On August 3, Seres unveiled its production and sales report for July, triggering widespread discussion in the capital markets.

According to data released by The Paper, Seres delivered 24,229 new energy vehicles in July, marking a year-on-year decline of 45.65%. Its core brand, AITO, also experienced a downturn in sales. Seres, which had previously surged ahead with the backing of Huawei's ecosystem, now finds itself facing a sales retreat.

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While many in the market attribute the sales decline to a single factor, this perspective is overly simplistic. A significant month-on-month sales drop is typically the result of a confluence of factors, including model transitions, shifts within the Harmony Intelligent Mobility ecosystem, escalating cost pressures, and financial adjustments at the accounting level.

Product Cycle Transition: Temporary Pressures Amid Model Shifts

A direct catalyst for Seres' notable sales decline in July was the temporary product gap caused by the transition of its main models.

Firstly, the high concentration of best-selling models and the impact of new product update frequency on overall market trends are significant. The M9 and M7, Seres' two flagship models, account for nearly all of its sales, playing a pivotal role in the brand's rapid penetration of the mid-to-high-end new energy vehicle market in China. However, when these flagship models undergo replacement cycles, the company's overall sales fluctuate, as evidenced by July's performance.

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Rumors of the M9's replacement have been circulating, causing potential buyers to hesitate, fearing they might purchase a vehicle just before a new model's release. Consequently, orders for the old model have decreased. Meanwhile, the new model is still in the production ramp-up phase, requiring time for parts supply, production line debugging, and delivery speed adjustments. Without orders for the old model, the new product cannot be launched in time, resulting in a sales decline.

Secondly, the rapid iteration pace and frequent model updates erode consumer confidence. The M7, as a volume-driven product, has undergone multiple large-scale modifications and upgrades in a short period, fostering a wait-and-see mentality among potential customers and weakening market purchases.

Thirdly, the lack of a second major best-selling product undermines the ability to withstand cyclical fluctuations. During the transition between old and new products, Seres lacks another high-end best-seller to support the overall market. With the flagship models undergoing replacement, no other models fill the sales gap. While a single best-selling product can help a company achieve temporary breakthroughs, establishing a more comprehensive, multi-tiered product matrix is essential to stand firm in the industry and withstand successive rounds of competition.

Ecosystem Matrix Expansion: Traffic Reconstruction Under the 'Five Realms'

As Huawei's Intelligent Mobility ecosystem continues to expand and multiple brands compete on the same platform, Seres' exclusive platform dividends have diminished. Traffic diversion and resource reconstruction have become core external factors contributing to its sales decline.

Firstly, the continuous expansion of the Harmony Intelligent Mobility ecosystem is eroding the early exclusive cooperation dividends. AITO's rapid rise to fame was partly due to Huawei's early resource allocation. When Harmony Intelligent Mobility first launched, Seres was essentially the only partner within the system, so Huawei's offline stores, marketing, and intelligent solutions were all geared towards Seres.

However, Harmony Intelligent Mobility has been expanding its cooperation scope, forming a 'Five Realms' matrix of AITO, Luxeed, Enjoyland, Shangjie, and Zunjie, with fifteen models covering various segments, including family cars, luxury sedans, and high-performance sports cars. Seres is no longer the only vehicle partner on the platform, and the previous special treatment for a single brand has now become a shared platform advantage for all parties.

Secondly, the increased product options in stores continue to dilute AITO's original traffic. Today, entering a Huawei offline store no longer means only AITO is available; customers can now compare models from various brands within the ecosystem. With a fixed total budget and more product options, potential AITO buyers are being diverted elsewhere.

Facing this new situation, Seres needs to break away from its platform-dependent mindset and actively build its brand advantages. Only by reducing its reliance on Huawei's traffic can it maintain its position and market share in the competitive Harmony Intelligent Mobility ecosystem.

Healthy internal competition within the platform should drive Seres to develop its unique differentiation advantages. Competition among different manufacturers in this ecosystem will prompt Seres to create its product competitive edge rather than relying solely on the platform's popularity. Huawei's technological branding alone is insufficient; the company must also establish its competitiveness in vehicle tuning, production control, and user experience. How to protect its core interests within a shared ecosystem is an unavoidable question for Seres.

