Wheels of Change: the Story of Huawei (Part 1)

Hi, welcome to Gasgoo. In this episode of “Wheels of Change: Stories of Chinese Auto Giants,” let’s talk about Huawei.

Three Business Models

Huawei started to develop in-vehicle modules as early as 2009 and formally established the connected car business unit in 2013 to drive initiatives in connected vehicles, autonomous driving and other related areas.

In December 2013, Huawei held a launch event for its new in-vehicle module, the ME909T, in Shanghai, and announced Huawei's official entry into the connected car market.

In the following years, Huawei launched a series of solutions in segments such as IoT (Internet of Things) devices, connectivity channels and cloud services related to connected cars, and established close cooperation with automakers and suppliers including Dongfeng, Changan, Audi, Toyota, BMW, Daimler, Bosch, and Continental, etc., driving forward the development of intelligent connected vehicles.

However, influenced by the intensity of industrial transformation at that time and Huawei's strategic decisions, resource allocation and other factors, Huawei did not make significant waves in the automotive industry.

Seeing the opportunity in the smart automotive revolution, Huawei made a high-profile debut as a Tier 1 at the Auto Shanghai 2019. Then, in May 2019, Huawei established the Intelligent Automotive Solution Business Unit (Intelligent Automotive Solution BU) as an end-to-end business unit responsible for smart automotive solutions, officially marking Huawei’s large-scale entry into the smart automotive sector.

Photo credit: Huawei

“Huawei does not make cars, focuses on ICT technology, helps automakers to build good cars, and aims to become a supplier for intelligent connected vehicles”-this is the positioning and strategic goal Huawei set for itself when it announced its entry into the automotive industry in 2019.

To be more specific, based on its experience in ICT over the past three decades, Huawei will focus on five major areas: Intelligent Vehicle-cloud Services, Intelligent Connectivity, Intelligent Cockpits, Intelligent Driving, and Intelligent Electric Vehicles.

Huawei believes that with the deep integration of the automotive and ICT industries, the intelligent connected vehicle will serve as a revolutionary engine for the development of human society, the impact of which will go beyond both industries themselves and will foster a significant market that is far more attractive than the direct manufacturing of vehicles.

Guided by its “not making cars” strategy, Huawei Intelligent Automotive Solution BU has continued to expand its “technology pool” and unveiled innovative solutions such as the MDC Intelligent Driving Platform, LIDAR, 4D imaging radar, AR-HUD, HarmonyOS Car OS, HUAWEI HiCar, in-car smart screen, in-car charging solution, DriveONE, C-V2X, and autonomous driving cloud service. At the same time, Huawei has actively promoted the industrialization and deployment of these solutions.

Photo credit: Huawei

To better establish its position as a supplier, Huawei integrated its Intelligent Automotive Solution BU and officially launched the intelligent automotive solution brand HI on October 30, 2020, along with the Huawei Inside business model.

Compared to traditional Tier 1 models, under the HI model, Huawei has not only provided OEMs with a full-stack intelligent automotive solution, including intelligent electric solutions, smart cockpits and intelligent driving solutions, but also continuously improved the user experience through ongoing technology updates.

For example, Huawei teamed up with BAIC ARCFOX and Changan AVATR to launch the ARCFOX Alpha S·HI and AVATR 11 models. However, the performance of the models was not ideal, with problems such as delivery delays for the ARCFOX Alpha S·HI.

Based on the traditional parts and HI model, Huawei further innovated its Intelligent Automotive Solution BU business model and introduced the SERES SF5 developed with SERES at the Auto Shanghai 2021, which was the preliminary formation of the Huawei Smart Selection project.

Compared to the previous two business models, under the Smart Selection project, Huawei has not only been fully involved in core aspects such as vehicle product definition, styling design, user experience and market release, but also helped OEMs with marketing and sales channels. To some extent, Huawei has become akin to an automaker.

For instance, the SERES SF5, the first model resulting from deep cooperation between Huawei and SERES, was equipped with several innovative Huawei solutions, including DriveONE ‎3-in-1 ePowertrain, HUAWEI HiCar, and HUAWEI SOUND audio system. After its launch, the model was also sold in many Huawei stores, and pre-orders exceeded 3,000 units in just two days.

However, the good performance of SERES SF5 in the market didn’t last for long. In December 2021, SERES announced the launch of the AITO brand developed with Huawei, and unveiled its first model AITO M5. With AITO as a new starting point, Huawei has officially formed a three-business model pattern: parts supply, HI model and Smart Selection project.

Photo credit: Huawei

In the following two years, based on the AITO brand, Huawei not only cooperated with SERES to launch several models, including the AITO M5, M7 and M9, but also expanded its partnership with CHERY, BAIC, JAC and other automakers based on the Smart Selection project.

To further enhance synergies, Huawei launched the Harmony lntelligent Mobility Alliance (HIMA) as a unified brand identity for the Smart Selection project in late 2023, marking Huawei’s entry into the era of a large alliance of multiple auto brands under HIMA.

With the continuous expansion of HIMA and the AITO models, Huawei's Intelligent Automotive Solution BU has demonstrated its core technological strength over the past two years. Huawei has attracted many new partners under the HI model in 2024.

Previously, Yu Chengdong, the chairman of Huawei’s Intelligent Automotive Solution BU, revealed that Changan’s DEEPAL brand would adopt the Huawei HI model, while Dongfeng VOYAH and MHERO would also cooperate with Huawei on a similar partnership.

