According to multiple insiders, Huawei's Automotive Business Unit (Auto BU) is poised to merge with Yinwang on January 1, 2025, involving a substantial number of employees.

Independence of Huawei Auto BU

Rumors of Huawei spinning off its Auto BU circulated last year, and now there are fresh developments on this matter.

It is reported that Huawei Auto BU will officially become independent on January 1 next year, marking a critical phase in its spin-off process.

Recently, Huawei has been actively engaging with Auto BU employees to sign new employment contracts and finalize compensation arrangements.

Approximately 7,000 Auto BU employees will transfer to Yinwang as part of this spin-off.

Previous reports indicated that transitioning Auto BU employees would receive N+1 severance compensation. They would also retain their internal Huawei stocks and continue to enjoy Huawei dividends. Upon signing with Yinwang, they would additionally receive a four-month signing bonus from Yinwang.

Regarding office locations, a clear separation has already taken place in Shanghai, where other Huawei departments have relocated to the Qingpu R&D Center, while Yinwang operates from locations such as Pudong Jinmin Park and Zhongbao. The progress of office area segmentation varies in cities like Suzhou.

An employee from Huawei Auto BU disclosed online that they have already signed a contract with Yinwang. In Shanghai, Yinwang employees are now distinct from Huawei and will no longer have the option to internally transfer to other Huawei departments in the future.

These developments align with Huawei's rotating chairman Xu Zhijun's previous statement: "By the end of this year, we aim to transfer all assets and personnel of Huawei Auto BU to Yinwang to achieve Yinwang's independent operation."

Addressing Automakers' 'Soul' Concerns

There are multiple reasons behind Huawei Auto BU's independence.

Firstly, independence can attract automaker funding, thereby reducing operational pressures.

In May 2019, Huawei established the Intelligent Automotive Solutions BU, emphasizing that it would not manufacture cars but instead position itself as a supplier of intelligent and connected vehicle components, specializing in products such as intelligent driving and HarmonyOS cabin systems.

Despite significant investments over the past five years, Huawei's Auto BU has incurred consecutive years of losses, albeit gradually decreasing. This year, however, the business turned profitable, marking a positive trend.

Turning to Yinwang, in January this year, Shenzhen Yinwang Intelligent Technology Co., Ltd. was formally established with a registered capital of 1 billion Chinese yuan. In March, Yinwang established subsidiaries in Shanghai, Suzhou, Dongguan, and Nanjing. In August, Changan Avitar and Thalys invested 11.5 billion yuan in Yinwang, each acquiring a 10% stake.

This influx of capital significantly boosted Yinwang's valuation to 115 billion yuan, roughly double that of Horizon Robotics, six times that of Momenta, and surpassing that of carmaking startups like XPeng and NIO, showcasing remarkable performance.

Upon Huawei Auto BU's independence, attracting external investments, particularly from automakers, is expected to further elevate its valuation.

Secondly, independence alleviates automakers' concerns about key issues, preventing fears of 'losing their soul'.

Huawei's rotating chairman Xu Zhijun previously noted that automakers' reluctance to purchase in large quantities stemmed from concerns about losing control over product development and competition from Huawei's smart car selection business. To secure orders, Huawei had to deeply integrate with OEMs.

In other words, automaker customers are acutely aware of these concerns.

Through independence, Huawei further clarifies its strategy of not manufacturing cars but focusing on being a supplier of intelligent automotive solutions. Automakers no longer need to worry about Huawei becoming a potential competitor in car manufacturing.

For automakers, post-independence, they can promote the Auto BU business and build an industrial ecosystem through investment and cooperation, achieving risk-sharing and benefit-sharing.

For the Auto BU, independent operation enhances its flexibility in responding to market changes, allowing it to focus more on technology research, development, and innovation. Huawei can also allocate more resources and energy to other core business areas, optimizing resource allocation.

Xu Zhijun envisions Yinwang as an independently operated company with diversified shareholding, achieving risk-sharing and benefit-sharing, with no short-term limit on the number of partners.

In summary, Huawei Auto BU's independence is a strategic necessity and a beneficial decision at this stage.

Self-Reliance with Strong Backing

It's worth noting that unlike the independence of businesses like Honor and Ultra Fusion, the relationship between Huawei and Yinwang will remain close after the Auto BU's spin-off.

To further assuage potential equity investors' doubts, Huawei promises that within the next eight years, its direct or indirect shareholding in Yinwang will not fall below 5%, and it will refrain from engaging in any activities similar to Yinwang's business.

Xu Zhijun summarized that post-independence, as Yinwang, Huawei Auto BU will operate autonomously while receiving long-term support from Huawei.

Currently, Huawei Auto BU is experiencing rapid business growth, with future contracts being signed under the Yinwang name.

The new company will focus on two core brands - Qiankun Intelligent Driving and HarmonyOS Cabin, aiming to lead the second half of the automotive industry's intelligentization journey.

We eagerly anticipate the impact of Huawei Auto BU's spin-off on the automotive technology landscape.