Huawei’s auto ambitions face a reckoning after Seres rift

(By Caixin journalist An Limin)

On 1 October, Chinese automaker Seres Group Co. Ltd. and Huawei Technologies Co. Ltd. announced a five-year agreement to form a dedicated team and deepen their partnership around their flagship electric vehicle (EV) brand, Aito.

Just two weeks earlier, the two appeared headed for a messy divorce.

On 15 September, Huawei and Seres abruptly overhauled their five-year partnership on the Aito brand. The carmaker moved to reclaim operational control of Aito’s product planning, design, marketing, retail sales and customer service — areas long managed by Huawei’s consumer business group. Under that separation plan, Huawei was to step back from unveiling new Aito models, the vehicles were slated to exit Huawei’s smartphone storefronts within months, and dedicated support personnel were being reassigned.

While the October pact brought both sides back together, people familiar with the matter said the agreement leaves critical questions of operational governance and retail control unresolved.

The rapid reversal highlights mounting friction within Huawei’s automotive ecosystem. While the tech giant’s brand cachet and retail network propelled Aito into a breakout hit, Huawei’s aggressive expansion with competing state-owned carmakers has diluted Aito’s exclusivity. Concurrently, steep supplier fees and slowing sales have weighed heavily on Seres’s balance sheet.

More broadly, the dispute illustrates an industrywide reckoning across China’s competitive EV market. As slowing demand and a prolonged price war compress profit margins, automakers are questioning whether leaning on a dominant tech partner justifies the financial toll and the surrender of corporate independence.

An uneasy truce

Following the mid-September rift, Seres executives moved to steady market sentiment. Vice-President Kang Bo insisted that Aito remained an anchor of Huawei’s Harmony Intelligent Mobility Alliance (HIMA), pledging that vehicle quality and service would not slip. Chairman Zhang Xinghai publicly affirmed that the automaker would continue standing “shoulder to shoulder” with the tech firm, while Seres raised dealer rebates behind the scenes to prevent network defections.

The alliance had saved Seres once before. Originally a low-profile maker of commercial micro-vans, the company faced insolvency after an early pivot to EVs stumbled. In April 2021, it partnered with Huawei, ceding sweeping control over product definition, styling, and distribution. The gamble paid off: consumers embraced Aito as the de facto “Huawei car”, fueling rapid sales growth even before early models received Huawei’s most advanced automated-driving hardware.

Maintaining that privileged position, however, required significant capital. In July 2024, Seres spent 2.5 billion RMB (US$373.5 million) to acquire Aito-related trademarks and patents held by Huawei. A month later, it committed 11.5 billion RMB for a 10% stake in Yinwang Intelligent Technologies, Huawei’s newly formed automotive software and components unit.

Internal succession dynamics also accelerated Seres’s push for autonomy. Over the past three years, Zhang has gradually transferred operating responsibilities to his 37-year-old son, Zhang Zhengping, who took charge of the core Aito manufacturing business in June 2026. People close to the firm say the younger Zhang faced pressure to establish his leadership outside Huawei’s shadow.

Local industrial policy added further pressure. Seres serves as a flagship manufacturer for Chongqing, which has designated intelligent connected vehicles as a strategic priority. City leadership monitored the dispute closely; Chongqing mayor Chen Xinwu visited Seres in late September amid the corporate manoeuvring.

The risks of going solo quickly became apparent. On 30 September, with Seres handling the rollout independently, the company opened presales for the new Aito M8. Initial orders fell noticeably short of past launches fronted by Huawei’s star marketeer and consumer business chief, Richard Yu.

By that evening, reports of a reunion were circulating online, setting the stage for the 1 October accord. Yet people familiar with the discussions say the retreat leaves lingering tensions, setting up contentious negotiations over day-to-day governance.

