Yu Chengdong’s position in Huawei’s Smart Car Solutions BU (hereinafter referred to as “Car BU”) has undergone new changes. On the morning of September 22, Huawei’s official website officially updated management information. Yu Chengdong’s position as CEO of Che BU has been replaced by Chairman of Che BU.
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According to China Business News, Jin Yuzhi, the former president of Huawei’s optical product line, will succeed Yu Chengdong as CEO of Automotive BU.
Since the establishment of CheBU in May 2019, almost every change in Yu Chengdong’s position in CheBU will bring about a new business adjustment.
In November 2020, the jurisdiction of the Auto BU business was adjusted from the original ICT Business Management Committee to the Consumer Business Management Committee.Yu Chengdong officially served as the director of the reorganized IRB for smart terminals and smart car parts, and began to plan a third business model - smart car selection - in addition to the parts and full-stack smart car solution HuaweiInside model (HI model) led by Wang Jun, then president of the car BU.
By May 2021, Yu Chengdong’s jurisdiction over Che BU will be further expanded., directly served as CEO of Che BU. Five months later, Wang Jun was demoted from the position of President of Che BU to Che BUCOO, concurrently serving as President of the intelligent driving solution product line. Wang Jun’s direct reporting target has also been adjusted from Xu Zhijun, Huawei’s rotating chairman, to Yu Chengdong.
With the rapid sales of Wenjie Auto in 2022, the smart car selection model led by Yu Chengdong began to be recognized by Huawei's top executives. Wang Jun, the relatively lonely head of the HI model business, was reported to have been suspended and transferred to another position in February this year. In response to rumors that Huawei's automotive business may undergo major adjustments, Yu Chengdong responded at the time that this was a normal personnel adjustment and said that Huawei had no changes in the direction of its automotive business.
But more than half of 2023 has passed, and the sales of Wenjie cars, which once sold more than 10,000 yuan a month, have plummeted compared to last year.One month before Yu Chengdong resigned as CEO of Che BUCSO, Wang Jun, who was suspended and transferred to another position, returned again and took up the new position of Che BUCSO.
As soon as Wang Jun, who was responsible for strategic planning, returned, Huawei Car BU made a new round of strategic adjustments at the same time. According to "Financial Eleven", Auto BU began to strategically shrink some businesses that did not have competitive advantages, and shifted resources to businesses with more profitable prospects such as smart cockpits and mid- to low-end assisted driving. Especially in terms of smart driving, Huawei Auto BU has changed its previous high-end positioning and begun to regard the development of the mid-to-low-end market as the focus of the new phase of work.
However, with Yu Chengdong stepping down from his position as Automotive BU CEO, there are still three major questions to be answered surrounding the layout of Huawei’s automotive business:
·Does this mean that Yu Chengdong’s work focus will return to mobile phones?
·With the gradual recovery of mobile phones, is it still worthwhile for Huawei to continue to vigorously develop its automotive business?
·Once Huawei abandons its automotive business, where will Huawei’s next new growth point be?
01
The original intention of establishing CheBU was to make up for the shortfall caused by the decline of Huawei's mobile phone business.In April 2021, when Yu Chengdong announced his plan to sell cars in stores for the first time, he said: "Although the sales volume of smart electric vehicles is not as large as that of mobile phones, the unit price is high, which can make up for the lack of sales of mobile phones."
Moreover, Huawei’s choice to use existing mobile phone stores to sell cars has another motive, which is to form a linkage between car sales and whole-house smart home business in addition to mobile phones.Maintain offline channels to the greatest extent and lay a solid foundation for subsequent mobile phone recovery.
Two and a half years later, Huawei's car sales business has not grown as quickly as Yu Chengdong expected, and its mobile phone business has taken the lead in recovering.
Since the chip supply was completely cut off in September 2020, in the third quarter of 2021, Huawei's mobile phones fell out of the top five in the domestic market sales list for the first time and became a new member of the Others camp.
As Qualcomm begins to be allowed to supply customized 4G chips to Huawei in 2022, Huawei mobile phones, which have initially opened up the supply chain, have begun to climb out of the bottom step by step. Omdia data shows that after one year of growth from the fourth quarter of 2021 to the third quarter of 2022, Huawei's mobile phone shipments will recover to 28 million units in 2022.
