In the first half of this year, passenger vehicle sales in China reached 12.72 million units, down 6% year-on-year, according to data from the China Association of Automobile Manufacturers. Domestic sales alone totaled 9.921 million units, a decline of 21.1%. Among these, new energy vehicle domestic sales came in at just 5.09 million units, down 13.4% from a year earlier.
Under pressure in the domestic auto market, Seres, the third domestic new energy vehicle company to achieve annual profitability, has reported a huge loss, despite achieving a net profit of 754 million yuan in the first quarter of this year.
On August 19, Cybersys' mid-2026 financial report revealed a net loss of 1.717 billion yuan, compared to a net profit of 2.941 billion yuan in the first half of last year, marking a shift from profit to loss, with a non-recurring item-adjusted net loss attributable to the parent company reaching 2.379 billion yuan.
But Seres' sales have not declined. In the first half of this year, Seres delivered 178,800 vehicles, up 3.87% year-on-year, with growth driven mainly by AITO, which sold 160,800 units, up 5.6%. Breaking it down, the second quarter saw more vehicles sold than the first quarter, yet Q1 posted a profit of 754 million yuan while Q2 swung directly to a loss of 2.471 billion yuan.
Seres attributed the decline to a temporary shift in its product mix, saying its main models entered a transition period in the second quarter of 2026, preventing full realization of production capacity and sales scale effects. The company also cited phased price increases for key components such as batteries and chips, along with impairment provisions on existing assets, as combined drags on overall profitability.
Sales are rising, but net profit has plummeted, with the two curves severely diverging. Some also believe that Seres has turned from profitability to huge losses due to the "commission" paid to HarmonyOS, which is a rigid cost for Seres, including the procurement of intelligent software and hardware, sales services, and other expenses.
We can calculate this problem from another angle.
Starting from 2024, Changan Automobile's actual controller of Avita and Wenjie brands, Seres, has successively invested in Shenzhen Ingwang, which is centered on Huawei's car BU. Similarly, JAC Motors is also promoting the investment. Among the three new shareholders, there are two "Jie" brands - Seres' Wenjie and JAC's Zhongjie. Avita also has in-depth cooperation with Shenzhen Ingwang. In the financial reports of Seres, Changan Automobile, and JAC Motors, Shenzhen Ingwang appears as a related party, providing a glimpse into the fees paid by automotive brands with in-depth cooperation with Huawei.
Yu Cheng and Hongmeng Zhihang: Making Money from 'Interface' Brands
Starting in January 2025, Yinwang will take over all operations of Huawei's former automotive business unit. From that point, Yinwang assumes most of the roles across Huawei's three automotive models—components supplier, Huawei Inside, and the smart-selection vehicle model—while Harmony Intelligent Mobility Alliance primarily handles the smart-selection model.
Yiguan and Hongmeng Zhihang have distinct differences. Based on Yiguan's business model, Huawei only sells intelligent vehicle solutions to automakers, including intelligent driving, cabin, and vehicle control, but the product definition, brand, channel, and marketing of the vehicles are all managed independently by the automakers. This can be understood as Yiguan being a supplier of intelligent components and technology for automakers.
The Huawei Inside model is divided into classic and Plus variants. Under the classic Huawei Inside model, Huawei provides a full-stack intelligent vehicle solution covering communication architecture, smart cockpit, and intelligent driving, while the automaker is responsible for product definition, manufacturing, and sales. Huawei Inside Plus signifies that Huawei has already become involved in the product definition stage, with Yinwang and the automaker operating through joint offices, resource sharing, and embedded processes. The automaker retains control over branding and sales, with the "Jing" brand and Avatr serving as typical examples of this model.
From 2022 to the first half of 2025, Seres paid Huawei 5.802 billion yuan, 7.248 billion yuan, 42.03 billion yuan, and 20.035 billion yuan. Based on the delivery volume during the same period, for every vehicle sold by AITO, Seres needs to pay Huawei 77,354.39 yuan, 77,356.13 yuan, 1,085,756.3 yuan, and 136,293.85 yuan.
However, in 2022 and 2023, the main models sold by Aion were the Aion M5 and M7. It wasn't until 2024 that the Aion M9 and M8, which target the luxury market, were launched and delivered. The growth curve of the average procurement fee paid to Huawei per vehicle is roughly consistent with the price change curve of Aion's main models - the starting prices of the Aion M5 and M7 are 229,800 yuan and 279,800 yuan, respectively, but the Aion M8 and M9 are priced at 359,800 yuan and 479,800 yuan, respectively.
