Huawei Looks to Automobiles As Its Smartphones Business Declines
Huawei’s year didn’t exactly end on a high note, with the Chinese telecom giant logging a 29% decline in revenue for 2021. The brand’s smartphone business is now struggling as it continues to be a target of the U.S. in its geopolitical trade war with China.
Finding a new revenue driver, Huawei is apparently now looking to try its luck in the electric vehicle (EV) space.
From a business standpoint, this is a wise move, considering how China is the world’s largest market for EVs. The country’s homegrown EV makers, Xpeng, NIO and Li Auto, recorded large delivery numbers this past December, signalling strong competition against market leader Tesla. Perhaps in a few years, they’ll also be joined by the likes of Xiaomi and Baidu, both of which have already announced plans to release their own EVs down the line.
The question now is: Can Huawei find success in this highly-competitive market?
The Shenzhen-based tech firm last week launched the Aito M5, a sport-utility vehicle it developed in partnership with Chinese auto manufacturer Seres. The vehicle, which runs on both electricity and fuel, comes equipped with Huawei’s proprietary HarmonyOS software with the Smart Cockpit operating system. This essentially means the vehicle’s functions can be controlled using Huawei’s other devices.
While Huawei has said in the past that it will not produce vehicles, the Chinese brand is front and centre in promoting the Aito M5, as Iris Deng of the South China Morning Post notes. And this decision likely comes from Seres not being as known in the country as Huawei.
The Seres SF5, for example, the first vehicle to implement Huawei’s in-car operating system, only sold over 7,080 units by the end of November after first launching in April. In comparison, Tesla sold about 52,859 vehicles in the month of November alone, as the report mentions.
Huawei touts that its industrial design team, software and user experience teams had a hand in designing the Aito M5, seemingly suggesting that the car is as much its own as it is Seres’. The firm also boasted that it beats the Tesla’s Model Y when it comes to power and driving distance.
However, given the stiff competition, Huawei can’t bank on its name value alone if it wants to find success in this new revenue driver.
"Consumers are not convinced about Huawei’s abilities in cars," Zhang Xiang, an automobile industry researcher at the North China University of Technology (NCUT) told the South China Morning Post.
"The company’s strengths lie in smartphones and 5G, and Huawei has not yet gained recognition from consumers when it comes to automobiles."
Niko Yang, a senior analyst at EqualOcean, an investment research firm, also said that Huawei seems to have a limited customer reach, with the brand not partnering with dealerships and choosing to sell its vehicle on its own website and stores.
Despite this, Huawei seems confident in this new venture. Rotating chairman Eric Xu in April said, "China needs 30 million more cars each year and the number is growing. Even if we don’t target the market outside China, and if we can earn an average of 10,000 yuan from each car sold, the business is already good enough for us."
EV sales continue to surge in China, reaching a record-high of 450,000 units in November, which is a whopping 121% increase versus last year’s sales. A sales clerk at a Huawei store told a South China Morning Post reporter that the Aito M5 received 6,000 orders within the first day. But because these numbers have yet to be verified, we can’t say for sure yet how Huawei’s new car is performing.
What seems clear is that Huawei is serious about its EV ambitions, with it planning to invest US$1 billion this year for car component development. How well it’ll do though, only time will tell.