Original by New Energy Outlook (ID: xinnengyuanqianzhan)

Full text: 3208 words, reading time: 11 minutes

Amidst the pressures of sales and performance, Guangzhou Automobile Group Co., Ltd. (hereinafter referred to as 'GAC Motor'), once proud and independent, has embarked on a new path by partnering with Huawei.

Recently, GAC Motor announced that the 78th meeting of its sixth board of directors approved the 'Proposal on the GH Project', sanctioning an investment in the establishment of the GH project company (tentative name, subject to registration) with a registered capital of 1.5 billion yuan.

According to the announcement, this new venture will deeply integrate the strengths of both companies, engaging in comprehensive collaboration across multiple domains, creating a new automotive brand, and launching a series of intelligent new models.

However, this 'experimental field' is not the first foray into collaboration between GAC Motor and Huawei. As early as 2017, the two entities had embarked on strategic cooperation in the realms of connected vehicles, intelligent driving, and new energy. The most recent deep cooperation was in 2021, but due to the automaker's 'soul theory', the 'pure electric large SUV' project between them ultimately fell through.

GAC Motor is acutely aware of the adage 'three strikes and you're out' and has already initiated 'joint working' with Huawei. Yet, can GAC Motor, now playing the role of a 'follower', turn the tide and regain its vitality by leveraging Huawei's robust momentum?

1. After Numerous Trials and Errors, GAC Motor Finally 'Embraces Change'

On January 14, 2025, Feng Xingya, General Manager of GAC Motor Group, announced that the collaboration between GAC Motor and Huawei's vehicle BU had entered a new phase, with both teams commencing joint efforts to launch a series of intelligent new models.

Image/Feng Xingya's post

Source/Screenshot from New Energy Outlook on the Internet

Feng Xingya also disclosed that the first cooperative project between the two entities would target the luxury intelligent new energy vehicle market at the 300,000 yuan level.

After eight years of a tumultuous journey, GAC Motor and Huawei have ushered in a new milestone in their collaboration.

Wang Kai (pseudonym), an insider in the new energy vehicle industry, noted that Huawei views this collaboration as a 'new model' and a key project within the company. This model diverges from Huawei's previous three modes of cooperation with automakers. It is neither the 'fifth realm' speculated by the outside world nor the traditional 'HI model'. Especially in terms of the balance of dominance and discourse power, it represents a new breakthrough.

In reality, it is not surprising to the outside world that GAC Motor and Huawei would adopt a new form of collaboration this time. After all, the reason for the change in their previous collaboration was also somewhat related to the issue of 'dominance'.

As one of the earliest automakers to collaborate with Huawei, GAC Motor had already established a partnership with Huawei in the field of intelligent connected electric vehicles as early as 2017.

In the following years, the market size of China's new energy vehicles grew rapidly, and policies, technologies, and market competition landscapes presented a drastically different landscape. In particular, the continuous rise of new automotive manufacturers brought an unignorable sense of pressure to traditional automaker brands.

Amidst this trend, Huawei, which 'does not manufacture cars', forged different forms of cooperation with automakers to help them stand out in the competition for new energy vehicles.

Based on this, in 2021, GAC Motor, as a traditional automaker, upgraded its collaboration with Huawei. GAC Motor unanimously approved the decision to cooperate with Huawei on the joint development of the AH8 model.

At that time, GAC Motor became the third automaker to adopt the 'HI model' and collaborate with Huawei, following BAIC and Changan.

However, two years later, what consumers anticipated was not the mass production, launch, and release of the AH8 model, but a sudden 'shift' in the collaboration between GAC Motor and Huawei.

In March 2023, GAC Motor announced that the AH8 project with Huawei would shift from 'joint development' to 'independent development'. Since then, in the AH8 project, Huawei's status changed from 'partner' to 'supplier'.

Image/GAC Motor Group AH8 Announcement

Source/Screenshot from New Energy Outlook on the Internet

Regarding this change, GAC Motor internally stated that independent development offers greater flexibility and speed advantages. GAC Motor prioritized profitability advancements and was willing to temporarily forego certain personalized advancements.

