Cover Story: Huawei’s Smart Car Ambitions Face Hurdles as It Seeks to Replicate Aito’s Success

Since its foray into the automotive industry, Huawei Technologies Ltd. has found notable success with its premium electric car brand Aito, in partnership with Seres Group Co. Ltd. This partnership not only turned around Seres from a loss-making company to one posting substantial profits but also positioned Huawei as a formidable player in smart car technology[para. 1][para. 3][para. 7]. Despite challenges with other partnerships with Chery Automobile Co. Ltd., Beijing Automotive Group (BAIC), and Anhui Jianghuai Automobile Group (JAC Motors), industry insiders believe Huawei’s intelligent driving business could potentially rival Tesla, Inc. in the smart car sector[para. 2][para. 5][para. 16].

The leadership of Yu Chengdong, Huawei’s Consumer Business Group Chairman, has been instrumental in Aito’s star performance within Huawei’s Harmony Intelligent Mobility Alliance. Aito’s product lineup accounted for over 90% of the alliance’s sales in the first eight months of 2024[para. 3]. Since its launch at the end of 2021, Aito achieved significant milestones, including selling over 75,000 units of the M7 model in its first year, making it one of China’s best-selling new energy vehicle (NEV) brands[para. 4]. By mid-2024, Seres swung to a net profit of 1.625 billion yuan ($229 million), reversing from a net loss of 1.34 billion yuan the previous year, primarily due to a surge in NEV sales driven by Aito[para. 5].

As the industry becomes increasingly competitive, Huawei aims to replicate the successful Aito model across all its partnerships. The launch of the latest M9 five-seat SUV marks the initial step in consolidating Huawei’s position in the smart car market. This collaborative effort with Seres set the foundation for Huawei’s Smart Selection business model, giving the company a substantial voice in product design and marketing while using automaker partners as manufacturers [para. 8].

Yu’s strategic efforts to expand Huawei’s automotive ventures faced initial resistance, but the success of the Aito brand validated his vision, leading to an expansion of Huawei’s partnerships from one to four by November 2023[para. 9]. However, not all expanded ventures succeeded. Huawei’s Luxeed S7 with Chery Automobile faced production delays and internal friction, leading to underwhelming sales[para. 10][para. 13]. Similarly, the Stelato S9, in collaboration with BAIC, did not meet expectations[para. 12][para. 15].

In response, Yu is now betting on the Luxeed R7, an electric coupe SUV co-developed with Chery, aimed at competitive positioning against Tesla’s Model Y. Despite these ambitions, competing directly with Tesla's advanced full-self driving (FSD) software remains challenging[para. 14][para. 17].

Aito’s success can partly be attributed to synergistic marketing strategies, as seen with its collaboration with Huawei’s Mate 60 series smartphones[para. 22]. Priced above 470,000 yuan, the high-end M9 further boosted Seres’ market position, achieving significant orders and solidifying its presence in the luxury EV market[para. 23][para. 24]. Consequently, Seres achieved a gross profit margin of 25% by mid-2024, surpassing industry giants like Tesla and BYD[para. 25].

Despite initial success, Huawei’s efforts to replicate the Aito model with other partners have faced mixed results. Different market focuses and internal company priorities have hindered consistent successes. For example, Chery’s focus on overseas markets and public listing preparations reduced its alignment with Huawei’s directives[para. 29]. The varying fates of models within Huawei’s partnerships raise questions about whether differences in product technology or management styles are to blame[para. 31].

Looking forward, scaling up the fleet to generate more data for intelligent driving technology is crucial for success in the smart car industry. According to projections, by 2028, around 93.5% of passenger cars in China will feature various intelligent driving systems, highlighting a significant market shift[para. 36][para. 38].