Cyrus has made notable moves recently. First, it repurchased the Wenjie trademark from Huawei for 2.5 billion yuan. Next, on July 28, 2024, the company announced plans to invest in Shenzhen Yingwang. Simultaneously, Cyrus will buy its third factory through a share issuance. Chongqing State-owned Assets will become a shareholder, benefiting from Cyrus’s stock price and profits. 1) In short, these three actions mean “buy, buy, buy.” The first buy involves the trademark. Previous analysis suggests this will impact the short term but benefit the long term. See “2.5 Billion Yuan Trademark Buy: Pros and Cons for Cyrus.” 2) The second buy involves investing in the vehicle business unit (BU), further binding Cyrus to Huawei and sharing long-term vehicle BU profits. This is also positive for Cyrus, as evidenced by the stock price reaction on July 29. 3) The third buy brings Chongqing State-owned Assets on board as a shareholder. Cyrus’s performance is solid. With the first two long-term benefits, Chongqing State-owned Assets will gain. This also serves as Cyrus’s gratitude for Chongqing’s support during tough times, while Chongqing will enjoy value preservation and appreciation. **1. Cyrus’s Highlight Moment** On the evening of July 28, 2024, Leverage Game watched a video of a passerby. The video showed Chongqing’s administrative head, Yu Chengdong, and Zhang Xinghai shopping together. This hints at significant developments. Besides the announcement of investing in Huawei’s vehicle BU, Cyrus Auto’s Weibo revealed that on July 29, the 400,000th AITO Wenjie vehicle rolled off the production line. The M9’s 70,000th delivery ceremony took place at Cyrus’s super factory. Since large-scale deliveries began, production has surpassed 70,000 units, making it the top-selling luxury car brand in China at the 500,000 yuan (69250$) price point. With this, AITO Wenjie achieved 400,000 vehicles in just 28 months, setting a record as the fastest Chinese new energy brand to reach this milestone. Chongqing Vice Mayor Jiang Duntao, Huawei Executive Director Yu Chengdong, and Seres Group Chairman Zhang Xinghai attended the event. According to Seres’ promotional material, the strong partnership between Seres and Huawei drives industry success. Zhang Xinghai stated, “Seres and Huawei have collaborated for three years. Our teams fought side by side. We sincerely cooperate and commit to the ‘software-defined vehicle, user-defined vehicle’ technology path. We focus on the AITO brand, working together on design and marketing. We aim to provide high-end smart electric vehicles and intelligent travel solutions, pushing towards our goal of one million units sold.” The one million units per year target emerged in 2023. At that time, Seres and Huawei signed an agreement in Shenzhen, amid a sales slump for the AITO brand. Few believed AITO could return to peak sales or set new records. After a resurgence in sales at the end of 2023, Seres experienced multiple highlights. On June 18, 2024, Seres’ stock price surpassed 100 yuan (10$), closing at 100.35 yuan (0$) per share, up 8.02%, with a market value of 151.5 billion yuan. In contrast, on the same day, Li Auto’s Hong Kong stock fell 3.07%, closing at 71.15 HKD per share, with a market value of 141.7 billion HKD. On June 18, in the U.S. market, Li Auto’s stock price dropped 0.49%, closing at 18.35 USD per share. NIO and Xpeng’s market values remain lower than Li Auto’s, making Seres the top new car maker in China on June 18. On June 19, Li Auto’s Hong Kong stock rebounded slightly, while Seres’ A-shares dipped 0.25%. On June 20, Li Auto’s Hong Kong stock fell 3.72%, closing at 71.20 HKD, with a total market value of 141.8 billion HKD. On the same day, Seres’ A-shares rose 1.09%, reaching 101.19 yuan (0$), with a market value of 152.8 billion yuan. Both Seres and Li Auto tightly compete in market value and other operational data, with ongoing rivalry likely to continue. After the peak in Seres’ stock price, it has generally declined over the past month. At the event on July 29, Yu Chengdong stated, “Our cooperation with Seres exemplifies the strongest cross-industry integration of the new era. This is just the beginning. Exciting developments lie ahead. We will deepen our collaboration and continue to support Seres in creating and selling the AITO brand. We aim to achieve leadership in intelligence and significantly surpass industry standards in mechanical quality, creating more miracles together.” At the event, Huawei and Seres emphasized that they will further deepen their cooperation. They will leverage each other’s resources and advantages to jointly define and design AITO brand models. They will also collaborate on brand marketing and shaping, establishing AITO as a world-class luxury automotive brand. This message has been shared before, but today, more people likely believe it. This is a shining moment for Seres, and even brighter moments may await. Following Changan Automobile, Seres officially announced its investment in Huawei’s automotive business unit (BU). Initially, rumors about investing in Huawei’s BU pointed to Chongqing state-owned assets. However, Chongqing later deemed the investment too expensive, and the matter was shelved. Subsequently, Changan Automobile, headquartered in Chongqing and under China Ordnance, began discussions with Huawei. The rumors became reality. On November 25, 2023, Changan Automobile signed a memorandum of investment cooperation with Huawei. Huawei plans to establish a company focused on developing, designing, producing, selling, and servicing automotive intelligent systems and components. Changan aims to invest in this target company, acquiring up to 40% of the shares and pursuing strategic cooperation. According to Changan’s announcement, the transaction is expected to conclude in the first half of 2024. After Changan’s announcement, the market expressed skepticism about the cooperation between Seres and Huawei, prompting Seres to respond that it also received an investment invitation and is currently in discussions. On January 16, 2024, Shenzhen Yingwang, the target company for Changan’s investment in Huawei’s BU, was established with a registered capital of 1 billion yuan. It primarily focuses on developing, designing, producing, selling, and servicing automotive intelligent systems and components. The main business areas include smart driving solutions, smart cockpits, smart vehicle control, smart vehicle cloud, and onboard optics. As of now, Huawei Technologies Co., Ltd. holds a 100% stake in Yiwang.