However, the outside world had varying opinions on this 'shift' in collaboration, with the most prevalent being that at that time, Huawei did not provide brand and channel empowerment in the HI model but was relatively dominant.

More importantly, Huawei's empowerment of automakers at that time did not significantly boost automakers' sales. Not only Avatar, which also belonged to the HI model, but even AITO had mediocre sales. Amidst multiple factors, GAC Motor made the decision to 'abandon' Huawei.

2. Confronting Reality, GAC Motor Has No Choice but to Reconsider

Today, the significant shift in GAC Motor's attitude is closely tied to Huawei's growing influence on one hand. On the other hand, the decline in GAC Motor's sales and performance in recent years may be the most direct factor prompting it to seek collaboration with Huawei again.

In 2024, GAC Motor's cumulative sales amounted to 2.0031 million units, a year-on-year decrease of 20.04%, achieving only 72.69% of last year's sales target. Sales of new energy vehicles were 454,700 units, a year-on-year decrease of 17.26%.

Specifically, for each brand, except for GAC Trumpchi, which experienced a slight increase of 1.99%, GAC Honda, GAC Toyota, and GAC AION all witnessed declines of over 20%. Among them, GAC Honda's sales fell by 26.52% to only 470,000 units; GAC Toyota's sales declined by 2.32% to 738,000 units.

Concurrent with the sales decline, revenue also plummeted year-on-year.

The performance report for the first three quarters of 2024 released by GAC Motor revealed that during the reporting period, GAC Motor achieved operating revenue of 74.04 billion yuan, a year-on-year decrease of 24.18%; net profit attributable to shareholders of listed companies was 120 million yuan, a year-on-year decrease of 97.34%; and after deducting non-recurring gains and losses, it incurred a loss of 1.87 billion yuan, with a year-on-year decrease of 146.49%.

Image/Partial data for the first three quarters of 2024 of GAC Motor Group

Source/Screenshot from New Energy Outlook on the Internet

Based on this, GAC Motor Group predicts that the company's net profit for 2024 will decrease by 73% to 82% year-on-year.

However, the decline in GAC Motor's sales and performance did not commence in 2024. Looking back at the eight years of trials and errors with Huawei, 'ups and downs' has become one of the most prominent labels for GAC Motor's sales.

In 2017, GAC Motor's annual sales exceeded 2 million units, with a year-on-year increase of 21.27%. Among them, the three major segments of GAC Honda, GAC Toyota, and GAC Passenger Vehicle all achieved double-digit growth.

However, from then until 2021, GAC Motor's annual sales never experienced double-digit growth year-on-year, and even witnessed year-on-year declines in 2019 and 2020.

It was not until 2022 that GAC Motor finally achieved a breakthrough with annual sales of 2.4338 million units, a year-on-year increase of 13.5%. If this performance is contextualized within the factors that led to the previous termination of collaboration with Huawei, it can also be understood as 'GAC Motor thought it could do it on its own'.

Image/GAC Motor sales in 2022

Source/Screenshot from New Energy Outlook on the Internet

But the good times did not last long. In the subsequent period, the development of China's new energy vehicles surpassed the expectations of all automakers. Especially after 2023, the relentless price war eliminated many brands.

Although GAC Motor was not eliminated, the decline in sales has been intuitively reflected in the report. As a comparison, Thalys, which chose Huawei in 2021, has become the earliest and most deeply integrated partner of Huawei's intelligent car selection business, with the richest product models.

Especially in 2024, Thalys sold a total of 426,900 new energy vehicles, a year-on-year increase of 182.84%. Along with the sales increase, Thalys' share price also soared. From April 2020 to the present, Thalys' share price has increased by 1872%, and its total market value has skyrocketed from the initial 9.834 billion to a maximum of 225.715 billion yuan.

