Car man Huawei is making waves again in building cars

Whether Huawei can stand at the top of the value chain and obtain the most profitable part will be the decisive factor in its entry into vehicle manufacturing.

Article/"Automobile Man" Zhang Heng

In recent years, Huawei has made frequent moves in the automotive industry. It is obvious that it has seen the opportunities of the times in the innovation of the "new four modernizations" of the automobile. People will think that Huawei is a company with a huge appetite, so they continue to speculate whether it will build cars and whether it will only be an upstream technology solution provider.

At the beginning of the new year, there is news on the Internet that Huawei has decided to restart its car-making project and launch a joint venture with Changan. Previously, Huawei has stated many times that it will only serve as a supplier of computing, networking and communication systems for smart cars and does not intend to build its own cars. But judging from Huawei’s recruitment situation, they are recruiting engineers for automotive safety, materials, structures, process simulation, electronic control and other positions. This naturally makes people doubtful. Does Huawei really want to build a car?

Looking at Huawei's past projects, we can draw one conclusion, which is why it can't build cars. This is the same as Apple. Huawei's main businesses are extremely profitable. Although there is no specific financial information disclosed, it is certain that its various businesses often make "50-50 profits." This also allows Huawei to attract first-class talents with very high salaries and further consolidate its technological advantages.

The biggest problem in the automobile industry is that the profit margin is not attractive enough. The comprehensive gross profit margin of automobile manufacturing is mostly around 10, and the best is 20. The number one group in the automobile industry has profit margins that are basically in single digits. Tesla, a brand at this price point, has annual sales of more than 400,000 vehicles, but it has not been able to achieve real profits to this day. Of course, there are companies in the automotive industry with high gross profit margins, such as Ferrari, but the volume is too small. With the volume and price of this ultra-luxury brand, Huawei will definitely look down on it. At the same time, this is also the main reason why Apple decided not to build a car.

But this is indeed an afterthought, and we should look back at the results. There was no profit in the mobile phone industry at the beginning. When Huawei started to engage in communications, it also used price wars to compete, so profits were inevitably not high. Today's high profits are due to technological leadership, which gives us more bargaining power.

In the early years of the mobile phone industry, except for Apple and Samsung, other mobile phone manufacturers did not make much profit. The reason why Huawei mobile phones make money today is the success of its strategy. For products with the same specifications as Xiaomi, the premium of Huawei brand can be 2,000 yuan more. On the one hand, it takes advantage of the sentiment of Made in China; on the other hand, through more than ten years of efforts, Huawei has conquered the most valuable part of the mobile phone industry - chip manufacturing. In addition, it also digs deep into mobile phone camera technology, which brings high premiums.

So, Huawei did not make money when it first entered an industry. It relied on its own efforts to eventually reach the high point of the value chain. Huawei finally achieved high profits in the fields of communications and mobile phones, but can this be replicated in the automotive industry? The answer to this question is the decisive factor in whether Huawei will eventually build a car.

From the perspective of "Autobot", it is very, very difficult, much more difficult than the communications industry and the mobile phone industry. Why? Because in the communications and mobile phone industries, before Huawei succeeded, there were at least high-profit companies. This shows that the communications and mobile phone industries are temporarily in the red ocean. As long as you get to the forefront of the industry, the winner will take all. What about the automotive industry? Tesla’s bicycle prices and profit margins are enviable, but it still cannot make a real profit. Of course, this is also related to the investment being too large.

Toyota is very profitable, selling tens of millions of vehicles around the world every year. Toyota’s gross profit margin is also very good in the industry, but compared with Huawei’s main business, it is even comparable to some other mid-to-high-end manufacturing industries. Compared with that, the attractiveness is also insufficient. As an asset-heavy industry, even if you can enter the first camp, it is much more difficult than the communications and mobile phone industries.

The most important thing is that the most valuable part of the new energy vehicle industry is the power battery, and there are already oligarchs like CATL. Huawei has no battery experience, so this business cannot be within the scope of strategic considerations. If it cannot get the most valuable piece, Huawei will most likely not do it. Even if it does not build complete vehicles, Huawei will definitely make achievements in automobile intelligence. As 5G technology is applied and popularized in cars, Huawei's advantages will become more obvious.

After entering the 5G society, will there be disruptive innovation models? How will the value chain of the automotive industry change? It's hard for anyone to say, everyone is just imagining things, and can only take one step at a time. (Text/"Autobot" Zhang Heng, some pictures are from the Internet) Copyright Statement This article is an exclusive original manuscript of "Autobot", and the copyright belongs to "Autobot".

This article comes from the author of Autohome Chejiahao and does not represent the views and positions of Autohome.