Summary of Key Points
In the first half of 2026, Seres experienced a sudden shift from consecutive quarterly profits to a net loss of 1.72 billion yuan (compared to a profit of 2.94 billion yuan in the same period last year), with revenue also declining by 7.9%. On the surface, this is due to product iteration (clearing inventory of older models and insufficient production capacity for new models) and rising raw material costs (chips and lithium carbonate, which increased the cost of each vehicle by 15,000-20,000 yuan). However, the underlying issue lies in the conflict with Huawei's "symbiotic model": the diminishing influence of Huawei's brand (consumer fatigue with its marketing), high channel fees (significant costs for purchasing and services from Huawei), and increased internal competition from other car companies collaborating with Huawei. Additionally, Seres has a weak independent brand identity and high sales expenses (which consume a large portion of its gross profit). Coupled with the industry entering a stage of competitive saturation, Seres is facing a critical challenge. Nevertheless, the company has a substantial cash reserve of 73.1 billion yuan, providing room for adjustment.
Detailed Analysis
1. Performance Turnaround: Surface Issues Mask Greater Problems
Seres's loss of 1.7 billion yuan in the first half of the year, compared to a profit of 2.9 billion yuan last year, reflects a significant decline of 4.6 billion yuan. The financial report attributes this to the clearance of inventory of older models (M5/M7) in the second quarter (resulting in lower gross profit margins) and the lack of production capacity for new models (M9/M6), as well as rising battery chip prices. More importantly, although Seres had sufficient gross profit margins (23.3%, higher than Tesla's in the industry, with a total gross profit of 13.4 billion yuan), its total expenses (including sales, management, R&D, and financial costs) amounted to 138.8 billion yuan, eroding all profits. Sales expenses alone accounted for 84.7 billion yuan, accounting for 63% of the gross profit—this is the main factor contributing to the loss.
2. The Decline of Huawei's Influence
Previously, Huawei's reputation helped Seres' products, such as the Askar, sell well. However, now its positive impact has turned into a double-edged sword:
- Declining Sales: Sales in May decreased by 17% year-over-year, and this trend continued in June and July, with only 26,000 units sold in July (compared to 30,000 units for a single model before).
- Weakening Brand Impact: The "Bamboo Cicada" incident has led to consumer skepticism about Huawei's high-profile marketing claims (e.g., "the best car within 10 million yuan"), diminishing the brand's appeal.
- Increasing Expenses: Seres spent 9.84 billion yuan on purchases from Huawei in the first half of the year (up from 5.6 billion yuan last year), with channel service fees accounting for 8% of the sales price (approximately 4.2-4.6 billion yuan, included in sales expenses). Huawei has also collaborated with other car companies like Xingjie and Yijing to launch "half-price Askar" models, directly competing with Seres.
3. Excessive Sales Expenses
Seres' sales expenses are exceptionally high:
- In 2025, sales expenses amounted to 24.19 billion yuan (at a cost ratio of 14.65%), while SAIC, with annual revenue of 646.1 billion yuan, spent only 20.8 billion yuan on sales expenses; BYD, with revenue of 800 billion yuan, spent 26.1 billion yuan. Despite having lower revenue, Seres' sales expenses are comparable to those of larger companies.
- The reason for this is its dependence on Huawei's distribution channels and the need to invest in its own showrooms (rental costs and staffing), creating a significant financial burden. In an industry focused on cost reduction and efficiency improvement, these expenses are almost unavoidable.
4. The Vulnerability of the Business Model
The core of Seres' model relies on Huawei, with Seres responsible for manufacturing the cars and bearing the risks, while Huawei provides technology and distribution channels, generating profits. However, this arrangement exposes several vulnerabilities:
- Full Risk Burden: Seres bears the consequences of declining sales and losses, while Huawei continues to receive its fees (for purchases and services). As a shareholder in Huawei's car business unit, Seres only earned a meager 0.6 billion yuan in investment income in the first half of the year.
- Lack of Brand Independence: Seres' branding strategy relies heavily on its suppliers, lacking a strong core competitiveness. For example, it is just considering entering the sedan market and is progressing slowly in international expansion (only 20% of its fundraising was used for this purpose), with a lagging product portfolio.
5. Is There a Chance for Recovery? Plenty of Cash, but Need for Self-Transformation
Seres is not completely out of options:
- Strong Cash Position: With 73.1 billion yuan in cash reserves and virtually no short-term debts, it has the funds for R&D and new product development.
- Management Changes: Zhang Xinghai has stepped down, and his son Zhang Zhengping has taken over responsibility for the Askar series, while his nephew Zhang Zhengyuan is in charge of the Saidu brand, aiming to reduce reliance on Huawei.
However, the challenges are significant: Saidu's predecessor, Landian, was unsuccessful, and its rebranding as "Doubao" may not be enough to establish a foothold in the higher-end market. The industry is entering a critical stage, and Seres must quickly identify its core strengths to avoid being eliminated.
Conclusion
Seres' dilemma stems from the limitations of its dependent business model. It has thrived thanks to Huawei's support, but now, with the fading of this influence, its brand strength and cost control capabilities are exposed. To overcome these challenges, Seres must reduce its dependence on Huawei and build its own brand and technical capabilities. This will be the decisive factor in its future success or failure.
(End of Analysis)