On November 26, 2023, Huawei and Changan Automobile signed a memorandum of cooperation to establish a new company that will focus on the R&D, production, sales, and service of intelligent driving systems and incremental components for intelligent connected vehicles. Behind this collaboration memorandum lies great potential, but it also comes with a series of challenges and questions. The new company is valued at up to 250 billion yuan, and Changan Automobile and its parent company, China South Industries Equipment Group***, are considering acquiring about 35% and 5% of the shares, respectively, while FAW Group and Dongfeng Motor Group are also in talks with Huawei to acquire up to 5% of the shares. However, if Huawei intends to have an absolute stake, it must hold more than 40% of the shares, which will result in an extremely limited stake in the remaining shares. In addition, the new company will be led by Huawei, adopting a "locomotive" model, with Huawei leading many car companies to jointly develop and license products. What is the difference between participating and not participating in new companies for other car companies?In addition, Changan Automobile's position among new companies is also attracting attention, and if its influence is too great, it will put pressure on other car companies.
The shock caused by this cooperation memorandum stems from the slow pace and backward concept of automobile upgrading of traditional domestic fuel vehicle companies, as well as the urgent need to reconstruct the automobile upgrade ecology. In the face of the rise of Tesla, BYD and a number of new car-making forces, traditional car companies seem to be powerless. Therefore, the significance of this cooperation memorandum is not only limited to the domestic market, but also has a profound impact on the international automotive industry. This memorandum of cooperation between Huawei and Changan Automobile has undoubtedly brought a huge shock to the entire automotive industry. The establishment of the new company will have a profound impact on the automotive industry, not only in terms of technological innovation, but also in the reconstruction of the industrial ecology. The success or failure of this cooperation memorandum will become an important node in the future development process of the automotive industry, which is worth paying close attention to and looking forward to. Huawei's near-term goal is to turn powerful car companies into strategic partners by cooperating with newly established car companies, and to clarify Huawei's strategy of not directly manufacturing cars based on common interests, so as to reduce the fear of other car companies and remove obstacles to development. The long-term goal is to build a new automotive ecosystem, led by Huawei, similar to Google's Android ecosystem.
Looking back at Google's development after acquiring Android in 2005, Google successfully launched the Android operating system through the support of a global consortium organization, beating other competitors to form the world's largest mobile device ecosystem. Similarly, in the information age, the combination of car upgrades and artificial intelligence requires a separate automotive ecosystem, and for now, HarmonyOS has the potential to be the foundation of this system. Therefore, the establishment of a new company between Huawei and Changan Automobile, the opening of equity, and the entry of powerful automobile companies are aimed at jointly promoting the formation of a new automotive ecosystem to compete with other world ecosystems, which may be the long-term significance of the establishment of the new company. In this information age, car upgrades and artificial intelligence are gradually integrated, and the cooperation between Huawei and Changan Automobile is to capture this trend. By cooperating with powerful car companies, Huawei seeks to turn them into its strategic partners, focusing on common interests, thus clarifying its strategy of not directly involved in automobile manufacturing. This move is expected to reduce the fear of other car companies towards Huawei, clear the development obstacles for the cooperation between the two sides, and help future development.
Huawei's long-term goal is even more ambitious, with plans to build a new automotive ecosystem in the automotive industry similar to Google's Android-led ecosystem. Looking back at Google's development after the acquisition of Android in 2005, Google successfully launched the Android operating system by establishing a global alliance organization, and formed the largest mobile device ecosystem in the world. Similarly, with the convergence of car upgrades and artificial intelligence, a new automotive ecosystem is imperative on its own, and the biggest potential base for this system may be HarmonyOS at the moment. Therefore, the establishment of a new company between Huawei and Changan Automobile, and the opening of equity to attract powerful automobile companies to enter, aims to jointly promote the formation of a new ecosystem to support the whole process of automobile upgrades, and compete with other ecosystems in the world, which may be the long-term significance of the establishment of the new company. In general, the cooperation between Huawei and Changan Automobile is not only for the current strategic cooperation, but also to create a new automotive ecosystem in the future.
The significance and influence of this cooperation will not only be limited to the present, but will also have a profound impact on the future pattern of the automotive industry.