At the beginning of 2023, the supply chain broke the news that Huawei had raised its annual shipment forecast by 10 million units, from the original 30 million units to 40 million units.
By the second quarter of this year, according to IDC data,Huawei's mobile phone market share soared by 76.1%, from 7.3% in the same period last year to 13%, ranking fifth in the country with Xiaomi.
Huawei's operating results for the first half of 2023 also showed signs of recovery in its mobile phone business. In the first half of the year, Huawei's terminal business revenue was 103.5 billion yuan, which started to stop falling and rebound compared to 101.3 billion yuan in the same period last year.
What's more,With the return of Huawei's 5G chips in the Mate60Pro series, the pace of recovery in Huawei's mobile phone sales has been further accelerated.Data from the supply chain shows that in the 36th week from September 4 to September 10, Huawei’s mobile phone sales accounted for 17%, ranking second in the domestic smartphone market, and only 0.2 percentage points lower than the first-ranked Honor. Some people in the supply chain predict that by the 37th week, Huawei's mobile phone sales share is expected to rank first in the country.
Stimulated by the huge sales of the Mate60Pro series, Huawei was even revealed to have raised the full life cycle shipments of Mate60Pro and Mate60Pro+ from the original 10 million units to 20 million units.
In 2018, under the leadership of Yu Chengdong, Huawei Consumer BG surpassed the traditional cash cow-Operator BG for the first time, with annual revenue share reaching 348.9 billion yuan. By 2020, Consumer BG revenue will reach its peak of 482.9 billion yuan. Due to external sanctions, Consumer BG's revenue will experience a cliff-like decline starting in 2021. By 2022, its revenue scale has shrunk by more than 50%, leaving only 214.5 billion yuan.One of the main reasons for the establishment of Che BU is to make up for the revenue deficit of more than 200 billion yuan caused by Huawei’s mobile phone business.
The current reality is that not only is the car BU still in a loss-making state, but its annual revenue is only about 2 billion yuan; Huawei's mobile phones, which have ushered in 5G chips, have hit a revenue target of nearly 500 billion yuan and once again have the hope of becoming the company's revenue pillar.
At this moment, Yu Chengdong steps down from his position as CEO of Che BU and turns his focus to the mobile phone business. This may be a more practical and cost-effective choice for Huawei.
02
If Yu Chengdong shifts his focus to mobile phones, whether Huawei's automotive business, which has already fallen into a downturn, is worthy of Huawei's continued investment of resources will become a new question.
In February this year, Jiemian News quoted Huawei insiders as saying that the cooperation project between Jihu and Avita in Hi mode has not yet brought a significant revenue boost to the car BU. The sales volume of the models cooperated by both parties has not improved significantly. In August, Jihu Auto delivered 1,800 vehicles, and the cumulative delivery volume from January to August was only 12,417 vehicles, which was not as good as Wei Xiaoli's single-month sales in August.
Under pressure from the lack of results, Huawei even considered making some Hi mode business lines independent.Among them is the intelligent driving solution business that relies on high computing power chips, and has jointly established a joint venture with Volkswagen to enter Volkswagen's first-tier supplier list. However, in the end, Volkswagen chose the Horizon. In October 2022, CARIAD, a software company owned by Volkswagen, announced the establishment of a joint venture with Horizon.
The development of the Hi model has encountered obstacles, and Che BU's revenue focus is entirely on smart cars. As of now, the only car brand that enters Huawei's channels for sales is still Cyrus. After the release of Wenjie M5, Yu Chengdong and Zeng Hao said that Wenjie M5 will hit 300,000 annual sales. When interviewed by the media in May 2022, Yu Chengdong changed his mind and said that 300,000 was an impossible goal. “It is already a miracle that 100,000-200,000 vehicles can be completed in the first year.”
In fact, Wenjie sold 75,000 cars in its first year on the market, which did not reach the 100,000 threshold after Yu Chengdong lowered his expectations.
