Chinese carmaker Seres, a Huawei partner, came out of the red in the first quarter of 2024 after experiencing losses for five years. The Aito EVs it co-developed with Huawei have gained traction in the market and accounted for 70% of Seres' sales volume.
Supply chain sources said the cutthroat price cut in the Chinese automotive market has put most carmakers under the pressure of financial losses. BYD and Li Auto are a few companies that have profited in China. Tesla is the only one in the world that makes money from battery EVs.
Aito EVs attracted the market's attention and saw orders jump as Huawei returned to the smartphone sector in 2023. According to Chinese media reports, Seres reported CNY220 million (US$30.8 million) in net profit for the first three months of this year. Its revenue was CNY26.56 billion, surging by 422% from 2023.
However, a recent Aito M7 accident on China's highways caused three deaths, triggering many questions and doubts about the vehicle's safety features. The Aito brand said the car was not equipped with Huawei's high-end smart driving-assisted system but adopted Bosch's solution, which Bosch denied. Aito did not comment on the matter further.
Automotive industry sources said history showed that controversies arising from accidents usually stopped automakers from earning profits, especially in European and US markets. This is why legacy carmakers in Europe, the US, Japan, and South Korea do not move as fast as Tesla or Chinese automakers in automotive electrification and electronics enhancement.
Huawei and Bosch are critical automotive tier-1s in China. Once their solutions invite disputes, the situation will impact carmakers who adopt the features and create a chilling effect in the market.
Chinese media reported that Huawei's automotive business unit has seen a similar loss to that of carmakers. The unit lost CNY6 billion in 2023, while the Smart Selection system came out of the red in the first quarter of 2024. Huawei's automotive unit has grown since April and is expected to begin earning profit in 2025.
In China, tier-1 suppliers who provide smart driving solutions usually gain more market traction than carmakers. Huawei is one of the iconic suppliers. Many people would connect the Aito brand with Huawei rather than the automaker Seres.
Some leading car companies did not collaborate with Huawei because they were worried they would pale by comparison. However, since the Chinese car market is shifting rapidly from EV manufacturing to smart vehicles this year, these automakers have started to work with Huawei to survive and compete in the market.
