Huawei Smart-Car Deal Sparks Stock Surge

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Huawei Technologies Co’s latest joint venture drove up the stocks in the automobile industry, displaying the technology giant’s ability to attract investors despite China’s uncertain and fluctuating stock market.

Huawei Technologies signed an agreement and established a joint venture with Changan Automobile as the communications technology and mobile phone company expands its network in the smart and interconnected automobile sector.

The two companies signed a memorandum of understanding (MoU) to create a new company that would absorb Huawei’s current smart car system business. Meanwhile, Changan would be in charge of supplying core automotive technology for an estimated 40% share.

Richard Yu Chengdong, chairman of Huawei’s intelligent automotive business, said, “We have deepened our cooperation with Changan Automobile and will also work with more strategic partner car companies to continuously explore new, open, and win-win business models.”

Per Changan Automobile’s statement, the joint venture between the two giants is expected to generate intelligent automotive solutions, such as smart cockpits, digital platforms, augmented reality heads-up displays, and cloud services. In contrast, Huawei would no longer participate in these categories after migrating its technology and staff to the new department.

Huawei’s stocks have experienced rate victories in Chinese equities this year as investors increased their shares of companies that produced the company’s latest market-hit smartphone and electric vehicle products. Furthermore, Huawei has demonstrated China’s self-reliance amidst the trade tensions with the West.

Changan Automobiles, which already signed a deal with Huawei for Avatr brand luxury EVs, emerged as one of the leading performers on the CSI 300 this year. The agreement between Huawei Technologies and Changan Automobile boosted the latter’s daily limit by 10% in Shenzhen on Monday. Suppliers to both companies also increased, despite the concerns regarding China’s economic status lowering the benchmark CSI 300 index by 1.3%.

In a statement, Huawei said the new company would manage the “research and development (R&D), production and sales of smart vehicle systems and components.” With other firms, Changan Auto will own 40% of the newly established company by Huawei, which will design and produce intelligent automotive systems and parts. Changan Auto also said the pact would accelerate its shift towards sustainability by becoming a low-carbon, smart-transportation technology enterprise.

Steven Leung, executive director at UOB Kay Hian Hong Kong Ltd said the agreement will bring “new competition to the EV sector, especially high-end EVs.”

China’s automobile sector is undergoing constant and rapid evolution. As consumers evolve, especially affluent young buyers, so does the industry. Given the increasing demand for innovative technology, the country’s automobile sector is producing smart, autonomous, and connected products, particularly in new energy vehicles that are gaining market share.

The joint venture between Huawei and Changan Automobile also came as the local electric vehicle industry experienced rapid change amid rising competition between Shanghai-based Tesla and various regional brands.

EV markers like Li Auto, BYD Co, and XPeng Inc fell more than 5% each in Hong Kong on Monday. In contrast, Huawei intelligent car partner Foryou Corp and Changan Auto supplier Chongqing Sulian Plastic Co witnessed an increase of over 8% each in mainland trading.

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