Hello! I'm your financial analysis assistant. This news article actually illustrates a very typical business scenario involving the dynamics of power struggles among established companies: When the "most powerful support" decides to step back, can the main player carry the weight on their own?
To help you understand the intricacies without having to wade through complex financial reports, I've broken down this news into five key points and explained them in plain language.
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Summary of Key Points
In one sentence:
Huawei is handing over the control of its "Askar" brand (mainly responsible for car sales and product development) to Seres, while stepping back to focus on being a technology provider. Although Seres has regained control, can it make up for the 1.7 billion yuan in losses incurred due to model upgrades and payments to Huawei through future sales? Currently, sales are declining, posing a significant challenge.
Key Highlights:
1. Role reversal: Previously, Huawei was in charge of sales and design, while Seres only manufactured the cars; now Seres will handle sales and design, with Huawei providing technology (such as intelligent driving systems and infotainment).
2. The truth about the losses: The 1.7 billion yuan in losses includes a large portion from the disposal of old molds and costs associated with providing technology to Huawei (10% of each car sold).
3. Current challenges: Askar's sales have halved recently, and if the new M6 model doesn't perform well, it will be difficult to turn losses into profits, especially since the M9 is the only high-end model.
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Detailed Analysis
1. Why the sudden "split"?
Many think Huawei is just trying to get rid of a burden, but that's not the case. It's more about a reallocation of resources:
- Huawei's strategy: Huawei has multiple brands, including Askar, Zhijie (Chery), and Xiangjie (BAIC). Askar has grown and established itself, so Huawei doesn't need to continue to manage it as closely. It wants to focus its energy and marketing resources on newer brands that need more support.
- Seres' strategy: Seres felt like a "contract manufacturer," with most of the profits going to Huawei. By taking back control, Seres hopes to save on channel costs and have more control over product development, not being completely reliant on Huawei's technological updates.
- Essential change: The relationship has shifted from Huawei doing everything to a model where the car company leads and Huawei provides support.
2. How were those 1.7 billion yuan in losses incurred?
Seres lost 1.7 billion yuan in the first half of the year. Let's break down these costs:
- First cost: Approximately 1.82 billion yuan was spent on disposing of old molds and outdated hardware for the M5 and M7 models. This was a one-time expense that won't happen again next year.
- Second cost: Rising manufacturing costs (chips, materials) and price competition in the market led to lower margins. Huawei charges 10% of each car sold as a fee for technology and services.
- Third cost: Seres paid Huawei 10% of each car sold (2% for technology licensing and 8% for channel services), totaling 9.84 billion yuan in the first half of the year. Over four years, 111.3 billion yuan went to Huawei, accounting for nearly 30% of Seres' total revenue, leaving only 14.82 billion yuan in net profit.
3. Can Seres handle the new responsibility?
Reclaiming control sounds promising, but being able to manufacture a car doesn't mean being able to sell it effectively. Seres faces two major challenges:
- Channel weaknesses: Askar's success relied on Huawei's nationwide stores and sales team. Seres lacks experience in managing large-scale sales networks and may experience efficiency issues.
- Brand identity: 58% of Askar's customers bought the cars because of Huawei's reputation, not the Seres brand itself. If Huawei's influence fades, Seres' brand value could be compromised.
4. Sales are the real indicator: Dangerous trends in the data
Sales are declining, which is concerning:
- Monthly sales increased slightly in the first half of the year but dropped by nearly 50% in July and August.
- Possible reasons: It might not just be due to model upgrades; market confidence could be low, or the new models might not be appealing enough.
- Analysts have lowered sales forecasts for 2026.
- Critical models: The M9 (high-end) is performing well, but the M6 (mid-range) is crucial for boosting overall sales and reducing costs. If the M6 fails, Seres could face a dilemma.
5. Can the losses be reversed?
Can Seres turn things around despite the losses?
- Short-term (next few months): It will be difficult to immediately reverse the losses due to declining sales and ongoing adjustments in the channel and brand recognition.
- Medium-term (1-2 years): Success will depend on three factors:
1. Sales stopping the decline and starting to rise, especially if the M6 becomes popular.
2. Margins improving through cost reduction or a higher proportion of high-end sales.
3. Huawei's fees being diluted by higher sales volumes.
- Long-term (business model): Seres is still heavily reliant on Huawei's technology. It has gained control of sales but not the technology.
Tips for consumers:
If you follow Seres or Askar:
- Don't just rely on headlines; check the delivery numbers each month. If the M6 sales don't improve, the company's performance will be in doubt.
- Watch for changes in the brand's marketing strategy: If Huawei's presence is less emphasized in sales, it might affect prices.
- Be cautious about the losses: Half of the 1.7 billion yuan was due to one-time expenses, so the real challenges lie in the ongoing costs and declining sales.
In one sentence: Reclaiming control is a step forward, but whether it leads to success depends on Seres' ability to sell cars effectively in the coming months.