'In 2024, Thalys' market performance and technological innovation capabilities undoubtedly put tremendous pressure on GAC Motor Group, prompting GAC Motor to reconsider collaboration with Huawei in 2024 to cope with the challenges of market competition,' Wang Kai analyzed. Thalys' all-round surge may also be one of the inducements for GAC Motor to 'bow its head' in 2024.

Youyou (pseudonym), a GAC Motor owner, has a straightforward view on GAC Motor's renewed collaboration with Huawei. 'Once upon a time, GAC Motor was the 'big shot', but now it has been left behind by numerous new automotive brands. If it doesn't 'hold onto the big shot', it will only be eliminated.'

3. Renewing Ties, Can GAC Motor Reverse Its Fortunes?

Once upon a time, GAC Motor did not cherish Huawei, and now, Huawei has not given up on GAC Motor. Therefore, this eight-year-delayed handshake is viewed by the outside world as a crucial move for GAC Motor to alter its fate.

In the current wave of intelligent automobiles, GAC Motor has already lagged behind, not only being far outpaced by new automotive manufacturers but also being overtaken by traditional automakers such as Changan and Geely on the intelligent track. GAC Motor urgently needs to catch up and reverse the situation, and collaboration with Huawei may be the key to unlocking the door to victory.

But at least from the current situation, it is positive for GAC Motor.

Since GAC Motor further disclosed the progress of its collaboration with Huawei on January 14, trading in GAC Motor's A-shares became more active that day. The closing price was 8.82 yuan per share, with a 5.25% increase, and the market value rose to 91.21 billion yuan. Relevant investors said that the collaboration between GAC Motor and Huawei is full of expectations and gives investors a glimpse of dawn for GAC Motor to regain its upward momentum.

Image/GAC Motor Group's k-line chart on January 14

Source/Screenshot from New Energy Outlook on the Internet

Investors' confidence is not unreasonable. As a traditional automaker, although GAC Motor's advantages in the era of new energy vehicles are slightly insufficient, it still has a profound foundation in the field of automobile manufacturing and has always enjoyed a good reputation for vehicle quality and comfort.

This is also the reason why Youyou chose GAC Motor.

Now, with the collaboration between GAC Motor and Huawei, and the support of Huawei's intelligent driving and other technologies, GAC Motor is poised to achieve a qualitative leap in intelligent configuration. However, in the fiercely competitive automobile industry, the market is unpredictable, and consumers' choices for new energy vehicles are no longer based on a single brand but a combination of multiple factors.

Against this backdrop, if GAC Motor aims to rely on Huawei to regain its upward momentum and achieve its set goals, it must deepen its collaboration.

As mentioned in the announcement, the new company will deeply integrate its respective advantages with Huawei and engage in comprehensive collaboration across multiple domains such as product development, marketing strategies, and ecological services through joint definition and design, to create a new automotive brand based on a new architecture and leading technology.

Wang Kai analyzed that for GAC Motor, collaborating with Huawei is not merely about increasing sales but also about reshaping the brand image, thereby enhancing the value of its autonomous brands and achieving the goals set by the previous 'Panyu Action' plan.

The 'Panyu Action' plan mentioned by Wang Kai was launched by GAC Motor at the 2024 Guangzhou Auto Show. Its objective is to make the sales of autonomous brands account for more than 60% of the group's total sales by 2027, challenging the sales target of 2 million units.

Image/Feng Xingya proposed the 'Panyu Plan' at the 2024 Guangzhou Auto Show

Source/Screenshot from New Energy Outlook on the Internet

Objectively speaking, the challenge of achieving the sales target of 2 million units for autonomous brands is a long journey for GAC Motor. It is also not easy to quickly reverse the momentum that has 'disappeared for eight years'. But GAC Motor has already embarked on the right path. Collaboration with Huawei can not only provide technical support to GAC Motor but also inject new vitality into its brand.

In the future, whether GAC Motor can stand out in the intelligent automobile market and achieve a turnaround remains to be seen by consumers.