Huawei has finally created a massive wave in the automobile industry.
On October 13th, Yu Chengdong, a standing director of Huawei, CEO of Terminal BG, and Chairman of the Intelligent Automotive Solutions BU, appeared at the Cyrus car factory and announced that orders for the new M7 model have exceeded 60,000 units. Receiving 60,000 large orders in 31 days is a feat rarely seen even before the rapid growth of the car market in 2019, especially in this year’s market downturn and brutal price wars.
First Financial reporters also learned that this victory was unexpected for most. Whether it’s Huawei’s front-line store personnel, Huawei’s car sales management department, Cyrus, suppliers, or numerous industry insiders, most didn’t anticipate such massive orders for the new M7.
A major reason for this skepticism was that the old M7 wasn’t a successful model. Based on auto industry experience, a redesigned model usually doesn’t experience such an extraordinary performance. Additionally, Huawei had not previously achieved significant success in car sales. Their first collaboration with Cyrus, the M5 model, was short-lived, with monthly sales falling to around 2,000 units after an initial surge.
This success of the new M7, while attracting a lot of attention, has also sparked heated debates. Tech industry professionals began to revisit Huawei’s “three-generation strategy” – the first generation to understand the industry rules; the second generation to reach an average level, becoming mainstream; the third generation to produce premium products, surpassing competitors. Traditional automakers generally believe that the M7’s technological foundation, Cyrus’s industrial base, and technological ceiling are not enough to support its long-term competitive advantage. As a newcomer to the automotive industry, Huawei still has a lot to learn about distribution and supply chain management.
Who’s right and who’s wrong? Zhu Jun, who moved from a traditional automaker to a tech company, told reporters, “Regardless of how the new M7’s orders finally convert, this battle has fully demonstrated that Huawei will be a formidable opponent.”
Looking into over-delay delivery compensation plans
On September 12th, Huawei held the launch event for the new M7, lasting over 70 minutes. It was Huawei’s first standalone launch for a car under its AITO sub-brand.
Compared to the old version, the new M7 introduced a 5-seater variant, priced between 249,800 and 329,800 yuan, 40,000 yuan cheaper than the pre-renovated M7. Additionally, the new M7 also offered a temporary discount of 6,000 yuan, further reducing the starting price to 243,800 yuan, which is 46,000 yuan cheaper than the old model. In some cities, there are local license subsidies and other policies.
With the price reduction, the new M7 further enhanced its intelligent driving capabilities and comfort features. According to the manufacturer’s data, some versions of the new M7 added a LIDAR sensor and equipped Huawei’s ADS 2.0 system, enabling intelligent assisted driving capabilities in scenarios like highways, urban areas, and parking.
After the launch event, traffic in Huawei’s stores surged, but initial orders didn’t explode. By the first weekend, the new M7’s traffic and orders hit a peak, with daily big order (high-intent orders backed by deposits) exceeding 2,000 units. By September 30th, daily orders fluctuated between 2,000 and 2,600 units, with a total of over 30,000 big orders received.
Orders for the new M7 further skyrocketed during the National Day Golden Week. First Financial reporters visited multiple Huawei stores in Shanghai during the National Day holiday and saw an endless stream of customers coming to view the new M7. Many brought their whole families, and test drives usually required waiting in line. The stores typically operate from 10 am to 10 pm, so sales personnel are divided into morning and evening shifts. However, due to the overwhelming number of customers, almost all salespeople worked overtime during the holiday.
According to data released by AITO, by October 6th, the new M7 had received over 50,000 big orders. This means that between September 31st and October 6th, the new M7 received an additional 20,000 big orders. Of which, 3,500 were added on October 5th and 7,000 on October 6th.
By October 13th, Yu Chengdong announced during a live event at the Cyrus factory that the new M7 had received over 60,000 big orders. This suggests that after the National Day holiday, the pace of new M7 orders slowed somewhat but still maintained an average of 1,600 to 1,700 units per day.
According to data from “Carfans”, as of October 7th, store visits for the new M7 had increased fivefold since its launch, with more than 80 new low orders added. Sun Shaojun, founder of “Carfans”, told reporters that about 35% of stores haven’t been authorized to sell the new M7, and shortages of test-drive vehicles in third and fourth-tier cities have affected overall store deals for the new M7. However, as more stores get authorized and more test-drive and display vehicles become available, the order volume for the new M7 has further potential to grow.
“The current orders are not the upper limit of the new M7’s sales,” said Sun Shaojun.
