Huawei spins off smart car business into JV with Changan

Huawei will spin off its smart car operations into a new company in partnership with one of China's biggest auto firms, Changan Automobile Co.

Huawei said it hopes the spin-off, yet to be named, will become "an open platform" that will attract investment from other auto firms.

The new company will take over the entire value chain of Huawei's smart and connected vehicles business, from design and production to sales and service.

The news drove Changan's stock up a maximum 10% in Monday trading, lifting the share prices of Changan and Huawei component suppliers as well, Bloomberg reported (paywall applies).

The two firms signed a memorandum of investment cooperation on Sunday, allowing Changan to invest up to 40% in the new company.

Changan described the memorandum as a statement of intent, with key details such as the level of investment to be discussed separately.

The state-owned company, which sold 2.3 million vehicles last year, has domestic joint ventures with Ford and Mazda.

Huawei's auto strategy has three strands: one part is component supply; another is Huawei Inside, or HI, in which it embeds its smart solutions; and the top-end is a range of partnerships with brands such as Chery, Seres and BAIC.

Huawei has supplied the HI solution to Changan for the Changan Avita.

'Circle of friends'

Analysts said the new spinoff will allow Huawei to expand its potential partners in what is still a very small business for the ICT giant. It has so far invested around $3 billion in its smart car solutions but last year took in just 2.1 billion Chinese yuan (US$296 million) in revenue.

Auto industry analyst Zhong Shi told China Business News Huawei was trying to "grow its circle of friends."

"One car cannot scale. It is an exploratory attempt to build a platform to attract more industrial investment and attract more cooperative manufacturers," he said.

Notably, the new company won't include Huawei's EV business. Its DriveONE electric power solution and its charging business will remain with its digital energy unit.

One of Huawei's most high-profile partners, Seres, with whom it has built several EVs, said in a statement that the new venture would not affect their long-term partnership.

Richard Yu, the head of Huawei's smart car solutions unit, said: "We have always believed that China needs to build an electrified intelligent open platform with the participation of the automotive industry."

Xu Zhijun, Huawei's rotating chairman, repeated Huawei's position that it will not build its own cars but will use its ICT technology and sales channels to help auto company partners build cars.