Huawei Aims for Better Results in Collaboration with Changan Auto Amidst Evolving Smart Car Endeavors

Today, at an event in Chongqing, Chairman of Changan Automobile Zhu Huarong revealed details about a joint venture established with Huawei last November.

The joint venture between Changan and Huawei, provisionally named ‘Newcool’, will focus on seven key business areas. These include intelligent driving, intelligent cockpit, intelligent car digital platform, intelligent car cloud, and intelligent car lights.

Zhu reiterated Huawei’s commitment to not engage in complete vehicle production or in the same lines of business as the joint venture.

What Is the Joint Venture Between Changan Auto and Huawei?

In November 2023, a subsidiary of Changan Automobile signed a Memorandum of Understanding (MoU) with Huawei to provide smart automotive system and component solutions. According to the agreement, Huawei will transfer its smart vehicle technologies and solutions to the joint venture, in which Changan would hold up to a 40% stake.

Yu Chengdong, head of Huawei’s smart vehicle business unit, mentioned that the equity stakes in the joint venture would be open to existing partners and other entities of strategic value.

Huawei’s decision to establish a joint venture with Changan Auto, which sold 2.053 million vehicles in 2022 and ranked as the fifth-largest automaker in China, marks a significant evolution in Huawei’s automobile business strategy.

Initially when Huawei’s smart car unit was founed in 2019, there was speculation that Huawei would launch its own car brand. However, over the past few years, Huawei has evolved its approach in the smart car sector, facing numerous challenges along the way.

How Does Huawei Collaborate with Auto Makers?

Adhering to its fundamental principle of not manufacturing its own smart cars, Huawei has developed three distinct models for collaborating with car manufacturers.

The standard automotive component supplier model refers to Huawei providing car manufacturers with components such as LiDAR, millimeter-wave radar, cameras, as well as in-vehicle TMS power management, and TMS thermal management components.

Huawei Inside (HI) Model means Huawei offers a full-stack intelligent automotive solution to car manufacturers, covering major intelligent systems including intelligent cockpit, intelligent driving, intelligent connectivity, and intelligent car cloud services, as well as a set of components involving more than 30 types of intelligent parts.

The BAIC Arcfox Alpha S HI version and Avita 11 models by Changan Auto utilize the HI (Huawei Inside) model.

The last model, Huawei smart selection model refers to Huawei providing car manufacturers with a full-stack intelligent automotive solution, including product definition, product design, user experience design, and product process design. Huawei also assists in defining the product, but the mechanical parts, chassis components, and tuning of the car are still led by the car manufacturer.

The AITO M5, an all-electric/range extender crossover SUV produced by Chinese car maker Seres under the AITO brand in collaboration with Huawei from 2022, employs the Smart Selection model.

The HI model has encountered resistance from car makers fearing that Huawei would overpower a critical component of their smart car business. In March 2023, Chinese car maker GAC Group suspended its in-depth cooperation with Huawei.

What Challenges Has Huawei’s Automotive Business Faced?

There were three car manufacturers adopting Huawei’s HI (Huawei Inside) model back in 2021, when Huawei announced the first batch of partners, including Changan Auto’s Avatr, BAIC Blue Valley’s Arcfox, and GAC Group’s Aion.

Today, only Avatr remains a partner of the HI model. Avatr is an EV brand Changan Auto joint-ventured with Huawei and battery provider CATL.

The automotive industry has expressed concerns about Huawei’s influential position potentially overshadowing car manufacturers. In August last year, a manager from GAC said at an industry forum that "Huawei is a rather big-name supplier. Although the quality of its components is good, the prices are uncontrollable, and there is basically no bargaining power in cooperation with Huawei."

There is a broad consensus among car manufacturers that entrusting the "brain" – the data and data processing capabilities – of autonomous driving to an external entity like Huawei is not advisable. This stems from the perception that the core of the HI (Huawei Inside) model involves outsourcing critical autonomous driving capabilities to an external party.

In 2021, the chairman of SAIC Motor stated at the shareholders’ meeting, "In terms of autonomous driving, SAIC Group finds it difficult to accept a single supplier providing a complete solution. This would mean ‘they are the soul, and we are the body,’ which we cannot accept."

SAIC ended up not collaborating with Huawei but instead formed a deep partnership with Chinese autonomous driving startup Momenta, nurturing its own trusted capabilities with entities that it has greater control.

In the same year, an official at Chinese auto company FAW Group commented that car manufactures should be cautious when technology companies offer to empower automotive enterprises by offering the "brain and nerves" of the car.

Another Chinese car maker GAC, which chose not to collaborate with Huawei, expressed that the company never intended to fully hand over its "brain" to Huawei from the beginning. GAC opted for a path of autonomous driving that combines in-house research and development with external cooperation. They have deepened their collaboration with the startup Heduo Technology.

One tangible outcome of Huawei’s foray into the smart car business is a collaboration with BAIC New Energy to produce the Arcfox Alpha S HI version. Upon its release, the Arcfox Alpha S HI version impressed many with its advanced driver-assistance capabilities, but its sales performance was disappointing.

According to official sources from Arcfox, the sales volume of Arcfox cars in January to November, 2023 was 3,849 units.

Now, Changan Auto’s Avatr is hoping to achieve better success. For 2024, Changan Auto is targeting annual sales of 90,000 vehicles for Avatr, which is slightly lower than last year’s target of 100,000 units.

Although official annual sales data for Avita for 2023 have not been released, third-party platform data cited by related media reports suggest that Avita sold about 25,000 vehicles throughout the year, only a quarter of the intended goal.

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