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Huawei approaches Audi, Mercedes about investing in its smart car firm

People check a display near a Huawei logo during a media day for the Auto Shanghai show in Shanghai, China April 19, 2021. REUTERS/Aly Song/File Photo
People check a display near a Huawei logo during a media day for the Auto Shanghai show in Shanghai, China April 19, 2021. REUTERS/Aly Song/File Photo

The Chinese company Huawei Technologies has reportedly spoken with Mercedes-Benz (MBGn.DE) and Audi, which Volkswagen owns, about the possibility of purchasing modest holdings in the company’s intelligent vehicle software and components business. This information comes from three individuals who are familiar with the negotiations.

According to them, the move is being made to expand its connections outside Chinese firms. According to one of the people who was briefed on the topic, Huawei (HWT.UL), which has been the target of sanctions imposed by the United States since 2019, also expects that the presence of international investors would assist in protecting the company from the possibility of new geopolitical tensions coming up.

Last month, the Chinese technology giant said it would be spinning off its Intelligent Automotive Solution (IAS) business unit, which has been operating for four years and aims to become the most prominent provider of software and components for intelligent electric cars (EVs).

According to sources who have previously stated, the unit is expected to be valued somewhere between $28 billion and $35 billion.

According to two sources, Huawei and Mercedes have been in exploratory discussions over the past few weeks. According to one source, the German automobile manufacturer was offered a three- to five-percent share, with the price up to negotiation.

However, Mercedes was not very interested in the idea since the company prefers to maintain control over its software to maintain its premium brand positioning rather than outsourcing it to a third-party provider, according to the source.

The extent of Audi’s interest in Huawei’s offer could not be ascertained at the present moment. On the other hand, according to two individuals, Audi and Huawei are aiming to collaborate to develop autonomous driving technologies for Audi. Beginning in the year 2025, these technologies will be used in automobiles designed for the Chinese market and manufactured by the joint venture between the German manufacturer and FAW Group.

The sources did not wish to be identified since the conversations were considered secret. In response to what it referred to as conjecture, Mercedes declined to comment. Audi declined to comment on the matter. A request for a response was sent to Huawei, but they did not answer.

As a result of Huawei’s approach, global automakers in China are increasingly looking to form partnerships with Chinese firms. These Chinese companies have made significant progress in the development of high-end features for consumers in China who are knowledgeable about technology.

Volkswagen is collaborating with Xpeng (9868. HK), an electric vehicle manufacturer, and Horizon Robotics, a company that designs chips for autonomous driving, to produce intelligent and connected electric vehicles tailored to the Chinese market.

A partnership between Audi and SAIC Motor (600104. SS) has also been formed to develop electric vehicles (EVs) in an area of the Chinese market where Audi did not previously have a presence.

While speaking at a seminar in April, Richard Yu, who is in charge of Huawei’s smart car business, stated that it had been challenging for firms in Europe, the United States, and Japan to select Huawei as their primary supplier of intelligent solutions owing to the sanctions imposed by the United States.

When asked about the situation, Yu said, “Therefore, it is a huge challenge because we have invested tremendously.” While many of China’s most prominent electric vehicle (EV) manufacturers, such as Nio (9866. HK) and BYD (002594. SZ), rely on their software, Huawei has forged collaborations with smaller electric car manufacturers, such as Series Group (601127. SS), as well as some significantly more prominent and more established automobile manufacturers, such as Chongqing Changan Automobile (000625. SZ).

After Huawei’s smart car business is spun out, Changan Auto has stated that it will be an investor in the company and hold as much as forty percent of the company together with other relevant parties.

In November, Yu stated that Huawei had sent invitations to investments in the smart car company to Seres, Chery Automobile (CHERY.UL), Jianghuai Automobile Group (600418. SS), and BAIC Motor (1958. HK). Additionally, Yu hoped that FAW Group (SASACJ.UL) may join the company.

Based on the information provided by sources, Dongfeng Motor (0489. HK) is another possible investor in the company.

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