Huawei’s Automotive Business Faces Profitability Challenge Amid High-Level Adjustments

On September 21st, Huawei officially announced internally that Jin Yuzhi, President of Huawei’s Optical Product Line, will take over as CEO of Huawei Intelligent Car Solutions BU (referred to as “Car BU” below), while the former CEO Richard Yu will be appointed Chairman of Car BU.

Smart cars are one of Huawei’s most attention-grabbing businesses at present. This personnel change will also greatly influence its future direction.

Public information shows that Jin Yuzhi is currently the Vice President of Huawei Technologies Co., Ltd. and the President of Huawei Optical Product Line. The intelligent in-car optical business products under his leadership include AR HUD, intelligent car lights, etc., which have business intersections with Huawei’s Car BU.

The optical product line led by Jin Yuzhi is one of Huawei’s star businesses, and its achievements have been highly recognized internally. Its optical network, access broadband, and other services maintain the top market share globally. In the Huawei Board of Directors election held in March this year, Jin Yuzhi was also selected as a candidate director.

Jin Yuzhi is the third CEO of Huawei Intelligent Car BU, with the previous two being Wang Jun and Richard Yu. In this adjustment, Richard Yu was promoted to Chairman of Car BU, while Wang Jun assumed the role of Chief Strategy Officer of Car BU.

An internal Huawei source analyzed that the job transfer of Richard Yu does not imply a reduction in his power. On the contrary, higher positions also provide more convenience in resource allocation.

Regarding the speculation that Richard Yu will focus more on the smartphone business, the aforementioned individual stated that there is still a lot of work for Richard Yu to drive in the automotive field, especially in terms of cooperation with manufacturers such as Jianghuai and Chery under the Smart Selection mode.

Huawei has always insisted that it does not manufacture cars, but rather collaborates with car companies to produce vehicles. Therefore, the Huawei Car Business Unit (BU) currently operates under three business models: Incremental Component Supply Model, HI Model (Huawei Inside Model), and Smart Selection Model. Among them, HI is the main promoted model by the Car BU, while the Smart Selection Model is primarily promoted by Richard Yu’s Terminal BG.

The partner in HI mode is Changan Automobile, and the two parties have collaborated to launch the car brand Seres. In Smart Selection mode, Huawei has collaborated with Seres to launch multiple models, which are sold in Huawei’s stores.

The most important task facing the new CEO is profitability. At the internal meeting at the end of last year, Richard Yu proposed that the Car Business Unit (Car BU) should achieve profitability by 2025. To achieve this, various business lines under Car BU have already started to carry profit indicators.

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In August of last year, Ren Zhengfei wrote an internal document at Huawei titled “The company’s operational policy should shift from pursuing scale to pursuing profit and cash flow.” In the document, he mentioned: “The smart car solution cannot be spread out on a complete front. We need to reduce research and development budgets, strengthen the commercial closed-loop, adopt a modular approach in R&D, focus on making several key components competitive, and connect with others for the remaining parts.”

According to Huawei’s released performance report, the revenue of its smart car business was 2.1 billion yuan in 2022 and 1 billion yuan in the first half of 2023. However, it did not mention the profitability situation. For reference, Huawei has recently invested 500 million yuan in just redesigning the M7 model.

“To achieve profitability, it means Huawei needs to help car manufacturers sell one million vehicles. This pressure is immense, but we have confidence in achieving it. We hope both the Smart Selection and HI modes can gain traction, with Smart Selection potentially having a larger volume. Regardless of which mode succeeds, we will succeed.” Richard Yu previously expressed this during an interview with Jiemian News.

The two paths to generate revenue are selling more cars and seeking more partners. Interface News learned from multiple Huawei stores that the sales volume of Wanjie in the first half of the year was not high, but the recently released redesigned M7 with five seats has improved the situation, especially after the launch of Mate 60, some resigned employees have also started to return. According to Huawei’s announced sales figures, the new M7 has received over 2000 large orders in a single day, and on September 17th, there were over 2700 large orders in a single day, breaking its own record.

In August this year, there were media reports that Huawei intended to promote the independent operation of its Car Business Unit (BU) and was in close contact with Chongqing State-owned Assets Supervision and Administration Commission for cooperation. It was said to be similar to the spin-off of the Honor brand. However, Huawei later denied these rumors.

At present, it can be confirmed that Huawei’s automotive business is still undergoing continuous adjustments, with the core objective being profitability. Faced with increasingly fierce competition in the new energy vehicle battlefield, Huawei needs an efficient organization to engage in combat, maximize the use of time and resources, and achieve commercial closure more quickly.