A research report by Wilson, a professional automotive market data research institution, shows that in 2025, the average transaction price of AITO vehicles reached 376,000 yuan, surpassing Tesla, NIO, Mercedes-Benz, and BMW to take the top spot. This also means that for every vehicle sold, AITO gives an average of 35% of its revenue to Huawei.
Procurement from Huawei as a proportion of Cirrus Logic's total external procurement has been rising year by year. In 2022, the amount Cirrus Logic procured from Huawei accounted for only 14.5% of its total external procurement, but by the first half of 2025, this proportion had risen to 33%. Huawei has consistently been Cirrus Logic's largest supplier.
A comparison of JAC Motors' financial reports over the past four years reveals that the company's Zhongji brand, which operates under JAC Motors, established a procurement relationship with Huawei starting from 2025. JAC Motors only disclosed one new supplier in its 2025 financial report, while the first model of the Zhongji brand, the Zhongji S800, was released in May 2025, with official deliveries exceeding 10,000 vehicles that year.
Jianghuai Automobile paid Huawei a total of 2.406 billion yuan in 2025, which translates to approximately 240,000 yuan for every JAC Jiayue S800 sold, or about 33.3% of the suggested retail price. In 2025, Huawei became one of Jianghuai Automobile's top five suppliers, accounting for 6.82% of the company's external procurement.
Similar situations can also be seen in Chery Automobile's prospectus. The prospectus shows that in the first quarter of 2025, Huawei first entered Chery Automobile's top five suppliers, with cooperation between the two beginning in 2023. In the first quarter of 2025, the Zhijia brand delivered a total of 33,000 new vehicles, only about 5,500 fewer than the total for all of 2024. The surge in sales drove a rapid increase in Chery's procurement costs from Huawei - in Chery's prospectus, Chery describes Huawei as "Supplier G, a company mainly engaged in the manufacture of communication system equipment, which provides auxiliary driving systems, intelligent cockpit systems, and other related automotive components and parts".
Saic and JAC Motors' procurement fees paid to Huawei go to Hongmeng Zhihang and Yingwang, respectively. The "J" brand, based on the Zhi Xuan car model, has all its intelligent solutions coming from Huawei's Car BU, the predecessor to Shenzhen Yingwang, while the new car's product definition and sales promotion are dominated by Hongmeng Zhihang. JAC Motors has not invested in Shenzhen Yingwang, and the specific procurement amount it paid to Shenzhen Yingwang in 2025 is unknown to the outside world due to a lack of disclosure obligations, but Saic provides a window into this.
Shenzhen Ingwang's profit curve is highly similar to that of Seres, with both achieving their first annual profit in 2024. In 2024, Seres' delivery volume increased by 338% year-over-year, mainly driven by the sales of the Aito M7 and Aito M9 models. Shenzhen Ingwang, established in January 2024, saw its revenue grow by nearly 460% in 2024 compared to 2023, according to industry estimates.
Huawei Senior Vice President and Haige CEO Jing Yuzhi revealed that HarmonyOS is Haige's largest client, accounting for approximately 80% of its business. Among them, Avita is the largest brand in terms of HarmonyOS sales. According to publicly available statistics, as of mid-August this year, of the 1.5 million vehicles delivered by HarmonyOS, 70% came from Avita.
Thus, the main source of revenue for Yingwang is also from Wenjie. According to the 2025 financial report of Seres, Seres paid Shenzhen Yingwang 22.325 billion yuan for procurement of goods and acceptance of services. Based on Wenjie's sales of over 420,000 units last year, the average procurement fee paid by Yingwang for each Wenjie vehicle is approximately 53,000 yuan.
In the first half of 2026, the Wenjie brand delivered 160,800 new vehicles, with sales growth of 10.2%, but the procurement fees paid by Seres to Shenzhen Inway soared from 5.604 billion yuan last year to 9.84 billion yuan, a year-on-year increase of 75.59%. This means that for every new vehicle sold by Wenjie, Seres pays Shenzhen Inway 61,193.7 yuan, higher than the 53,000 yuan for the whole of last year and 38,900 yuan for the same period last year.
However, Huawei is not the direct cause of the losses for the "interface" brand. A series of data points to a reality: the price surge of chips, storage, and lithium battery raw materials starting from mid-2025 has been passed on to the entire vehicle manufacturing industry in 2026. If automakers do not raise their prices, their gross profit margins will be eroded by the upstream price increases.
Upstream Price Hikes Spark Downstream Price War
Upstream companies are busy raising prices, while downstream companies are engaged in price wars, which has been the norm in the automotive industry over the past two years, directly resulting in the continuous deterioration of profit margins for vehicle manufacturers.
