Why can Huawei's cars only become more expensive as they sell?

AutoReport

·June 11, 2024 12:02

follow

"After cooperating with car companies, Huawei can reduce software costs, but no one will help them reduce hardware costs."

On the last night of the Dragon Boat Festival holiday, Yu Chengdong sent a friend circle to congratulate Hongmeng Zhixing on the three-day Dragon Boat Festival sales of over 7000 units across the entire series. "Continuously leading the high-end luxury new energy race!"

From "high-end" to "luxury", from asking about the world to enjoying the world, the Huawei Smart Selection car, which has been renamed as Hongmeng Zhixing, is going further and further on the increasingly expensive track, which is not the same as the current trend of new forces.

Not long ago, Xiaopeng Motors announced that it will launch a new sub brand MONA this month, with an expected first model price of 150000 yuan; On May 15th, NIO also launched its new brand "ONVO Ledao Automobile" in Shanghai, with its first car - the Ledao L60, a family intelligent electric mid size SUV, unveiled and pre ordered, starting at 219900 yuan.

As for the ideal delay in the launch plan of pure electric SUVs after MEGA's failure, the current contraction focus is on selling extended range vehicles, and recently stimulated a wave of sales with a price reduction strategy. The failure of MEGA not only represents the failure of the attempt to convert from ideal to pure electricity, but also represents the failure of its price system to rise.

In order to survive in the knockout stage, there are two schools of thought among new force brands: one is to stick to the existing territory and price range, and the other is to move downwards and seek greater space for sales expansion. Only Huawei is an exception.

The first car of Huawei Hongmeng Zhixing's third brand, the Xiangjie S9, positioned as an executive level luxury flagship sedan, which started pre-sale on May 31st, has a pre-sale price of 450000-550000 yuan. After the M9, it has solidified the price range of Huawei's model positioning as "luxury". Of course, there will also be a million dollar luxury car that Huawei and JAC have not yet named.

From Wenjie to Zhijie, and then to Xiangjie, the price has increased from 250000 yuan to 500000 yuan, and even up to 1 million yuan... Huawei seems to want to use the smart driving card to dominate the mid to high end new energy vehicle market.

NO.1

The pricing range of the Wenjie M5 and M7 from 250000 to 300000+is still considered the mainstream pricing level in the extended range SUV market; The pricing of the Zhijie S7 after its second listing (249800 to 349800) is undoubtedly based on the principle of giving more configurations rather than lowering the selling price; The price of Xiangjie, which has reached a new high of 450000 yuan for pre-sale, is not cost-effective compared to the NIO ET7 or the BBA "56E" after terminal discounts.

Some people have commented that lowering the selling price can easily affect brand reputation and positioning, so Huawei's approach is more like a helpless move to ensure reputation during the price reduction trend. Yu Chengdong's recent rhetoric at the press conference has also changed to "roll value rather than roll price.".

But another "hardship" of Yu Chengdong - that the price cannot be lowered, perhaps it is the truth.

At the Huawei HarmonyOS Spring Communication Conference in April this year, Yu Chengdong said, "Cars under 300000 yuan using Huawei's advanced intelligent driving are selling at a loss." He further stated that Huawei is currently being sanctioned due to its supply chain and various reasons, resulting in slightly higher costs for intelligent driving.

The high cost of Huawei Smart Driving is a well-known fact in the industry. At present, Huawei's intelligent driving team has exceeded 7000 people, and the cumulative R&D investment has exceeded 30 billion yuan.

In contrast, BYD and Xiaopeng's intelligent driving teams have a scale of 3000-4000; In three years, Xiaomi invested 3400 people and a total of 30 billion yuan, and the first car, the Xiaomi SU7, was launched. Huawei's 30 billion yuan investment is only for intelligent driving.

In terms of investment in innovation and research and development, Huawei ranks second, while no domestic enterprise dares to claim first. As for the automotive business, from software algorithms to self-developed smart chips, no new force can match it. This is also why Huawei Smart Drive, although not the earliest, still quickly entered the first tier.

In addition to Huawei's own investment costs, there are also costs for partners.

During the auto show, a senior manager of a joint venture roast: "Huawei can reduce software costs after cooperating with auto companies, but no one will help reduce hardware costs. Each company has its own supplier and parts system, so it is impossible to form a platform and reuse it."

In his view, this is a problem that Huawei Hongmeng Intelligence is destined to be unable to solve. This also means that even if Huawei cars sell more and more, they will not be able to significantly reduce hardware costs.

For Huawei cars today, there is a technological moat, but a cost moat like BYD has not yet been established.

The combination of unbeatable costs, Huawei's insistence on mid to high end positioning, the need for positioning differentiation among brands under Hongmeng Zhixing, and profit pressure from Yu Chengdong have made Huawei's pricing increasingly high a necessary option.

NO.2 [Is selling expensive enough to make a profit?]

