Huawei Looking to Seek Control of Small Automaker for EVs: Sources

Huawei Technologies is in talks to take control of a small domestic automaker's electric vehicle unit, two people with direct knowledge of the matter said.

An Electric Frontier for Huawei

This is a significant shift for the world's largest telecom equipment maker. Notably, the company is battered by US sanctions.

After US sanctions forced Huawei to sell a part of its smartphone business, this push is very important. Most importantly, it will signify a major change in business focus for the company.

The automaker it is in talks with is Chongqing Sokon. The sources reported that the talks are going on to acquire a controlling stake in Chongqing Jinkang New Energy Automobile. Moreover, the sources added that this move will allow Huawei to make intelligent cars with its own label. Jinkang counts US EV brand Seres, formerly known as SF Motors, as its main asset.

This move also serves as an evidence that the telecom vendor is looking to be more involved in EVs. Right now, Huawei provides operating systems for EVs and self-driving cars. Now, the company wants to be more present end-to-end.

Notably, the company is also seeking control of the EV brand ArcFox, owned by BAIC group. The EV maker recently launched its Alpha S model equipped with the "Huawei Inside" system. Earlier this month, the company's rotating chairman Eric Xu announced pacts with three state-owned Chinese carmakers. These included the aforementioned BAIC Group, to supply "Huawei Inside", a smart vehicle operating system, at the Shanghai Auto Show. However, BAIC are happy to have the telecom vendor as a minority shareholder.

As per one of the sources, the telecom giant is looking to finalize the deal as soon as July.

Incidentally, Reuters in February reported the company's plans to make EVs. The news outlet also reported that the smartphone maker could launch some models later this year.

EVs for Everyone?

There are three key motivating factors for Huawei's foray into EVs. First, technology firms such as Xiaomi are upping their efforts in this field. Second, China is heavily promoting greener vehicles to reduce its carbon emissions. Third, the said US sanctions have forced the company to change its business focus.

One of the sources also said that Huawei also plans to buy an undetermined stake in privately-owned Chongqing Sokon Holdings, the biggest shareholder of Shanghai-listed Sokon, as a part of the deal. Richard Yu, head of consumer business group at Huawei is leading the talks with Sokon. He and his group were responsible in making Huawei one of the world's largest smartphone makers.

An EV-Ready Future

Estimates suggest that by 2025, EVs and hybrids will make 20% of all auto sales in China. Huawei have deeply involved themselves in operations and manufacturing of Sokon and its Seres unit. Under the tie-up, Seres's first model, "Huawei Smart Selection" SF5, debuted at the Shanghai Auto Show and received over 3,000 orders within two days after the presale started last week, according to Seres.

Moreover, Huawei is selling SF5 vehicles in its stores across China including its online store VMall.com. The company aims to launch the first intelligent car under its own brand for mass production at the earliest by the end of this year, said one of them.

Sources report that the telecom vendor has high hopes for the model. However, Sokon is struggling to meet the said expectations, due to its limited supply chain. The sources report that these expectations "realized without solid technology improvements in the supply chain."