Huawei's venture into the EV market is poised for success as it garners serious interest from investors, including Changan Auto. The valuation of this innovative endeavor has now reached the staggering RMB 250 billion (approximately $34.7 billion), per the latest reports.
Huawei announced the decision to spin off its Intelligent Automotive Solution (IAS) business unit, which has been in operation for four years. The IAS unit aspired to become the Bosch of the intelligent EV era, focusing on cutting-edge automotive technologies. In this strategic move, the new company will inherit the IAS unit's core technologies and resources, setting the stage for groundbreaking developments in smart car technology.
Changan Auto, another prominent player in the automotive industry, and other major players are looking to acquire stakes in the new firm. And the talks are valuing the new entity at RMB 200 billion to 250 billion. State-owned automakers like FAW Group and Dongfeng Motor Group are also in advanced talks to acquire minority stakes in the venture.
Even as it welcomes new investors, Huawei intends to maintain a substantial presence in the venture. The tech giant is expected to remain the single largest shareholder, holding 40% to 50% of the new firm for at least the next two to three years. However, it's essential to note that deal specifics, including ownership distribution and valuation, are subject to regulatory approval.
It is a significant departure from Huawei's usual business model, where founder Ren Zhengfei and employees held ownership of its various ventures. The decision to spin off the smart car unit signals Huawei's willingness to adapt to evolving markets.
The decision to divest from the smart car business comes as Huawei faces challenges in growing this sector. Despite substantial investments totaling $3 billion and a dedicated R&D team of 7,000 employees, the unit reported revenue of only RMB 1 billion (just over $141 million) in the first half of 2023, a fraction of Huawei's overall earnings.
Huawei initially had high hopes for the smart car unit to drive new growth, but market dynamics have proven to be more complex than anticipated. This strategic shift allows the company to recover capital for research and development (R&D) and refocus its efforts to stay competitive in the rapidly evolving EV industry.
The new firm, as outlined by Huawei, will engage in a wide range of activities, including research and development, production, sales, and service of intelligent automotive systems and component solutions. This is a comprehensive approach and it reflects Huawei's ambitions to become a significant player in the smart car industry.
The potential relocation of the new firm's headquarters to Chongqing, a city known for its automotive industry, is another strategic move that aligns with Huawei's long-term goals. It is expected to facilitate the company's planned listing of the smart car unit, further strengthening its position in the market.
While specific leadership details remain undisclosed, Huawei's Richard Yu, who has overseen the smart car unit for years, is unlikely to lead the new venture.
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