Profit Margin Pressures: Double Squeeze from Rising Costs and Fixed Expenses

Rising raw material prices, heavy fixed cost burdens, and intense industry competition are collectively shrinking profit margins.

Firstly, price fluctuations in the upstream supply chain are raising the cost baseline for vehicle manufacturing. In the first half of 2025, the company reported a net profit attributable to shareholders of RMB 2.941 billion, but in the first half of 2026, it expects a net loss of RMB 1.5-1.8 billion. The second-quarter single-quarter loss was particularly severe, estimated at approximately RMB 2.254-2.554 billion based on first-quarter public data, marking a shift from profit to loss. Rising prices of key components like memory chips and lithium carbonate have increased per-vehicle production costs, eating into profit margins.

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Secondly, deep cooperation entails fixed rigid cost expenditures, reducing profit margins. As a vehicle manufacturer closely tied to Huawei, Seres bears various cooperation-related costs, including parts procurement, technology licensing, and channel services, colloquially known as the 'Huawei tax.' While these expenditures provide mature resources like intelligent driving systems, Harmony cockpits, and offline stores, they also compress profit margins, as these fees must be paid regardless of market conditions.

Finally, intensifying industry competition makes it difficult to pass cost pressures downstream to end-users. The new energy vehicle market has entered a phase of intense competition, making it challenging for Seres to transfer rising raw material prices and supplier-related costs to consumers through price hikes. With shrinking profit margins, any sales fluctuations directly impact profitability.

Financial Structure Adjustment: Balancing Short-Term Impairments and Long-Term R&D

Clearing historical burdens through short-term asset impairments while ramping up long-term independent R&D for technological breakthroughs represents a difficult trade-off between short-term financial pressure and long-term development strategy.

Image Source: Seres Announcement Screenshot

Firstly, asset impairments amplify current-period losses, but shedding historical burdens is a pragmatic choice. The rapid pace of technological updates in new energy vehicles and software/hardware means old platforms and components quickly lose value. Seres has made impairment provisions for certain existing assets rendered obsolete by technological advancements. While these impairments increase current-period book losses, most are one-time accounting actions. Clearing out inefficient old equipment avoids sustained losses from legacy issues, a choice Seres has opted for.

Secondly, sustained increases in independent R&D investment sacrifice current profits for technological independence. Seres is ramping up investment in its independent R&D sector, with R&D expenses rising significantly year-on-year. Substantial funds are flowing into self-developed projects like chassis development, vehicle integration, and intelligence, inevitably consuming current profits. Only by gradually building its technological foundation can Seres reduce external technological dependencies, transition from vehicle contract manufacturing to technological self-reliance, and complete its identity transformation.

Thirdly, balancing short- and long-term priorities is the most challenging practical issue during the transformation phase. Seres cannot cut R&D investment or avoid necessary asset impairment provisions for the sake of short-term financial appearances, as this would harm its long-term competitiveness. However, it also cannot ignore short-term financial pressures and allow losses to continue expanding. How to strike this balance is an ongoing challenge for Seres during its transformation.

Conclusion

Due to the July sales plunge and first-half performance setbacks, Seres must endure growing pains after its rapid development. These figures honestly expose the company's current weaknesses in multiple areas: poor risk resistance in its product line, dispersed traffic within its ecosystem, significant cost pressures, and an early-stage transition to independent R&D.

However, crises also contain opportunities. In the second half of the year, production capacity for new replacement models will continue to ramp up, the pressure from one-time asset impairments will ease, and technological achievements from independent R&D will gradually be applied. Seres still has the potential to recover its performance.

Relying on the halo of external platforms can enable rapid sprints at the starting line but cannot ensure stable, long-term growth. The true test lies not in achieving impressive sales figures by leveraging external trends but in honing product strength, cost control capabilities, and core technologies amid brutal market competition, evolving into a vehicle manufacturer with independent hematopoietic capabilities. Whether this difficult transformation can succeed will ultimately be answered by the market and time.