In Huawei’s electric vehicle department, a huge screen highlights the two biggest changes in human travel in the past 150 years: from horses to cars, and from internal combustion engines to driverless electric vehicles.
Huawei was not part of the first automotive revolution, but despite being hit hard by U.S. sanctions, the Chinese tech giant is determined not to be left out of the second.
The world’s largest telecommunications group and one of the largest smartphone makers believe it can corner the lucrative sector of the auto industry as it transitions to automation and electrification.
Its aspirations range from supplying automakers with hardware including telecommunications equipment, screens and infotainment systems to developing software for advanced self-driving car systems and computer chips, but it has no plans to build its own cars.
“No matter how good Huawei’s cars are, at best they can only be like mobile phones, accounting for 10% to 20% of the market share,” current chairman Xu Zhijun said in a recent interview with Chinese state media.
Instead, Xu said Huawei’s automotive ambitions are to become the “Chinese version of Bosch,” referring to the more than $50 billion the German industrial giant generated last year from its mobile parts and services unit.
The Financial Times was able to visit Huawei in the southern Chinese city of Shenzhen, but the company declined to be interviewed on the record.
Huawei’s entry into the auto market comes as China’s dominance of electric vehicle resources, manufacturing and technology is transforming an industry dominated by U.S., European and, more recently, Japanese and South Korean companies.
Nissan and Honda are in exploratory talks to merge, the latest sign of the threat posed by the fast-growing Chinese manufacturer to traditional automakers.
Vincent Sun, an equity analyst covering China’s auto industry at investment research group Morningstar, said Huawei’s telecoms, chip design and smartphone businesses have “big synergies” with the technology underpinning increasingly advanced cars. “.
“Huawei is a different animal,” Sun said, adding that traditional car companies need to increase spending on research and development to avoid being eliminated “like Nokia,” referring to the Finnish phone maker’s failure to adapt to the smartphone era.
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British research organization IDTechEx said that as the transformation of electric vehicles accelerates, global service revenue from robotaxis alone is expected to reach as high as US$1.2 trillion per year.
However, Huawei’s push into electric vehicles has also raised questions about how foreign markets will treat a company led by founder Ren Zhengfei, a former People’s Liberation Army engineer.
The company has been at the center of U.S.-China tensions for years as Washington accuses alleged state and military ties of posing national security risks. U.S.-led restrictions on its telecom sales and cutting-edge chip technology have hit its global ambitions.
Senator Marco Rubio, President-elect Donald Trump’s nominee for secretary of state, claimed in October that one of Huawei’s “primary goals” was to expand the Chinese Communist Party’s ability to spy on and disrupt other countries’ communications.
Huawei has spent five years and at least US$5.6 billion on electric vehicle-related research and development as part of its search for new growth drivers. Executives believe Huawei is preparing to tap dozens of Chinese technologies, from chips, radars and cameras to artificial intelligence, data centers, autonomous driving and infotainment systems.
Revenue from the group’s new car business unit was 4.7 billion yuan ($655 million) last year, more than double the previous year but accounting for less than 1% of the group’s total revenue of 704 billion yuan.
In January, the privately held company began spinning off its electric vehicle business, registering a new entity to market its key electric vehicle systems and components, including self-driving software.
Huawei has since sold two 10% stakes in the company to Avatr Technology and Chongqing-based automaker Seres.
The deals value Yinwang at $16 billion, not far from the market capitalization of listed Geely, one of China’s largest private carmakers. Huawei is still looking for new strategic investors.
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The group has formed partnerships with a group of traditional Chinese automakers, such as state-owned group Chery, Ceres, BAIC and JAC Motors, and is closely involved in vehicle development and sales, including leveraging its vast retail network.
For traditional Chinese brands, the partnership with Huawei is a lifeline in the transition to electric vehicles after years of declining sales of gasoline-powered cars and severe overcapacity.
Huawei has also struck smaller but potentially more significant deals to provide software and hardware solutions. That includes selling its advanced self-driving systems for some models made by BYD, the Warren Buffett-backed group that is challenging Tesla as the world’s largest electric car maker.
Despite the geopolitical backdrop, foreign companies in joint ventures in China, including Germany’s Audi, Japan’s Toyota and Nissan, are also working with Huawei to develop advanced driving technology in a bid to survive the onslaught of Chinese competition.
Bill Russo, former president of Chrysler China and founder of an automotive consulting firm, said Huawei is among a group of Chinese Internet giants and equipment manufacturers that also include Baidu, Alibaba, Tencent and Xiaomi that are unleashing new “recurring… “The source of income is related to electric vehicles.
According to data provided by the Financial Times, in the first 10 months of this year, sales of models jointly developed by Huawei and its four major partners, Chery, Ceres, BAIC and JAC, totaled 353,600. A fifth partner, government-backed Guangzhou Automobile Group, was announced in late November.
Aito cars produced by the Seres-Huawei joint venture dominate sales, with the company accounting for nearly 4% of the market for battery and plug-in hybrid electric vehicles. In comparison, Tesla has a 6% share of the electric vehicle market, with slightly more than 500,000 vehicles in stock; BYD has a 35% share with 2.9 million vehicles.
Huawei is also aiming to grow through a surge in automation of commercial vehicles used in mines, ports and other logistics hubs. The group touts its ability to connect its transportation and logistics fleets to its global data centers.
Christoph Weber, head of China business at Swiss engineering software group AutoForm, said Huawei has proven how technology groups with little experience in the automotive industry can quickly expand market share and pose an existential threat to existing companies.
“Clearly, technology and the automotive industry are converging,” he said. “It puts more pressure on other people.”
Additional reporting by Harry Dempsey in Tokyo
