Huawei's smart car firm valued at around $35bn
What's the story
Huawei is spinning off its Intelligent Automotive Solution (IAS) unit into a new company, which could be valued at up to 250 billion yuan or $34.67 billion (roughly Rs. 3 lakh crore), reported Reuters.
The new firm will focus on smart car software and components.
Chongqing Changan Automobile and some others could own as much as 40% of this fresh entity. Big shots like FAW Group and Dongfeng Motor Group are also eyeing about 5% each.
Details
Huawei to remain largest shareholder for the next few years
Huawei is expected to remain the largest shareholder, holding 40% to 50% of the new firm for at least the next two to three years.
However, the details of the deal, including ownership split and valuation, have not been finalized and are subject to change.
The transaction will also require regulatory approval before moving forward.
At a valuation of around $35 billion, the new entity will surpass the likes of Hyundai ($33.75 billion) and Tata Motors ($31.3 billion), per CompaniesMarketCap.
What Next?
Reasons behind the spin-off
This spin-off is a rare move for Huawei, which has been owned by founder Ren Zhengfei and nearly 1,00,000 shareholding employees since 1987.
One reason for the sale is Huawei's struggle to grow its smart car business and the need to recoup capital for research and development (R&D) spending.
The IAS unit has been the only money-losing unit among Huawei's main six, generating just one billion yuan in revenue in the first half of 2023.
Insights
This move will fortify Huawei's footprint in smart car tech
The new company will focus on R&D, production, sales, and service of intelligent automotive systems and component solutions.
It will also absorb Huawei's other auto-related assets and resources outside the IAS business unit.
This move could potentially help Huawei expand its presence in the smart car industry and recover from its recent financial struggles.