Huawei Seeks Investment from Audi and Mercedes for Its Smart Car Firm

KEY HIGHLIGHTS
  • Huawei Seeks Investors: Huawei has approached Mercedes Benz and Audi, exploring their interest in acquiring small stakes in its smart car software and components firm.
  • Global Expansion Strategy: Huawei aims to expand partnerships beyond Chinese brands, considering foreign investments to safeguard its business amid geopolitical tensions, particularly U.S. sanctions.
  • IAS Business Unit Spin-off: Huawei plans to spin off its Intelligent Automotive Solution (IAS) business unit, valued between $28 billion and $35 billion, aspiring to dominate the supply of software and components for smart electric vehicles.
  • Preliminary Talks with Mercedes: Huawei initiated talks with Mercedes for a 3-5% stake, but the German automaker showed limited interest, preferring to retain control of its software for brand positioning.
  • Potential Audi Partnership: Huawei and Audi are reportedly planning a partnership to develop autonomous driving technologies for Audi’s vehicles in the Chinese market from 2025, with a focus on Huawei’s expertise.
  • Challenges Amid U.S. Sanctions: Huawei faces challenges in becoming a primary supplier for European, U.S., and Japanese companies due to U.S. sanctions, hindering its efforts despite significant investments in smart car solutions.
Huawei Seeks Investment from Audi and Mercedes for Its Smart Car Firm

In a recent development, Huawei Technologies of China has reportedly approached Mercedes Benz and Volkswagen’s Audi to gauge their interest in acquiring minority stakes in its Intelligent Automotive Solution (IAS) business unit, reported by Reuters. The IAS division, established four years ago, aims to position itself as a leading provider of software and components for smart electric vehicles (EVs). Three individuals familiar with the matter revealed that Huawei is seeking to broaden its collaborations beyond domestic brands and hopes that involvement from foreign investors will enhance the company’s resilience against potential geopolitical tensions, especially in light of U.S. sanctions imposed since 2019.

Huawei’s IAS Spin-Off: Mercedes Hesitant, Audi Collaboration Uncertain

Last month, Huawei announced its intention to spin off the IAS business unit, estimated to be valued between $28 billion and $35 billion, as it strives to expand its influence in the burgeoning smart EV market. Preliminary discussions between Huawei and Mercedes reportedly took place recently, with the Chinese tech giant proposing a 3% to 5% stake in the IAS unit, subject to negotiation on valuation. However, Mercedes is said to have shown limited interest, preferring to retain control over its software to maintain its premium brand positioning rather than outsourcing it to a supplier.

The level of interest from Audi regarding Huawei’s offer remains uncertain, but sources suggest a potential collaboration between Audi and Huawei to develop autonomous driving technologies. These technologies are expected to be integrated into vehicles targeting the Chinese market from 2025, manufactured through Audi’s partnership with FAW Group.

Sources have chosen to remain anonymous due to the confidential nature of the discussions. When approached for comments, Mercedes declined, referring to the information as speculation, while Audi also opted not to comment. Huawei did not respond to requests for comment.

This move by Huawei comes amidst a trend where global automakers operating in China are increasingly seeking partnerships with local companies, capitalizing on their advancements in high-end features for tech-savvy Chinese consumers. Volkswagen, for instance, has collaborated with EV automaker Xpeng and Horizon Robotics to develop China-specific intelligent and connected electric cars. Audi has also joined forces with SAIC Motor to venture into EVs for a segment in the Chinese market where it previously had no presence.

Richard Yu, overseeing Huawei’s smart car business, acknowledged the challenges of being chosen as the main supplier for European, U.S., and Japanese companies in the intelligent solutions space due to U.S. sanctions. Despite these challenges, Huawei has formed partnerships not only with smaller electric car manufacturers like Seres Group but also with larger, traditional automakers such as Chongqing Changan Automobile. Changan Auto has committed to being a significant investor in Huawei’s smart car business, potentially holding up to 40% along with other relevant parties.

In November, Yu disclosed that Huawei had invited investments from Seres, Chery Automobile, Jianghuai Automobile Group, and BAIC Motor, expressing the hope that FAW Group could also join as an investor. Dongfeng Motor has also been identified as a potential investor in the venture, according to sources familiar with the matter.

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Source(s): Times Of India

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