Huawei has demonstrated to the world that making electric cars is as easy as assembling smartphones

Following the resounding success of the Aito M7 electric car, Huawei is poised to launch two new car models and outsource the labeling and production to at least five companies. This strategy has sparked considerable controversy among traditional electric vehicle manufacturers in China.

According to Bloomberg, following the resounding success of the Aito M7 SUV electric car, Huawei is now planning to launch two more new car models to demonstrate China’s strength in the electric vehicle sector to the world.

Although Huawei faces challenges in the smartphone market due to restricted semiconductor supply from the United States and Western countries, it is precisely because of these challenges that the Chinese conglomerate has diversified its product portfolio and made significant breakthroughs in the electric vehicle industry.

For instance, Huawei’s Aito M7 series is priced at only 250,000 Chinese yuan, equivalent to $34,300, which is much cheaper than other models of the same category from Tesla. This product is a result of Huawei’s collaboration with Seres Group and has received 80,000 orders within just the first 50 days of its launch.

The success of Huawei demonstrates that despite pressure in the smartphone and 5G sectors, Chinese businesses can still find a way to thrive with the support of the government and the technological infrastructure built over many years.

Furthermore, Huawei’s ability to secure numerous orders for its electric car model also showcases China’s advantage in current automotive manufacturing capabilities.

Instead of investing heavily in developing electric vehicles like many other young startups, Huawei has chosen to outsource most of the hardware components and focus on its core strength: software.

After developing the control systems and driver assistance features, Huawei simply applies its brand label and sells the products. Meanwhile, the manufacturing responsibilities are handled by the startups, which benefit from the orders and do not have to worry about market penetration since they are associated with a renowned name like Huawei.

Is making electric cars easy?

According to Bloomberg, Huawei is collaborating and outsourcing with at least five other automobile manufacturers to develop electric cars under its brand label. The company is soon set to launch two new electric car models, the Avatr 12, produced by Chongqing Changan Automobile, and the Luxeed S7, produced by Chery Automobile.

By outsourcing the entire production process, Huawei focuses solely on developing control software and driver assistance features, such as customization on highways or voice interaction capabilities.

The practice of outsourcing and branding is also favored by many startups, as they can increase sales thanks to the reputation of Huawei. With its vast distribution channels, Huawei sells the Aito electric car directly in its mobile phone retail stores.

It should be noted that Huawei is currently leveraging the national spirit of the Chinese people to stimulate sales.

According to Bloomberg, many customers purchased the newly released 5G product, the Mate 60, as an act of national pride and patriotism, rather than solely for practical use. This is the first return of Huawei to the smartphone market since facing Western sanctions on chips.

This pattern may also repeat itself in Huawei’s electric vehicle sector.

“The success of the Aito-Huawei electric car is 50% due to the national spirit and the other half is due to technological quality,” said Daniel Kollar, Director of the consulting firm Intralink.

Currently, experts are closely monitoring Huawei’s moves to determine the long-term viability of this electric vehicle business model, considering the presence of over 100 competitors in the market and hundreds of electric car models available for customers to choose from.

According to the disclosed information, the Avatr 12 model will be priced at 300,800 Chinese yuan and equipped with Huawei’s intelligent control software ADS 2.0, featuring 29 sensors and 11 high-capacity cameras.

The collaboration between Chongqing Changan and Huawei in the Avatr series represents a new breakthrough in the electric vehicle industry. Chongqing has only sold 12,000 units of the previous Avatr model in the 12 months leading up to September 2023. Therefore, the collaboration with Huawei for the Avatr 12 is expected to boost sales and bring benefits to both parties.

All for survival

According to Bloomberg, the outsourcing and branding strategy of Huawei’s electric cars is considered a smart solution in the context of a saturated Chinese market.

Self-production of electric cars has become unprofitable due to weak consumer demand, which is not enough to offset the costs amid Tesla’s ongoing price war.

Meanwhile, many electric car startups such as WM Motor and China Evergrande’s NEV have either filed for restructuring or halted trading due to their inability to repay debts.

Other young electric car companies have had to engage in buyouts and mergers with each other in order to survive in the competitive market.

Volkswagen and Audi have signed contracts with startups Xpeng and IM Motor to develop electric cars. Stellantis has invested $1.1 billion to acquire a 21% stake in Zhejiang Leapmotor Technology, an electric car startup based in Hangzhou.

“Huawei’s strategy is to leverage its technological strength by collaborating with as many different companies as possible, so that when market consolidation happens, they will have a network of partnerships with surviving companies in the electric car industry,” said Daniel Kollar, Director at Intralink.

Furthermore, Bloomberg reports that Huawei’s move comes at a time when many companies have applied to manufacture electric cars but face delays due to tighter government regulations in Beijing, which aims to prevent a market bubble from forming.

By outsourcing or collaborating with various companies to produce electric cars, Huawei has surpassed Xiaomi in this field. Xiaomi is still waiting for government approval to manufacture its own electric cars, but the current market conditions pose significant challenges.

Even Didi Global, a well-known ride-hailing platform in China, intended to enter the electric car market by partnering with Xpeng. However, due to the difficulties in obtaining licenses, Didi decided to abandon the project.

Returning to Huawei, the success of the Aito product has made many other electric car companies envious.

He Xiaopeng, the founder of Xpeng, a struggling electric car startup facing significant losses and struggling to increase sales, raised doubts about the safety of Aito’s automated emergency braking system and its suitability for nationwide deployment.

On the other hand, Chen Hong, Chairman of SAIC Motor, one of the largest electric car companies in China, believes that cooperating with Huawei and using the telecommunications company’s software is akin to handing over control and the essence of the product to external parties.

Huawei responded by stating that they do not aim to control anyone but rather hope to assist the struggling electric car industry.

“In the era of increasingly popular smart electric vehicles, competition in this field will become extremely fierce. Therefore, in the long run, I believe that companies closely cooperating with Huawei can survive and become one of the few remaining companies,” said Richard Yu, Director in charge of Huawei’s electric car division, frankly.

Source: Bloomberg

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