"As Huawei's partner network grows, Seres' competitive advantage may diminish."

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Cost Reduction and Efficiency Enhancement? Seres Exposed to Have a '520 Plan'!

According to Jiu Pai News, Seres has recently been exposed to have formulated a '520 Plan' and optimized older employees, attracting public attention. The report cited an image of a document with an official seal, stating that Seres Group Co., Ltd. "will implement the '520' plan: either reaching the age of 50 or having 20 years of service in the company will result in everything being reset to zero, with both parties engaging in a new round of mutual selection."

In response, a Seres employee told Jiu Pai News, "It's true, but many of our employees have over 20 years of service and are doing well. There's even an annual award for longevity. The plan for mutual selection or resetting to zero hasn't started yet." Another Seres employee quoted in the report said, "Colleagues within the company should address each other as comrades-in-arms, directors, or ministers. There's a prevalent overtime culture without overtime pay, and sales staff are pressured to drink alcohol."

The document in question was dated September 2024. Regarding the authenticity of the document, the Secretary of the Seres Board of Directors said they were unaware of the matter and that everything should be based on official announcements.

First, there was CATL's 896 work schedule, urging employees to "work hard for 100 days." Later, Chery was exposed to mandatory overtime, with '896' becoming the norm without overtime pay. Recently, Volkswagen has made attendance a "killer app," emphasizing that employees must be present for 8 hours, preparing for layoffs. Now, Seres has redefined 520, making the competition among automakers increasingly unpredictable.

01.

Turning the Tide

In the first half of this year, Seres demonstrated to the public with a remarkable interim report that the importance of choice far outweighs effort. Financial reports show that Seres sold approximately 201,000 new energy vehicles in the first half of the year, a year-on-year increase of 348.6%. The AITO series delivered approximately 181,000 vehicles in the first half, accounting for over 90% of total sales and ranking second among new forces in the Chinese market, behind NIO.

Revenue reached RMB 65.04 billion, a year-on-year surge of 489.6%, with a net profit attributable to shareholders of listed companies of RMB 1.625 billion. Notably, net profit in the second quarter alone reached RMB 1.405 billion, a significant quarter-on-quarter increase of 638.6% compared to the first quarter. Stable vehicle prices also contributed to a marked improvement in Seres' gross margin in the first half of the year compared to previous years.

Zhang Xinghai, Chairman (Founder) of Seres Group, said, "Since the launch of the M9, our prices have actually increased, and orders have continued to grow without any price reductions. Many cars are now lowering prices to boost sales, but this doesn't necessarily lead to increased sales volumes. In the end, we need to focus on building our brand, because a strong brand is what creates value."

Little did anyone expect that Seres had faced severe financial difficulties. In 2023, Seres reported a net loss of nearly RMB 2.45 billion for the entire year, and accumulated losses from 2020 to 2023 totaled approximately RMB 9.835 billion.

In 2021, Seres embarked on a cross-border collaboration with Huawei, marking the beginning of its turnaround. Since establishing its partnership with Huawei, Seres has repeatedly been questioned about becoming a 'contract manufacturer' for Huawei. However, Seres has emphasized on multiple occasions that it is not a contract manufacturer and does not engage in such business. Every car sold generates revenue solely for Seres, while Huawei collects a corresponding service fee.

Leveraging Huawei's strong influence, Seres' market value soared to RMB 141.6 billion on June 18th this year, surpassing NIO for the first time to become China's leading new energy vehicle startup by market value, albeit temporarily. The 2024 Hurun Global Rich List shows that the wealth of Zhang Xinghai and his wife Yan Min surged by 30% to RMB 18.5 billion, with their ranking rising by 591 places.

02.

The Road Ahead is Not Smooth

In July this year, Seres acquired the AITO and other related trademarks and patents from Huawei for up to RMB 2.5 billion. For Seres, this transaction was undoubtedly a worthwhile investment.

However, it also signifies that Seres is entering a new stage of development. The success of the AITO series is inseparable from Huawei's strong support. Since the establishment of Huawei's Vehicle Business Unit, Huawei's senior executives have repeatedly emphasized their commitment to 'not manufacturing cars.' In addition to AITO, Huawei has three other series under its 'Four Worlds' strategy: Zhi Jie, Xiang Jie, and Zun Jie, and an increasing number of automakers are becoming Huawei's partners. Seres' position as the flagship of the AITO series is gradually diminishing.

Relying solely on AITO's performance is clearly insufficient to excel in the fiercely competitive automotive industry, a fact well-understood by Seres.

At present, Seres' self-owned brands have not made much of a splash. It is reported that Seres has multiple brands under its umbrella, including Blue Electricity, Ruichi New Energy, Dongfeng Fengguang, and Dongfeng Xiaokang, offering a range of products from new energy SUVs and vans to fuel-powered SUVs and MPVs.

In March 2023, Seres launched its new new energy vehicle brand, Blue Electricity, with its first model, the Blue Electricity E5, utilizing both Huawei's intelligent vehicle technology and BYD's Fudi battery hybrid technology. However, sales have been modest, with only 1,705 units sold in May 2024, a significant disparity compared to AITO's sales figures.

Seres' positioning is also evolving, moving closer to that of a typical heavy asset, low-margin new force automaker. So, without Huawei's backing, will consumers still be willing to pay for Seres' products?

Seres itself must be feeling anxious, and its ties with Huawei will undoubtedly deepen. While Seres may appear to be thriving, it still faces significant challenges. As the automotive industry continues to evolve and the new energy vehicle market rapidly changes, Seres' deep integration with Huawei may necessitate a profound transformation.