Seres purchased the AITO brand, valued at over 10.2 billion yuan, for 2.5 billion yuan, marking a new era in its collaboration with Huawei.

On the surface, it appears to be a transaction of brand assets between two companies, with Seres acquiring it at a bargain price of almost two-fold discount. However, behind the scenes, it represents the clarification of the ownership of the AITO brand after long-term cooperation between the two companies, and a reaffirmation and strengthening of their respective strategies and positioning.

Upon completion of the transaction, Seres will own the complete brand assets, and both parties will continue to create value for users and the capital market based on their respective advantages.

Whether it's the transaction price or future long-term development, Seres has "won big".

【Purchasing "AITO" at a Two-Fold Discount, Winning Again】

An announcement has once again made Seres the focus of attention in the automotive industry.

On July 2, Seres announced that its wholly-owned subsidiary, Seres Motors, had agreed with Huawei to acquire 919 AITO-related text and graphic trademarks and 44 related design patents held by Huawei for 2.5 billion yuan, expected to be completed before December 30 of this year.

It's worth noting that AITO is currently a star brand among new forces in the automotive industry. In June this year, AITO delivered over 40,000 vehicles in a single month, setting a new record.

Among them, AITO M9 delivered 17,241 vehicles in June, with cumulative orders exceeding 100,000, firmly occupying the top spot in sales of models priced above 500,000 yuan, becoming an X-factor shaking up the Chinese high-end luxury car market. The new M7 sold over 110,000 vehicles in the first half of the year, ranking first among new force models in China, while the new M5 delivered over 10,000 vehicles since its launch. AITO products are exhibiting a surge of momentum across three fronts, with more new products to be launched this year.

▲Source: Brand Announcements, First Electric

With the help of AITO, Seres sold 44,126 new energy vehicles in June, representing a year-on-year increase of 372.04%. From January to June this year, cumulative sales reached 200,949 vehicles, representing a year-on-year increase of 348.55%. It can be seen that AITO is the biggest contributor to Seres' success.

While the transaction seems straightforward on the surface, it has strategic significance for both Huawei and Seres.

In terms of price, Seres' asset evaluation report showed that the market value of AITO-related assets transferred by Huawei exceeded 10.2 billion yuan on the valuation base date. However, Seres only spent 2.5 billion yuan, close to a two-fold discount, which is undoubtedly a very "responsible" transaction for listed companies and investors.

Compared to acquisitions with multiples of several times or even dozens of times the original price, Seres' acquisition is a steal.

Secondly, this transaction will not affect the development of joint business between the two parties. In short, there is no change in cooperation, except that the ownership of AITO's trademarks and design patents has shifted from Huawei to Seres.

Previously, Huawei also transferred trademarks such as "Xiangjie" and "Zhijie" to related parties, further reaffirming its philosophy of "not building cars" and continuing to help automakers build and sell good cars with its leading intelligent connected vehicle technology.

The question of "whether Huawei builds cars or not" once caused significant controversy and was even believed to implicate the interests of cooperative automakers. However, now, the boundaries of Huawei's Smart Selection Car (HarmonyOS Intelligent Mobility) are clearer.

By transferring the brand to its partner, Huawei is essentially reiterating to the outside world that it "does not build cars" and is committed to empowering automakers. Seres is the automaker with the deepest and broadest cooperation with Huawei, as well as the largest vehicle installation volume. Even though Huawei is expanding its "circle of friends," it is difficult to replicate Seres' success in terms of cooperation depth, product sales performance, user recognition, and other dimensions.

This also determines the uniqueness of Seres and is the reason for its higher valuation.

Finally, this transaction clarifies the ownership issue of the AITO brand. The market and public opinion have high attention to AITO, but previously, due to the brand belonging to Huawei and the manufacturing belonging to Seres, it caused some confusion for users.

Seres' acquisition of the AITO brand is conducive to its future long-term development, and the positioning of Seres and Huawei will be clearer. In the future, they will leverage their respective resources and advantages to jointly design and market new luxury automotive products with cross-border integration.