To make matters worse, entering 2023, Wenjie's sales will start high but then decrease. In the first half of 2023, Wenjie's total sales volume was less than 30,000 vehicles, and it has been difficult to return to the monthly sales threshold of more than 10,000 vehicles. The latest sales data in August shows that Wenjie delivered 5,018 new cars, a year-on-year decrease of 77.4%.
Yu Chengdong is not unaware of the crisis that smart cars are becoming increasingly difficult to sell. According to an insider at Thalys, "(In March) Huawei changed its AITO company to HUAWEI company. In fact, it was under great pressure on sales. This year, the overall situation has undergone some changes. Its (Huawei) sales volume cannot increase, and it can't even negotiate when it goes out."
However, Yu Chengdong's plan to boost sales by further binding the Huawei brand to Wenjie was halted by Ren Zhengfei's document.
As the only loss-making business within Huawei, after Ren Zhengfei issued a "cold theory" warning in August last year, entering the car BU in August this year, there was once news of a solo career and an external appearance with reference to Honor.
In mid-August, Huawei refuted the rumors through social media, saying that "online rumors are inconsistent with the facts, and it has not discussed car BU-related matters with the Chongqing State-owned Assets Supervision and Administration Commission."
However, according to "Financial Eleven", the contact between CheBU and Chongqing State-owned Assets Supervision and Administration Commission is true, but the form of cooperation is not as rumored.
03
Once rumors are true, Huawei plans to abandon its automotive business. Although Huawei can still gain new growth momentum through the recovery of its mobile phone business in the short term, it willFacing the smartphone industry, which is already in a downward cycle, Ren Zhengfei still needs to make a decision on who can become the new growth point to support Huawei's development in the next decade.
Data from the China Academy of Information and Communications Technology shows that China’s smartphone shipments have declined year by year after reaching a high of 560 million units in 2016. In the second quarter of 2023, data released by IDC showed that China's smartphone market shipped approximately 65.7 million units, continuing to decline by 2.1% year-on-year, and demand has not yet recovered. This is the eighth consecutive quarter of year-on-year sales decline in the smartphone market.
The market is cold, and competition such as homogeneity and price wars are intensifying.Smartphone manufacturers that have entered the mature stage have almost all chosen smart electric vehicles as the strategic direction to support the company's development in the next decade.
After struggling for five or six years, Lei Jun officially made up his mind in March 2021 and chose to build a car himself. Xiaomi's first mass-produced model will arrive in the first half of 2024.
Cook is also plotting a car-building plan. According to Bloomberg, Apple Car is expected to be launched in 2026, priced at about US$100,000, on par with Tesla's entry-level Model S. Well-known Apple analyst Ming-Chi Kuo directly set a valuation of one trillion US dollars for Apple Car.
On May 22, 2019, six days after Huawei was added to the "Entity List" by the United States, Ren Zhengfei issued a document describing the company's industrial portfolio strategy to Huawei employees: Huawei's industrial portfolio must be balanced. We need both short-cycle smart terminals and mid-cycle highly sticky connectivity and computing businesses. At the same time, we also need a relatively long-cycle Internet of Vehicles business.
Regarding the Internet of Vehicles, Ren Zhengfei further gave a direction, believing that the connection of smart cars, on-board computing, autonomous driving, etc. are all important directions for the Internet of Vehicles, and Huawei must resolutely invest in it as a strategy.
Internet of Vehicles and cloud computing are the two future breakthrough directions planned by Ren Zhengfei for Huawei. However, cloud computing, one of the stars of future business, is now facing the possibility of business contraction.
According to Leifeng.com, in August, Huawei's management proposed in an internal document that Huawei Cloud would no longer operate as an independent company and be adjusted to be managed according to a business department system. The group level would establish an additional management committee for the cloud business. This means that in subsequent financial reports, Huawei may no longer disclose the revenue status of its cloud computing business separately.
As one of the few options in Huawei's reserve strategy, car BU may still bear the important task of Huawei building a new growth curve. But behind the changes in the positions of Yu Chengdong and Wang Jun, will it be a sign that Huawei will once again shift from ToC to ToB in the field of car manufacturing?