huawei addresses "car making" concerns via new venture

Initially a communications technology company, Huawei's main business includes ICT infrastructure and smart devices (such as mobile phones and tablets). However, in 2019, Huawei began supplying parts to car manufacturers, marking its entry into the automotive industry. 

Recently, Huawei and Chongqing's traditional automotive giant Changan Auto announced the establishment of a new company. This venture will integrate technologies, assets, and personnel from Huawei's Car Business Unit (Car BU), including smart driving, smart cockpit, and cloud technology.

Huawei's move is interpreted as a new phase in its automotive business. Previously, Huawei's senior executives repeatedly stated publicly that "Huawei does not make cars" but will help car companies build better vehicles. 

Huawei cooperates with car manufacturers in three ways: basic component supply, complete intelligent driving solutions, and smart selection. Smart selection involves Huawei's deep involvement in the partner's vehicle definition, design, marketing, and sales. 

However, this model is controversial in the industry as it significantly diminishes the involvement of the partnering car manufacturers. Some industry insiders believe that smart selection is a step very close to "Huawei making cars," except for using its partners' manufacturing qualifications and factories. 

This view is widespread in the industry. For instance, Chen Hong, the chairman of SAIC, China's top car seller, expressed at a shareholders' meeting in 2021 that cooperating with Huawei is akin to giving away the "soul" and retaining just a "shell."

The extreme concern is that the car companies' brands will be significantly weakened. If Huawei announces car production one day, it could lead to a competitive relationship and possible technology blockade. Previous collaborations with Huawei might reduce the car companies' investment in smart driving technology, leading to a loss of independent capability to produce good cars.

Establishing this new venture can be seen as Huawei's concrete response to these concerns. Firstly, the cooperation agreement with Changan, the first partner, clearly states that "Huawei will not engage in business competing with the new company's scope." 

Secondly, Huawei claims the new company will be an open platform serving the smart vehicle industry, inviting car manufacturers to invest in equity. Investors in the company will bind to Huawei's smart car business to some extent, but as shareholders, they may have more control over the business.

Huawei's competence in producing high-end chips independently

Changan Auto, the first company to announce investment in Huawei's new company, is also noteworthy. Since 2019, the two companies have signed a strategic cooperation agreement. 

Regarding cooperation mode, Changan's high-end electric car brand Avatr adopts Huawei's intelligent driving solution model, giving Changan greater overall control than the innovative selection model. 

An industry insider believes the new company's cooperation model with car manufacturers will likely resemble the Changan-Huawei model.

According to Caixin, citing a veteran in the field of intelligent driving, car companies realize that intelligent driving is particularly costly. Huawei's spinoff of Car BU partly reflects the low return on investment.

Established in 2019, Car BU is Huawei's only loss-making business unit, with an annual R&D investment exceeding one billion USD. Huawei's semi-annual financial report for 2023 shows that Car BU's revenue was only 1 billion CNY, which is disproportionate to the investment scale and negligible in Huawei's semi-annual sales revenue of 310.9 billion CNY.

However, Huawei's technicians have pointed out that their biggest advantage in developing autonomous driving is similar to Tesla, having both algorithms and self-developed chips and sensors. Self-developed chips are highly compatible with algorithms, not only performing better but also costing less. 

In contrast, general-purpose chips, designed to meet various enterprises' needs, have a lot of redundancy. Recently, many car companies have been rumored to be developing their chips, but no domestic company can rival Huawei in this field.

Besides the controversy over whether cooperation with Huawei will lead to a loss of soul, Chinese car companies like Changan see Huawei's strong brand appeal. This September, Huawei's release of the new Mate 60 Pro phone seemed to declare the failure of U.S. sanctions on its chip production, demonstrating Huawei's capability to produce competitive high-end chips independently. 

Furthermore, in the automotive field, the effect of Huawei's endorsement on car companies has shown explosive growth this year. For example, the new car model AITO M7, co-branded with Seres and released by Huawei, has been a sensational success in China.