Shenzhen Yiwang has established five subsidiaries in Dongguan, Hangzhou, Shanghai, Nanjing, and Suzhou. These companies focus on manufacturing smart vehicle equipment. By May 2024, Changan Automobile disclosed its investment progress. The company actively advances all project work. It has nearly completed the due diligence. Both parties are negotiating key transaction terms. The company expects to sign the final transaction documents by August 31, 2024. A few days after signing a memorandum of cooperation with Changan in 2023, Yu Chengdong invited “FAW” to join during the Zhijie S7 launch. He received a response. Yu also revealed that he invited the “Four Realms” partners—Seres, Chery, Jianghuai, and BAIC—to open equity. By March 2024, Dongfeng Group’s Deputy General Manager You Zheng confirmed that Dongfeng is collaborating with FAW on related equity matters. Reports indicate that GAC also expresses interest in equity participation. However, only Changan Automobile and Seres have confirmed their intention to invest in Huawei’s vehicle BU through formal announcements. According to Seres’ announcement, based on the progress of preliminary work with relevant parties, the company has initiated negotiations with Yiwang and its shareholders to invest in Yiwang. They aim to support Yiwang in becoming a world-class leader in intelligent driving systems and components, and to create an open platform for the automotive industry. Specific investment amounts, transaction methods, and prices will depend on the final transaction documents signed by both parties. If the transaction is completed, Yiwang will become a subsidiary of the company, and the scope of the company’s consolidated financial statements will not change. In this context, both Seres and Huawei have ambitious goals and expectations for Yiwang. Sirius invested in Huawei’s car BU. It became the first partner to take this step. The announcement coincided with the rollout of 400,000 Wanjie vehicles. This shows Sirius’s decisiveness and determination to grow stronger. Pressure shifted to Changan Automobile. Changan promised results by August 31. Sirius spent 2.5 billion yuan to repurchase the Wanjie trademark from Huawei. On July 28, Sirius issued a notice about its investment in Yingwang, signaling progress. Observers noted that Huawei’s car BU improved significantly entering 2024. The situation changed since Changan and Huawei began negotiations. For Sirius and Changan, the focus is on how much equity they will gain in Yingwang and the costs involved. Changan’s potential to acquire up to 40% of shares remains a hot topic. Many media outlets noted that Huawei’s car BU has greatly increased its revenue capacity since its independent launch six months ago. Reports suggest the BU generated 10 billion yuan in the first half of the year, 1.5 times the revenue of the previous two years combined. While unconfirmed, Wanjie’s strong sales in the first half of 2024 are widely acknowledged. According to Sirius’s June sales report, the group sold 49,169 vehicles in June, a 162.18% year-over-year increase. From January to June, total sales reached 235,800 vehicles, up 155.85%. In June, Sirius sold 41,457 vehicles, a staggering 631.42% increase year-over-year. From January to June, total sales reached 182,602 vehicles, marking a 608.83% increase. Cyrus expects revenue of 63.9 billion to 66.0 billion yuan in the first half of 2024. This marks a year-on-year increase of 479% to 498%. The growth shows Cyrus’s rapid expansion. In previous years, Cyrus’s annual revenue peaked at over 30 billion yuan. This revenue occurred only in 2022 and 2023, after partnering with Huawei. Now, Cyrus reports over 60 billion yuan in half a year. This is impressive. For the first half of 2024, Cyrus expects a net profit of 1.39 billion to 1.70 billion yuan, turning a profit compared to the same period in 2023. Since 2019, Cyrus has reported losses in recent years. From 2020 onwards, Cyrus has faced annual losses. The profit turnaround in the first half of 2024 highlights the contribution of the Wanjie model. In the first quarter of 2024, Cyrus turned a profit, earning just over 200 million yuan. In the second quarter, large-scale deliveries of the Wanjie M9 significantly boosted profits. Huawei’s revenue from the Wanjie model is substantial. While the exact share is unknown, Cyrus’s revenue and profit suggest that Huawei’s vehicle business unit benefits greatly. Moreover, more automakers are collaborating with Huawei, whether through smart selection or other partnerships. Therefore, the revenue of Huawei’s vehicle business unit has undoubtedly surged. In comparison, the 2023 Global Parts Suppliers Top 100 list by Automotive News ranks Desay SV at 89. Last year, Desay’s annual revenue exceeded 20 billion yuan for the first time, reaching 21.9 billion yuan. Thus, Huawei’s vehicle business unit, established only five years ago, entering the global supplier top 100 this year is a certainty.
After the launch of the new Ultra model, M7’s monthly deliveries quickly surpassed 20,000 units. The demand remains strong. M9 has maintained its position as the sales champion in the 500,000-unit category for six months. It has received over 110,000 orders and holds a solid backlog. New models like the Enjoy S9 and Smart R7 are confirmed for release. Rumors suggest that M8 will also launch within the year. As a result, the car BU’s revenue in the second half of 2024 will likely exceed the first half. Both revenue and profit for 2024 are set to reach new highs. There is no doubt that a self-sustaining car BU with soaring revenue will have a different valuation than when it started the spin-off in 2023. Seres has benefited from its relationship with Huawei and is willing to invest heavily. But what about Changan Automobile? The question is simple: How much is Changan willing to pay? And how much equity will it receive? The competition is intense. On July 29, boosted by the investment news, Seres’s stock price rose by 5.32%. This market reaction gives Seres confidence and may strengthen Changan’s resolve.