【Shifting Gears and Speeding towards the Starry Sea】

Since their collaboration in 2021, Huawei and Seres have created a classic cross-border integration in the history of the global automotive industry, and Seres has emerged from adversity to become the first enterprise in terms of market capitalization among new forces in China.

It's worth noting that AITO's first model, the M5, was only launched in December 2021, and it has been only two and a half years since then. Seres is now one of the top automakers in China, rising from obscurity to fame, from the periphery to the forefront, which can be described as a business miracle.

Behind this success lies the groundbreaking cooperation model with Huawei. Previously, the two parties also signed the "Agreement on Further Deepening Joint Business Cooperation," marking their firm commitment to developing the joint business model and fully building the AITO brand after signing a related agreement in February 2023.

Currently, Huawei's empowerment of automakers is divided into three modes: the traditional Tier 1 (automotive parts supply) mode, the Smart Selection Car mode (HarmonyOS Intelligent Mobility) led by Huawei's Terminal BG, and the HUAWEI INSIDE (HI mode) led by Huawei's Vehicle BU.

It is worth mentioning that Seres Motors is the only automaker that has signed strategic cooperation agreements with Huawei's Smart Selection Car, Vehicle BU, and Huawei Digital Energy, representing the deepest level of cooperation.

With such a successful precedent, "many large automakers have come to cooperate with Huawei on Smart Selection Car, but resources and manpower are limited, so we can only focus on four sample points," Yu Chengdong once revealed. Therefore, Seres stands out as a unique case, further highlighting its uniqueness among new forces.

Moreover, Seres is actively participating in introducing strategic investment in new companies established by Huawei's Vehicle BU. If successful, both parties will form a community of interests.

Previously, Huawei planned to spin off its Vehicle BU, a first-tier department, into an independent subsidiary and offer up to 40% of its equity for external financing.

Yu Chengdong publicly stated that in the first three months of 2024, Huawei's Smart Selection Car business had achieved profitability, and the Vehicle BU was close to the verge of profitability balance. It is expected that starting from April, it will achieve positive and healthy development. Considering Huawei's brand appeal and influence, investing in Huawei's Vehicle BU is undoubtedly a win-win choice.

Meanwhile, this transaction lays the foundation for AITO to enter the global stage.

Currently, going abroad has become an important growth point for many automakers. Companies like Chery and Great Wall are gaining momentum in the international market, and Chinese manufacturing is highly attractive to overseas users. Moreover, the penetration rate of new energy vehicles in many overseas countries is still low, presenting vast development potential.

Currently, China's new energy vehicle penetration rate is far ahead, approaching the 50% mark (according to data from the China Passenger Car Association); while the overseas penetration rate is less than 20%. Except for China, Europe has a slightly higher rate, while North America and other regions are below 10%, indicating significant growth potential.

In 2023, China exported 4.91 million vehicles, representing a year-on-year increase of 57.4%, surpassing Japan and officially becoming the world's largest automobile exporter.

The trend of going abroad is booming, but due to certain established factors, Huawei faces challenges in overseas markets. The transfer of the AITO brand to Seres eliminates this potential impact, paving the way for AITO to enter international markets and laying the foundation for it to become a world-class new luxury automotive brand. In the future, as Seres advances into the starry sea of the international market, its ceiling will undoubtedly rise significantly.

As Zhang Xinghai, Chairman of Seres, said, "At the beginning, some industry colleagues 'looked down' on Seres, but now they 'don't understand' Seres."

Now, even if they understand, Seres has already entered a new era of development. After this transaction, Seres will shift gears again and speed towards the future.

Disclaimer

This article involves content related to listed companies and is based on the author's personal analysis and judgment based on information disclosed by the listed companies in accordance with their statutory obligations (including but not limited to interim announcements, periodic reports, and official interactive platforms). The information or opinions in this article do not constitute any investment or other business advice, and Market Value Watch assumes no responsibility for any actions taken as a result of adopting this article.

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