The year 2024 will not only be a big year for HIMA products but also for the HI model.

Four Brands

Huawei’s Smart Selection project has often been compared to its HI model.

For Huawei, these two business models have never been contradictory, but complementary. In the past two years, the Smart Selection project has been the most important customer for the parts supply business.

In other words, the success of the Smart Selection project also drove the growth of the parts supply business. For example, with the strong sales of AITO in 2023, shipments in the parts supply business increased rapidly to 3 million units from 2 million units in the previous year.

Initially, Huawei launched the Smart Selection project due to the challenges in promoting the parts supply business. In addition to providing full-stack intelligent automotive solutions under the HI model, Huawei also offered its brand, marketing, channel and other advantages to automakers. The performance of the Smart Selection project was positive and gradually overshadowed the parts supply business model.

In addition to the strong sales of AITO, Huawei’s collaborative Smart Selection project with CHERY, BAIC, JAC and others has been gradually implemented in 2024. Huawei’s commitment to investment in HIMA has become more pronounced, with clearer strategic directions.

“The models jointly developed by JAC and Huawei are positioned in the top-end premium car segment. The STELATO is positioned as a high-end sedan brand, while the LUXEED is positioned in the mid-to-high-end car segment, which means a wide range of people can afford the car. The AITO focuses on SUVs,” said Yu Chengdong about the positioning of the four Smart Selection brands.

STELATO is the Smart Selection brand jointly developed with BAIC, while LUXEED is another Smart Selection brand with CHERY.

In terms of pricing, these four major brands cover almost the entire market of mid-to-high-end new energy vehicles priced above 250,000 yuan, but avoid intra-brand competition through different positioning.

Since its launch in late 2021, the AITO brand has unveiled three models: the AITO M5 mid-size SUV, the AITO M7 mid-large-size SUV, and the AITO M9 large SUV. AITO launched the first-generation M5 and M7 in 2022 and upgraded them around 2024. AITO unveiled the M9 in late 2023 and delivered it in February this year.

With the competitiveness and goodwill of Huawei, the three models have become important sales pillars for HIMA. According to the data, in the first four months, the AITO brand delivered a total of 110,928 units, a year-on-year increase of 689%, ranking first among Chinese new EV start-ups and even surpassing last year’s total sales of 94,380 units.

The AITO M7 was the main driver of the sales growth. From January to April, AITO delivered a total of 85,226 new M7s, accounting for about 76% of its total deliveries. Since its launch in September last year, AITO has delivered a total of 133,808 M7s as of April 30, with cumulative orders reaching 180,000 units.

AITO M7, the second model of AITO brand, was launched in July 2022 and upgraded in September 2023. Compared with the first generation, the new 2023 AITO M7 model not only improved the capabilities and user experience in intelligent driving, intelligent cockpit, chassis tuning and other functions, but also reduced the price range from the original 319,800 to 379,800 yuan to 249,800 to 329,800 yuan.

Photo credit: HIMA

Thanks to its outstanding product strength and price advantage, the new AITO M7 has been hotly sold since its launch. Since October last year, the monthly sales of the model have exceeded 10,000 units for seven consecutive months.

In January this year, the delivery of the new AITO M7 exceeded 30,000 units for the first time, reaching 31,253 units, which helped AITO successfully rank first among Chinese new EV start-ups, and continued to be the top seller for the following two months.

AITO also began delivering the M9 model in the first quarter and launched the new upgraded M5 in April. Both models have shown promising market performance.

According to official data, the AITO M9 has accumulated over 80,000 pre-orders as of May 11, with 6,243 units delivered in March and 13,391 units in April. Pre-orders for the new AITO M5 exceeded 10,000 units within 12 hours.

This means that AITO’s total sales volume still has considerable room for future growth.

On this basis, HIMA has continued to expand its product lineup and strengthen its position in the high-end market through cooperation with CHERY, BAIC and JAC.

The LUXEED brand, jointly developed by Huawei and CHERY, launched its first mass-produced model and HIMA’s first all-electric coupe - LUXEED S7 - in November last year.

Photo credit: HIMA

However, the initial performance of the LUXEED S7 was less than ideal due to factors such as factory relocation and chip shortages. In the three months prior to its launch, the monthly production of LUXEED S7 was just over 2,000 units, unable to meet market demand. According to the data, LUXEED S7 received more than 20,000 pre-orders in just 20 days after its launch.

On April 11, Huawei relaunched the LUXEED S7 at Huawei's HIMA Communication Conference. With production capacity secured, the performance of LUXEED S7 has improved, with deliveries reaching 4,546 units in April, becoming another important sales support for HIMA brands.

Meanwhile, the STELATO S9 and the first high-end new energy vehicle in cooperation with JAC are also about to be launched.

The STELATO S9 is the first mass-produced model under the STELATO brand jointly developed by Huawei and BAIC. Previously, the STELATO S9 was officially unveiled at the Auto Beijing 2024 and positioned as an executive-level luxury flagship sedan to be launched in the third quarter, competing with top luxury brands such as Mercedes-Benz, BMW and Audi.

The first model to work closely with JAC, Yu Chengdong said, aims to compete with models such as the Maybach and Rolls-Royce Phantom, with prices expected to reach into the millions of yuan.

Photo credit: HIMA

It’s worth noting that HIMA has just begun to take shape, and Huawei has already begun to unify the management of the Smart Selection brands in the past two months. For instance, in April, HIMA’s total sales again ranked first among Chinese new EV start-ups, including shipments from both AITO and LUXEED.