According to statistics tracked by the China Association of Automobile Manufacturers, in the first half of this year, the average sales profit margin of vehicle manufacturers was only 1.5%, a historic low, equivalent to a net profit of just 1,500 yuan for a new car priced at 100,000 yuan.
Cui Dongshu, secretary of the Passenger Car Information Sub-branch of the China Association of Automobile Manufacturers, issued a warning on August 27 that, given the downward profit margin trend of recent years, the recent decline in auto industry profits remains substantial. Combined with rising upstream prices driving up manufacturing costs for vehicle makers, earnings pressure on mainstream automakers will continue to intensify sharply. According to tracking data from the Passenger Car Association, in the first seven months of this year, the overall profit margin in the auto industry stood at just 3.6%, with total industry profits of only 216.2 billion yuan, a sharp 20% plunge year-on-year.
In June this year, Siles' Chairman Zhang Xinghai presented an account of upstream price increases at the China Automotive Chongqing Forum: the unit price of storage chips rose from 20 yuan to nearly 100 yuan, and the price of lithium carbonate increased from approximately 80,000 yuan per ton last year to around 180,000 yuan per ton this year. One increased by four times and the other by 2.5 times, and when passed on downstream, the average production cost per vehicle for Askar increased by 15,000-20,000 yuan. In the first half of this year, Siles' gross margin decreased by 5.6 percentage points compared to the same period last year.
At NIO's second-quarter earnings conference, NIO CFO Fang Liu also mentioned that the cost per vehicle in the second quarter of this year increased by 14,000 yuan compared to the end of last year, and is expected to continue to increase by 2,000-3,000 yuan in the second half of this year, meaning that by the end of this year, the raw material cost of each new car will be 16,000-17,000 yuan more than at the end of last year.
The average transaction price of NIO brand vehicles changed little, at 390,000 yuan in the first quarter and 406,000 yuan in the second quarter, roughly in line with the overall level for 2025. Over the past three quarters, NIO's vehicle gross margin was 18.1%, 18.8% and 18.5%, mainly supported by its two flagship models, the NIO ES8 and ES9, both of which had gross margins of over 20%.
Cost pressures have permeated every aspect of the automotive manufacturing industry. Guangzhou Automobile Group Co., Ltd. reported a loss of 4.467 billion yuan in the first half of the year, an increase of approximately 76% compared to the same period last year. Changan and Great Wall saw their net profits nearly halved, while XPeng Inc. earned a net profit of 200 million yuan from revenue of 38.1 billion yuan, with a net profit margin of around 0.6%. Jianghuai Automobile reported a loss of 749 million yuan in the first half of the year, largely due to Anhui Volkswagen's provision of over 2 billion yuan in losses during the same period. Li Auto Inc. also reported a net loss of nearly 4 billion yuan in the first half of the year.
Hindered by rising supply chain costs, Li Auto has lowered its gross margin target to a range of 15%-20%. Li Auto's chairman mentioned during the company's earnings conference on the 26th that the increase in costs of core components such as batteries and storage chips this year is a common challenge faced by the entire industry. As Li Auto has a greater demand for storage and semiconductors, it is also more severely affected.
Li Xiang also implicitly stated that due to intense market competition, Li Auto will not pass on rising costs to consumers. The financial reports of companies like Seres and other automakers have also revealed another painful fact about the current market competition: the massive cost of launching new models, and the significantly shortened product replacement cycle, have resulted in huge asset impairment, which has directly eroded their profit margins.
Saic Motor recorded a 1.57 billion yuan impairment charge for intangible assets related to "whole vehicle and auto parts technology development" in its financial report. The asset had a carrying value of 2.72 billion yuan before the impairment, but its recoverable amount was reassessed to be only 1.149 billion yuan. Including credit impairment and other items, the impact on net profit was 1.75 billion yuan. Saic Motor explained that the rapid iteration of industry technology and the failure of existing car models to meet expected sales revenue have weakened the foundation for the corresponding intangible assets to generate economic benefits.
Seres' swing from profitability to massive losses cannot be simply attributed to what outsiders call the "Huawei tax." Huawei's share of Seres' revenue is, in fact, a rigid cost the latter must bear. However, as long as sales grow steadily and costs remain controllable, Seres has already proven in the past that this model does not preclude profitability.
However, what lies ahead for Seres is not just the so-called "Huawei tax". The cost pressure brought about by the rise in upstream key raw material prices and the waste of R&D resources due to the overly short industry iteration cycle are two new difficulties that all "tier-one brands" must face, and are also common problems for the entire automotive industry.