Huawei Technologies (HWT.UL) new smart car software and components firm is set for a valuation of up to 250 billion yuan ($34.67 billion) after it sells stakes to investors, including Changan Auto, three people with knowledge of the matter said. The Chinese company said on Sunday it would spin off its four-year-old Intelligent Automotive Solution (IAS) business unit — which aimed to become the equivalent of German automotive supplier Bosch of the intelligent electric vehicle (EV) era — into a separate entity and is considering making it public in the next two to three years. It will retain most of the new firm, which is expected to be valued at between 40% and 50% of its current size. The sources said that the precise details of the finer points of ownership distribution and valuation are still under negotiation.
The new firm will focus on research and development, production, sales, and services for intelligent automotive systems and component solutions. It will also absorb some of Huawei’s other auto-related assets. It will likely be headquartered in Chongqing, a sprawling southwestern city where Changan is based. The move will allow the companies to deepen their existing collaboration, accelerating the new firm’s comprehensive intelligent vehicle capabilities and hastening its transformation into a low-carbon mobility technology leader. It will also lessen concerns from some of the Chinese car industry’s existing players that Huawei could someday compete with them as a rival carmaker, GF Securities analyst Liu Xuefeng said.
Changan has already deeply collaborated with Huawei’s IAS team in developing its Avita EV brand, which is equipped with the Chinese tech giant’s full suite of intelligent driving features. The memorandum of cooperation between the two will allow them to expand their partnership and accelerate the commercialization of the new IAS solutions, Changan said in a statement.
The agreement was signed at the Shanghai Motor Show. Changan and Huawei will jointly promote the new IAS solutions, including its Harmony operating system and Smart Cockpit, across China’s booming EV market. The companies also plan to collaborate on future projects, such as developing autonomous vehicles and connected services.
Investors reacted with optimism after the announcement. EV makers whose products use Huawei’s technology saw their shares rise in Hong Kong and mainland China trading. Among them, Changan’s EV brand Avita and suppliers like Foryou Corp. and Chongqing Sulian Plastic Co. surged more than 5% each in Hong Kong. Huawei shares rose about 2% in Hong Kong trading and dropped more than 4% in Shenzhen.
Amid mounting international pressure over security issues, Huawei has been seeking to diversify into areas like 5G network equipment and EVs. Its primary telecoms equipment business has been hit by US-China trade tensions and penalties imposed over national security concerns. That has led to the company being barred from selling its equipment in some Western countries. The diversified car division may give the company a much-needed boost as it seeks to recover.