Reporters learned that the Cyrus factory designed for producing the M7 has an annual production capacity of 150,000 units. The original production plan for the new M7 was around 10,000 units/month. Due to the unexpectedly high order volume, Cyrus has already held a mobilization meeting to encourage the team to increase production.
On October 7th, a screenshot of an email from Cyrus to its suppliers circulated online, showing that the first phase of daily production capacity for the new M7 is 450 units. The second Cyrus factory will begin production at 750 units per day starting November 1st, and they requested that the entire supply chain raise its capacity to the same level by October 30th. Cyrus confirmed the authenticity of this email screenshot to reporters.
A source from Cyrus’s production and manufacturing department told reporters that the factory is currently running 24 hours a day, and they expect the daily production capacity for the new M7 to increase to around 600 units in October. Based on the number of orders, production capacity, the time required for production to ramp up, and supply chain logistics, it will take Cyrus at least three months to deliver the 60,000 big orders.
Sales staff in Huawei stores told reporters that customers who placed orders during the National Day holiday will have to wait at least two and a half months to get their cars. To avoid losing orders, Huawei is considering compensation policies for deliveries that exceed the promised timeline.
The overwhelming orders for the new M7 were like a long-awaited rain for Huawei’s car sales front-line staff. Reporters found out that Huawei set the sales commission at 800 yuan/unit for order bookings and 800 yuan/unit for deliveries. With the additional multiplier for exceeding targets, based on current order volume, sales staff are estimated to earn a commission of 2,000 yuan per car.
Recently, a netizen posted their Huawei ID badge and September pay slip on a social media platform, stating, “AITO M7 is selling like crazy. Now I’m earning a post-tax salary of 60,000+ yuan.” The pay slip showed 72 “net big orders” with a commission of 50,400 yuan; 40 deliveries with a commission of 16,000 yuan, totaling 66,400 yuan in sales commissions.
Resurgence from the Brink
Regarding the exceptional “report card” that AITO’s new M7 handed out, Yu Chengdong commented on social media, “Resurrected from the brink, it was really not easy.”
Reporters found that before the launch, Huawei, Seres (赛力斯), distributors, and suppliers did not anticipate the M7 would be such a “hot seller.” Due to lack of preparation, some stores have yet to receive the display cars. The reasons are simple: the old M7 was considered a failed product, and the first two cars produced by the Huawei and Seres collaboration were not considered successes.
The first car from the Huawei and Seres collaboration was the M5, which once had excellent sales performance, selling over 10,000 units in August last year. However, after August, M5 sales stagnated, fluctuating between 4,000 and 6,000 units per month.
Early this year, after Tesla drastically reduced its prices, AITO was the first brand to follow suit, but the results were disappointing. From January, M5 sales slumped to 2,732 units. Until September of this year, M5 sales hovered between 1,000 and 2,000 units, with a few months exceeding 3,000 and 4,000 units.
M7 is the second car model introduced by the Huawei and Seres collaboration, and it followed the trajectory of M5. In the second month after its launch, the monthly sales of M7 surpassed 5,000 units. But from the 6th month after its launch, M7 monthly sales consistently fell below 2,000 units. From April to August this year, M7 monthly sales lingered below 1,000 units.
The failure of the old M7 was attributed to both its design and technological framework. Huawei store staff informed reporters that the old M7 initially garnered significant traffic and attention. However, due to product features like its design, short wheelbase, and cramped space in the six-seat version, customers ended up choosing the Li Auto L8 instead.
Li Auto car store staff even said that the old M7’s introduction of a six-seater version on a 2,820mm wheelbase was like using its shortcoming to compete with the strengths of the Li Auto L8. “Although Huawei brought a lot of traffic and attention to the AITO M7, the product couldn’t retain it.”
Traditional automakers believe that the technological framework of the old M7 made it hard for it to succeed. A product manager from an automaker told reporters that Seres primarily produced and sold mini-vans and cheap passenger cars in the gasoline car market before. “They have basic technical specifications, but they are neither advanced nor new. It’s hard to achieve a 200,000 RMB car with such limitations.”
However, all this changed after the launch of the new M7. First, 500 million RMB was invested for various improvements. Second, the new M7 mainly promotes the five-seat version, avoiding the shortcomings of the six-seat version. Third, the new M7’s launch perfectly leveraged the traffic from MATE60 PRO. According to public information, the shipment targets for MATE60 PRO and MATE60 PRO+ have been revised up to 20 million units, with attention reaching 50 million to 60 million people, far exceeding traditional automakers. Fourth, the addition of Huawei’s Hongmeng system and ADS 2.0 smart driving capabilities make the M7’s cockpit and smart driving domains stand out. Fifth, they introduced the concept of “omnidirectional anti-collision,” shifting the perception of smart driving from a trendy tech feature to a crucial safety feature, breaking into new customer groups.
