The troubled Chinese smartphone giant Huawei Technologies is rumored to be delving deeper into electric vehicle space through the acquisition of Chongqing Jinkang New Energy Automobile, the maker of the Seres brand.
The deal is now in talks stage, with Huawei seeking a controlling stake in the EV unit from Sokon, as reported by Reuters. Rumors that the blacklisted telecoms giant was talking to state-owned Changan Automobile, BAIC Group’s BluePark New Energy Technology, and others on EV production surfaced as early as in February. Reuters had called it a “major shift” for Huawei, which was forced to restructure as Washington waged it tech war. The EV market is a less chip-intensive space than smartphones, as noted Gavekal Dragonomics analyst Dan Wang.
As to Seres, back in July 2019, it struggled to launch in the United States. Reports of layoffs of about a third of its employees at the Santa Clara, Calif., office surfaced at the time, along with a halt on U.S. productions plans. A year and half later, in February 2021, Shanghai-listed Sokon sold its loss-making U.S. EV plant for $150 million to Electric Last Mile Solutions, according to Yicai Global.
The medium noted that the automaker has performed poorly both in China and the United States. Now, Sokon may have found the investor it needed to put up its Seres vehicle in the race against competitors.
For Huawei, this wasn’t its first entry into the EV space. For years, the company has been developing software systems, sensors, and 5G hardware for autos, and has partnered with several industry giants including Daimler AG (OTC: DMLRY) and General Motors Co. (NYSE: GM) on the technology. While the company has denied its EV production plans in February, Reuters cited several sources claiming the design for a car has begun and the project is expected to launch this year.
China’s EV market has boomed in 2020 and is expected to hit sales of 1.8 million units this year. The Chinese success of Tesla (Nasdaq: TSLA) drew many newcomers to the market, including local challengers like Nio (NYSE: NIO), Xpeng Inc. (NYSE: XPEV), and Li Auto (Nasdaq: LI). Recently, two other China tech giants, Baidu Inc. (Nasdaq: BIDU; HKEX: 9888) and Xiaomi (OTC: XIACY; HKEX: 01810), revealed plans to dive into EV production.
On Friday in Shanghai, shares in Sokon jumped 10% to 48.46 yuan. In New York, EV stocks were in the green, with Nio up 4%, Tesla up 3%, Xpeng and Li Auto both up 1% in early trading.