This marks the 1360th original article from 'New Energy Frontier.' Click above to follow and 'star' our account for more insights. Please note, this article reflects the personal views of 'New Energy Frontier' and does not constitute investment advice. The author does not manage investment groups, charge for stock tips, or handle client finances.

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In the burgeoning wave of new energy vehicles (NEVs), when discussing dark horses and dramatic turnarounds, Seres stands out as a prime example. From a humble beginning as a traditional small factory on the verge of collapse, relying on micro-cards and minibuses, Seres has transformed into a dominant force in the luxury car market with its AITO M9, surpassing even BBA (BMW, Mercedes-Benz, Audi) and achieving a meteoric rise in the stock market to become a multibillion-dollar giant.

However, as the adage goes, "Even pigs can fly when the wind blows," but what happens when the wind subsides? Few pay heed to the aftermath.

On July 12th, Seres issued a performance pre-announcement for the first half of 2026, projecting a staggering net loss attributable to shareholders (of the parent company) ranging from RMB 1.5 billion to RMB 1.8 billion, with a non-recurring net loss attributable to shareholders (of the parent company) between RMB 2.2 billion and RMB 2.5 billion!

It's a tragic turn of events. After finally achieving profitability for two years, Seres is now slipping back into the red.

In the first quarter, the net profit attributable to shareholders was still RMB 750 million, yet the half-year report reveals cumulative losses exceeding RMB 1.5 billion, indicating that Q2 alone suffered losses surpassing RMB 2 billion. What went wrong with the company?

01 Behind the Heavy Losses

While the sudden financial downturn may seem alarming, it's not entirely without precedent. Given the circumstances in the NEV industry over the past two years, automakers have faced challenging times, albeit to varying degrees.

Several factors contribute to Seres' heavy losses in the first half of the year.

The most direct catalyst is the pressure from rising raw material prices.

The first half of 2026 has been unkind to NEV manufacturers, with prices of lithium carbonate, industrial metals, and memory chips all on the rise. The average price of lithium carbonate in the first half of 2026 was around RMB 160,000 per ton, doubling from around RMB 70,000 per ton in the first half of 2025.

Although this is significantly lower than the peak price of RMB 600,000 per ton a few years ago, times have changed. NEV prices in 2021 were vastly different from now, with general price declines of 30% to 40%, and even halving in some cases. Moreover, competition this year is fiercer than ever, making it impossible to pass on cost increases to consumers. On the other hand, lithium battery manufacturers upstream of automakers, especially CATL, generally pass on price hikes to automakers, leaving them to bear the brunt of lithium carbonate price increases, as evident from CATL's performance.

The same logic applies to industrial metals and memory chips, particularly memory chips. Even powerful companies like Apple are at the mercy of upstream chip manufacturers, let alone Seres.

Secondly, asset impairments have contributed to the losses.

The announcement states that, based on the principle of prudence, the book value of certain existing assets with limited adaptability due to technological iterations and model updates has been adjusted.

NEVs have now become akin to consumer electronics, with rapid technological advancements and model updates causing significant depreciation of earlier equipment and inventory, necessitating impairment write-downs.

In simpler terms, from the M5 to the M7, then to the M9 and M6, the higher the technological content (or 'Huawei influence') of new models, the greater the depreciation pressure on many models, production lines, and component inventories previously used for older models, as well as inventory of older models. Given the poor performance in the stock market, taking a significant write-down all at once isn't necessarily a bad move. Of course, this issue isn't unique to Seres; it applies to all NEV manufacturers, except for Tesla, which has fewer models.

As 'New Energy Frontier' has repeatedly stated, before autonomous driving technology truly matures for large-scale commercial use, NEVs represent a challenging business model, combining the heavy asset and depreciation drawbacks of fuel vehicles with even faster technological iterations. Coupled with changes in the aftermarket and sales models, the business model is actually much worse than that of fuel vehicles.

Looking back, it's clear why Ren Zhengfei insisted that Huawei wouldn't manufacture cars.

Apart from not competing with partners for profits, it's likely that Mr. Ren saw through the business model and China's intense competitive pressure. While various 'Jies' (brands) collaborating with Huawei are incurring heavy losses, Huawei is steadily earning money as a supplier. Indeed, experience counts for a lot.

As for those who accuse Huawei of being a vampire, having earned tens of billions from Seres over the years, opinions vary. Personally, I find such remarks absurd. Without Huawei, Seres would just be Dongfeng Xiaokang, incapable of the transformation it's undergone today.