A large amount of investment in human and financial resources has also led to Huawei Car BU losing 10 billion, 8 billion, and 6 billion respectively from 2021 to 2023.

Three years ago, Ren Zhengfei released a statement on social media saying "pass on the chill to everyone.". Huawei should shift from pursuing scale to pursuing profit and cash flow, and reduce all unprofitable businesses. It can be imagined how much profit pressure Yu Chengdong has been under in recent years. Therefore, Yu Chengdong has mentioned the issue of profit and loss on many occasions.

Due to the fact that the sales volume has not yet increased, Huawei Car BU was the only unprofitable business unit in the Huawei system last year. However, in May this year, Yu Chengdong announced the profitability of the car BU. He said that in the first quarter of this year, Huawei's Smart Selection and Car BU have all turned losses into profits.

At the same time as Huawei Car BU, there is also its partner, Celes.

According to the 2024 first quarter report released by Selis, its net profit in the first quarter turned positive, ending four consecutive years of losses. For the entire year of 2023, the net loss of Selis was as high as nearly 2.45 billion yuan.

According to financial report data, in the first quarter of 2024, Selis achieved operating revenue of approximately 26.561 billion yuan, a month on month increase of 38.61%, and a year-on-year increase of 421.76%; The net profit attributable to the shareholders of the listed company was approximately 220 million yuan, an increase of 845 million yuan compared to the same period last year, achieving a turnaround from losses to profits.

The biggest contributor to both Car BU and Sailis's simultaneous profitability is the Wenjie M7. Last August, the newly redesigned New World M7, which cost 500 million yuan, gained huge attention and terminal orders while taking advantage of the hot sales of Huawei's Mate 60 smartphone. The Wenjie brand has also come back to life from this.

As of the end of May, when the new M7 Ultra version of Wenjie was launched, the cumulative order volume of M7 had reached 180000.

But behind the prosperity lies the multiple difficulties faced by Huawei Automobile.

Why does the popular M7 need to be upgraded and renewed after only 8 months of release? Due to the beautiful start of the M7, there are now signs of weak growth - the sales of the M7 have dropped from 30000 units per month to 9000 units in April this year. In May, due to the lack of official release of specific model data, it is estimated that the sales of the M7 will be around 8000-9000 units.

Using new car iteration to create a new wave of consumer stimulation, although crude, is effective. But with the intensification of industry competition and the gradual decline of Huawei smartphones, to what extent can the M7 Ultra stimulate terminal sales? Has the peak of the world of inquiry passed? None of them are known yet.

According to insiders, the Wenjie M9 is still selling at a loss due to its high cost.

It can be confirmed that it is not easy for profitable car BUs to continue to maintain profitability in the next quarter. Because Yu Chengdong's current difficulties are far beyond just asking for the M7.

After its second release, the sales of the Smart S7 have increased, reaching 5012 units in April and falling back to 3455 units in May. Such a sales scale is bound to fail to meet the profitability standards;

The Xiangjie S9, which will be launched in August, not only will it be difficult to compete with the BBA C-class sedan alone, but will the cooperation between Huawei and BAIC also encounter similar difficulties in delivering the Zhijie S7? After BAIC, there is also Jianghuai, a new round of "torture" starting from scratch;

It is understood that during the three-day Dragon Boat Festival holiday of Hongmeng Zhixing, the 7000 units were all contributed by Wenjie;

In addition, Huawei cars, which sell more and become more expensive, will inevitably face a narrower market size and a test of brand accumulation

In short, the profit of car BU in the first quarter can only be considered as a shot in the arm for Huawei Automobile to continue moving forward, and there is still a problem of "strengthening emissions" waiting for Yu Chengdong to overcome.

NO.3 [written at the end]

Last year, Huawei Car BU was spun off and became independent, and its subsidiary "Yingwang Intelligence" has already been registered. At present, Huawei has invited car companies such as Changan, Celes, Chery, JAC, BAIC, Mercedes Benz, Audi, and FAW to participate in financing.

Utilizing external capital to revitalize new energy vehicles has been a common practice in the automotive industry in recent years. Huawei Car BU, which is short of money, can independently raise funds, at least temporarily unload the burden of profits and travel lightly. According to financial institutions, the valuation of the joint venture company has reached over 100 billion yuan.

To this day, Huawei Automotive is still a unique presence in the automotive industry. Some people appreciate Huawei's tremendous voice in intelligent driving, while others hope that Huawei Automotive can truly become a business card for China's mid to high end automotive industry.

The task is heavy and the road ahead is long. Mr. Yu, come on. It's really not possible, let's make our own cars!

This article is from the WeChat official account "AutoReport Auto Production" (ID: autoreport), written by Yu Jie, edited by Yang Guang, and released by authorization.

The viewpoint of this article only represents the author himself, and the 36Kr platform only provides information storage space services.

为什么华为的车只能越卖越贵？