Reporters learned from Huawei insiders that over 60% of the current orders for the new M7 are concentrated on the five-seater and six-seater MAX smart drive versions, with list prices of 309,800 RMB and 329,800 RMB, respectively. This matches the order structure that reporters learned from the stores, meaning that the majority of users did not choose the entry-level model priced at 249,800 RMB. Instead, they prefer a car with advanced smart driving capabilities.
A head of the product marketing department of a car company told reporters that if the product competitiveness of the old M7 was 65 points, the new M7, combined with Huawei’s brand and marketing capabilities, could be given 85 points.
Strategically, M7 has stopped competing with Li Auto L8 and targets Li Auto’s other main model, L7, with a lower price. Sun Shaojun said that based on the order situation during the National Day period, the new orders for Li Auto L7 were not affected. However, the proportion of Li Auto L7 customers comparing it with AITO M7 has continuously increased. Previously, customers were moving towards Li Auto, but now stores find that Li Auto customers are starting to return to AITO M7.
Because Huawei lacks experience in the automotive industry and Seres has no experience in large-scale production and delivery in high-value markets, the industry generally believes that the new M7’s next challenges are order conversion, delivery, and the consistency of product quality in large-scale production.
A new car needs to go through five stages from order to delivery: model configuration confirmation, production scheduling, logistics shipping, PDI inspection, and car delivery. Although the 5,000 RMB deposit is non-refundable, competitors might offer subsidies for the deposit loss to poach customers. If the delivery time is too long, some orders might be lost. Huawei and Seres’ order and delivery separation model results in low delivery efficiency, which Huawei may need to address in the future.
Moreover, the new M7 orders have already far exceeded capacity. Seres has set a plan to increase production capacity by nearly 70% in the short term. Whether the company can effectively mobilize and manage the supply chain to ensure large-scale delivery and product quality consistency remains to be seen.
Is There Longevity?
Traditional automakers’ product managers typically believe that the technical superiority in aspects like the car body structure, chassis, and powertrain, along with long-term user experience and genuine word-of-mouth, are the foundations for a product to maintain its competitive edge in the long run. Seres’s capabilities in the traditional car hardware segment are not outstanding. Hence, some traditional auto industry professionals are reserved about the new M7’s long-term sales potential.
Executives from multiple automakers told reporters that while internally analyzing why the new M7 was such a hot seller, the profound realization was, “Huawei’s brand and traffic capabilities, technological reserves, learning capacity, and execution are too formidable.”
“The automotive industry typically has a significant rule: if a car can’t succeed within a year of its launch, it’s essentially discarded. It rarely makes a comeback. But the new M7 broke this rule. The primary reason behind this is Huawei,” Zhu Jun told reporters.
He said traditional automakers usually have many models. If one fails, they promote another. But what makes Huawei remarkable is that they didn’t give up on the M7. They continued to invest in a previously underperforming product, leveraging their massive technological reserves to create new product advantages and ensure a rapid strategic shift.
For example, younger users like to try new things and experience new technologies, but they are also very picky about product design and interior style. Older family customers don’t have a high perception of smart driving and have conservative aesthetics. AITO’s standout feature is Huawei’s high-end smart driving, but its exterior and interior styles tend to appeal to an older demographic, which is one reason its initial sales performance wasn’t great.
The current customer group for the new M7 is primarily between 30 and 50 years old, mainly families. The main selling model is also the smart driving version, which seems counterintuitive to many in the automotive industry. A significant reason behind this is that in the past year, Huawei has been aggressively promoting its high-end smart driving capabilities. Innovatively, they’ve combined smart driving with proactive safety, conveying the concept that advanced smart driving makes driving safer, changing the simplistic understanding that smart driving is just about hands-free operation. The new M7’s strong association with smart driving directly targets the Li Auto L7’s weak point in smart driving capabilities, winning over some of the Li Auto L7 customers.
During store visits, reporters found that salespeople at Huawei stores would proactively introduce Huawei’s ADS smart driving capabilities to customers. They would highlight scenarios where, if a child or pedestrian suddenly dashes in front of the car from a blind spot, the AEB automatic braking would intervene to stop the car. “Human eyes can’t see this scenario, but the radar can,” salespeople would explain.