It can only be said that Huawei possesses a certain ability to turn stone into gold, but even Huawei cannot change a company's business model. A company's performance still hinges on its business model and the competitive landscape of its industry.

In the first half of this year, AITO's total sales (cumulative sales) reached 160,800 units, a year-on-year increase of 5.60%. Although the growth rate isn't spectacular, considering the generally high product prices and the fierce competition this year, it's quite respectable. The poor performance can only be attributed to industry-wide issues.

Compared to performance, 'New Energy Frontier' has always had concerns about Seres' independence, and this remains the case. However, with the company's increased losses and intensified industry competition, this issue might now have a new and different answer.

02 Soul Tied to Huawei: When Will Independence Happen?

Regarding the company's independent operations, although management vehemently denies any lack of independence, insisting they are an independently operated enterprise, it's clear that Seres' soul is heavily influenced by Huawei, which is undeniable, at least in the perception of consumers and investors.

Technology, intelligent cockpits, sales systems, and even the car logo are dominated by Huawei. Without Huawei's support, the market wouldn't recognize AITO to such an extent. One can imagine: without Huawei, how could a company primarily selling Dongfeng Xiaokang vehicles sell them for over RMB 500,000, let alone achieve such explosive sales? It's simply unthinkable.

Actually, relying on Huawei in the short to medium term is acceptable. The market has always been concerned about whether Seres can rely on Huawei forever, when it can become independent, and when it can have its own identity?

Unfortunately, the answer is also harsh: at least in the short to medium term, there's no visible strength for Seres to de-Huaweiize, nor should it from a practical standpoint.

From technology to sales channels, and even consumer perception, the deeper AITO is entangled with Huawei, the more willing consumers are to buy. If it forcibly becomes independent now, it would almost be 'cutting itself off from the market.'

For Seres, true independence can only be achieved by accumulating enough strength through cooperation with Huawei, then completing the accumulation of know-how in the NEV field, including the entire chain of vehicle manufacturing, software, intelligent cockpits, etc., especially technological accumulation in the field of intelligent driving. Secondly, it should expand into broader areas of intelligent hardware and embodied intelligence (robots), cultivating a second growth curve through multi-dimensional technological accumulation and hardcore products, while strengthening Seres' own brand attributes.

That said, although Seres is unlikely and shouldn't detach from Huawei in the short to medium term, the NEV industry has been mired in difficulties these past two years, while Huawei has been thriving. There's also no need to worry about Huawei independently manufacturing cars. As the flagship brand of Huawei's Smart Selection vehicles and the best-performing one, AITO is likely to only receive increased support from Huawei, unless other 'Jies' can emerge and perform better, or if the market becomes unappealing to Huawei, leading to a gradual reduction in investment. However, considering the vast size of the NEV market, abandonment is unlikely, so concerns about AITO being abandoned can be somewhat alleviated.

03 The Future of Seres

'New Energy Frontier' has consistently emphasized when tracking companies like BYD, Li Auto, and Xpeng that the future and investment opportunities in NEVs can only await the true maturation and large-scale commercial use of autonomous driving technology.

This viewpoint also applies to Seres.

Autonomous driving is currently the only ultimate weapon capable of breaking the 'traditional consumer goods attribute' of automobiles and reconstructing the business model. Once the industry truly enters the era of large-scale commercial use of L4-level and even driverless technology, the definition of cars will fundamentally change. They will no longer be personal private property and means of transportation but will become mobile, 24-hour 'embodied intelligent service nodes' (Robotaxi).

Given current technological levels, true maturation is expected by 2030 at the latest, and it's likely that maturation and large-scale commercial use will occur simultaneously. In this regard, Seres, backed by Huawei, has an advantage.

Seres' other advantage lies in its successful premiumization backed by Huawei. As long as it establishes its brand advantage, the company at least has the potential to continue encroaching on the mid-to-high-end fuel vehicle market left by BBA and others. Currently, the penetration rate of NEVs in this high-end market is relatively low, offering greater growth potential and better resistance to upstream raw material price hikes.

By the way, institutions' average performance expectations for Seres in 2026 were RMB 10 billion to RMB 12 billion. Therefore, when it comes to investment, institutional forecasts can only be taken with a grain of salt. The core is to look at the industry, then the enterprise.

Choosing wisely is far more important than working hard. It's no joke that in the short to medium term, beta (market risk) is far more important than alpha (excess return)!