Dilution and margin pressures

At the core of the dispute is Aito’s diminished exclusivity. Following the brand’s initial success, Huawei expanded HIMA to include Chery Automobile Co. Ltd., BAIC BluePark, JAC Motors and SAIC Motor Corp. Ltd. Simultaneously, Yinwang struck product-definition partnerships with Guangzhou Automobile Group Co. Ltd. (GAC) and Dongfeng Motor Group Co. Ltd. to launch two additional brands, Qijing and Yijing.

As Huawei deployed its technology across multiple partners, Aito lost its unique appeal. In March 2026, when HIMA announced that its advanced 896-line lidar system would debut on flagship Aito and Maextro models, GAC’s Qijing brand revealed the identical hardware just one day later.

The proliferation of Huawei technology directly affected Seres’s earnings. After posting profits in 2024 and 2025, Seres recorded a net loss of 1.72 billion RMB in the first half of 2026. Aito’s flagship M9 faced intensified competition from premium rivals, including Nio Inc.’s ES9, Zeekr’s 9X and Li Auto Inc.’s L9.

The price of tech integration

Compounding these volume headwinds are Huawei’s commercial terms.

Under the HIMA model, carmakers bear extensive expenses, including component procurement, software licensing, development fees, and sales commissions. In the first half of 2026, Seres recorded 8.47 billion RMB in selling expenses — 14.7% of its revenue, compared with an 8.9% sales and administrative expense ratio at direct-sales rival Li Auto.

Rising raw material prices for lithium carbonate, memory chips, copper, and aluminum have further narrowed margins, making high supplier fees harder to absorb. Nio chairman William Li recently estimated that input costs have added roughly 14,000 RMB to the production cost of each vehicle.

Meanwhile, competitors are developing alternatives to avoid supplier lock-in. In September, Chongqing Changan Automobile Co. Ltd. unveiled an in-house assisted-driving system co-developed with Horizon Robotics to limit reliance on Huawei. In smart cockpits, ByteDance Ltd.’s Volcano Engine has begun deploying its Doubao AI assistant in SAIC’s Roewe vehicles alongside automated-driving software from Momenta.

As assisted-driving systems mature across the industry, executives note that Huawei’s premium pricing risks shifting from a marketing asset into a cost burden.

The autonomous horizon

To preserve its technical edge and pricing power, Huawei is looking to autonomous driving. China’s mandatory safety standard for autonomous driving is set to take effect in July 2027, alongside draft revisions to the Road Traffic Safety Law that establish a legal framework for commercial operation.

Recent models from Huawei’s partner brands feature Level 3-capable hardware architectures, intended for activation via over-the-air updates once regulations allow.

Transitioning to advanced autonomy will require substantial capital. Two automaker technology executives told Caixin that meeting the mandatory standards and achieving mass production could require hundreds of millions, or even billions, of RMB.

Yinwang chief executive Jin Yuzhi said success in the segment demands extensive research and development budgets, safety capabilities, and vertical integration. Huawei estimates that computing infrastructure alone will require 70 billion to 80 billion RMB in capital investment over the next five years.

A partner representative said Huawei aims to secure market share during the rollout of Level 3 systems before repeating the model at Level 4. A person close to Huawei added that the company is exploring robotaxi technology, with plans to eventually select an automaker partner for vehicle assembly.

Yet technological milestones may not resolve the underlying frictions in Huawei’s automotive network. While Huawei’s retail presence and brand loyalty continue to drive showroom traffic, automakers remain wary of compromising their margins and brand identity over the long haul.

“Most automakers partner with Huawei to tap its consumer base,” one person familiar with the ecosystem said. “The alliance remains the closest thing on the market to a ‘Huawei car’.”

For Seres, the new five-year agreement stabilises a partnership critical to its market standing. Whether the commercial terms can deliver sustainable profitability remains an open question.

This article was first published by Caixin Global as “In Depth: Huawei’s Auto Ambitions Face a Reckoning After Seres Rift”. Caixin Global is one of the most respected sources for macroeconomic, financial and business news and information about China.

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