Huawei's Car Business Set to Enter New Era as it Bets on Sustainable Growth

A new year brings fresh beginnings for China's tech giant, Huawei, as its car business is expected to enter a new stage of operation, with an anticipated scale increase. The company has hinted at its plans to continue focusing on the software and hardware industry, rather than manufacturing cars itself.

Huawei set up its car business unit in 2019, under the guidance of former Chairman Yu Chengdong. According to Dong, "if Huawei starts building cars, it would only occupy a tiny fraction of the global market share, let alone 20 percent." In light of this comment, the company has opted for developing various software components for the automotive industry instead.

There are three business models developed by Huawei for its car business:

1. Tier 1 Mode: Similar to that of a Tier 1 supplier. Based on Huawei's existing ICT experience and development capabilities, it provides auto core components such as smart driver platform, laser radar systems, etc. Some brands even choose to install these components in their models.

2. Huawei Hi (HI) Model: Based on customers' needs, joint developments are conducted by Huawei, while using products developed in collaboration with other manufacturers to meet demand. HI serves as a bridge that enables more flexibility and reduces dependence on any single supplier or technology. Companies like BMW and Toyota have previously used these technologies.

3. Huawei Car Business Model: By combining the Tier 1 model with its own technological strengths, Huawei can provide software solutions, hardware components, and services tailored to customers' precise needs within the automotive sector. Through long-term strategies for development of digital automotive parts and car systems, a sustainable competitive edge will be achieved.

The rapidly changing landscape in the automotive industry is likely to drive suppliers, including those from outside China, to focus primarily on software-related innovations that can help improve efficiency while reducing costs and increasing competitiveness. The role of battery technology has transformed dramatically as the sector seeks ways to reduce production volume and manage declining prices better. As for car sales market share, with its latest automotive industry data showing 37.1% global battery supply market share as of early this year, Ningde Time will face significant opportunities in gaining the larger market.

Boeing has actually cut costs and laid off thousands of employees due to market competition. Even in a struggling financial state, it is still willing to take drastic measures such as closing two car factories. As for industry competitors, even established companies with strong economies cannot withstand changes in the market by not responding promptly and adaptability during strategic planning.

The global supply chain has changed dramatically over the past few years due to factors like rising production costs, trade policies etc. It also becomes much more complicated to maintain competitiveness when manufacturers are forced to adopt lower price strategies as the market declines amid increasing market competition. The latest trend of a major player such as BMW struggling in the competitive market showcases what consequences can occur for traditional suppliers not focused enough on R&D of auto automotive parts.

In conclusion, although China's tech industry is constantly evolving rapidly, Huawei must strategically plan to maintain itself in this fast pace, since new global developments take precedence over their traditional strategies.