Changes in the sales channel also demonstrate Huawei’s rapid learning and iterative capabilities. Huawei’s collaboration with Seres to develop cars had Huawei deeply involved in product definition and research & development and took charge of sales, while Seres was responsible for R&D, production, delivery, and after-sales. But in practice, the delivery centers recruited by Seres also started selling cars. Combined with Huawei’s inexperience in selling cars in its phone stores, this led to multi-headed management, lack of focused objectives, a messy situation for AITO’s retail outlets, lack of fighting strength, price undercutting between stores, and significant internal competition. It was so chaotic that discounts began on the very first day of the new car’s launch.
Additionally, Huawei’s phone stores initially lacked experience in selling cars. The people they hired came from various backgrounds, with varying abilities. Coupled with the poor sales performance, which demoralized the team, their combat capability in the retail channel was subpar.
However, Huawei quickly took measures, including revoking the authorization of stores involved in irregularities and assigning store managers (OAs) to stores. Today, although AITO’s car stores still operate through Huawei’s agents, quasi-direct management, direct management, and Seres’s delivery centers, the staff’s caliber has significantly improved after several rounds of training and restructuring. One store employee told reporters that compared to the traditional car brands they had served before, Huawei places more emphasis on training sales staff and is very meticulous about process management. However, they also feel that some OAs sent by Huawei don’t have experience in the auto industry and don’t seem to have a direct positive impact on frontline sales.
Some store personnel believe that the OAs sent by Huawei’s HuiTong to assist in store management find it challenging to achieve end-to-end implementation and execution. Dealers don’t recognize or accept their management, leading to internal conflicts.
In July of this year, Yu Chengdong held internal discussions with distributors and suppliers. When asked about AITO’s sales performance, Yu Chengdong said that over the past year, Huawei has ventured into a completely new field and achieved some results. At the same time, due to a lack of experience and maturity, they took some detours.
“In the face of external shocks, we will make rapid improvements. This year, we will optimize various areas, including retail, service, and delivery. We will also improve mechanisms, increase store inspections, and enhance overall service capabilities to give users a better car buying and using experience,” Yu Chengdong stated.
Recently, details from Li Auto’s autumn strategic meeting were revealed, with one of the key points being to avoid competing directly with Huawei. “Why must Li Auto avoid Huawei? Because Huawei’s close combat capability is too strong. Everyone is afraid of competing with Huawei because it means a contest of resources, but no one can outcompete them,” an insider told reporters.
A person close to Huawei’s Car BU shared a detail with reporters: the new M7 is equipped with HUAWEI DATS 2.0, a dynamic adaptive torque system, and the front and rear axles have torque vectoring capabilities. Huawei first made a DEMO through Austria’s AVL Company to understand the working principle of torque vectoring. Then, Huawei internally set up several teams to tackle this technology. Those who succeeded continued, and those who failed were dismissed. This individual said that under such a mechanism and culture, Huawei’s decision-makers never worry about not being able to execute their decisions. It’s the most terrifying aspect of the company. “A group of people with strong learning capabilities charging forward, like a bulldozer, every objective must be achieved.”
Whether the new M7 can achieve long-term success, and whether AITO cars can achieve long-term success, remains an open debate in the industry.
Apart from factors related to the car’s technological architecture, the partnership between Huawei and Seres is also viewed skeptically for its longevity. Huawei has repeatedly explained its logic of “helping carmakers produce and sell good cars” — to realize the large-scale production of Huawei components. However, from the perspective of car manufacturers, they see Huawei as a potential and robust competitor.
A former Huawei Car BU employee told reporters that although Huawei deeply participates in Seres product R&D, Huawei personnel cannot replace Seres’s technicians for execution. Seres internally also has diverse opinions. So, from an actual execution standpoint, Huawei’s deep involvement has its limits. For instance, Huawei doesn’t completely control everything from product definition to R&D, which should be the starting point for a car’s success.
Moreover, even a weak company like Seres desires independent growth. In March this year, Seres launched a new brand, “Blue Electric,” and its first car, E5. E5 is a range-extending hybrid SUV, smaller than M5 and M7, and has many design similarities to the M7, with a price between 130,000 RMB and 150,000 RMB. Huawei store salespeople are concerned that Blue Electric E5 might weaken M7’s reputation and brand premium.
Reporters also learned that there are some frictions in the collaboration between Huawei and Chery. However, Zhu Jun believes that as long as Huawei can strengthen its automotive business, partners who are “wavering” will voluntarily return to Huawei. “If the current somewhat awkward cooperation model is seen as a form of adversity, and if Huawei manages to truly emerge from this adversity, it will be unstoppable once the situation turns favorable.”