Has Seres' 'Soul' Been Extracted?
Seres, the Chinese automaker partnered with Huawei for its AITO brand, reported a significant net loss of 1.5-1.8 billion RMB for the first half of 2026, causing its market value to plummet. This reversal from a profitable 2025 highlights the challenges of its deep relian…
Intelligence analysis by Gemini 2.5 Flash
Once a market darling due to its Huawei partnership, Seres is now grappling with substantial losses, primarily from its AITO brand. The article frames this as a consequence of rising costs, fierce competition, and the high price of its 'soul-sharing' collaboration with Huawei, prompting Seres to pursue dual strategies for survival.
Imagine a toy car company that was struggling, then teamed up with a super popular tech company to make smart, cool cars. Everyone loved them, and the toy car company made lots of money! But now, the tech company is working with other toy car companies too, and the smart cars are getting more expensive to make. So, the original toy car company is losing money and trying to build its own new line of cars while still working with the tech giant, which is like trying to play two different games at once.
Analysis
The Cost of a Shared "Soul"
Seres' recent financial downturn, marked by a projected net loss of 1.5-1.8 billion RMB for the first half of 2026, starkly contrasts its profitable 2025 performance and highlights the inherent risks of its deep partnership with Huawei. The article details how Seres, once a struggling low-end automaker, found a lifeline in Huawei's "Smart Selection" model, which provided design, technology, and sales channels for the AITO brand. This collaboration propelled Seres into the high-end new energy vehicle (NEV) market, leading to a significant surge in revenue and market capitalization.
However, this success came at a steep price. Seres' financial reports reveal a substantial portion of its revenue flows back to Huawei through procurement of core components, technology licensing fees, and shared R&D costs. In 2025, approximately 130,000 RMB of every AITO car sold went to Huawei, leaving Seres with a thin net profit margin of only about 14,000 RMB per vehicle. This fragile profit structure made Seres highly vulnerable to external shocks, such as the reported five-fold increase in storage chip prices and the doubling of lithium carbonate costs, which added 15,000-20,000 RMB to the manufacturing cost of each car.
Navigating a Crowded and Costly Market
Beyond the Huawei partnership's financial implications, Seres is contending with a rapidly intensifying competitive landscape and weakening consumer demand in China's NEV sector. The first half of 2026 saw a 5.9% decline in overall passenger car sales, coupled with persistent price wars. AITO, which initially capitalized on a scarcity of high-end family NEV SUVs with models like the M7 and M9, now faces a deluge of new offerings from rivals such as Nio, Xpeng, Denza, Zeekr, and Voyah. This increased supply has eroded AITO's previous pricing power and market premium.
Furthermore, Huawei's strategic expansion of its "Harmony Intelligent Mobility Alliance" to include other automakers like Chery, BAIC, JAC, and even SAIC, introduces internal competition for AITO. New brands like Luxeed and Stelato, also powered by Huawei's technology, are entering the same price segments as AITO, further fragmenting the market and potentially siphoning off sales. This dual pressure from external competitors and internal Huawei-backed brands leaves Seres' already thin profit margins with little room for maneuver, leading to the significant losses observed in Q2 2026.
A Dual Path to Uncertain Salvation
In response to these mounting pressures, Seres has embarked on a two-pronged self-rescue mission. The first involves strengthening its ties with Huawei through a 11.5 billion RMB investment in Shenzhen Yinwang, Huawei's intelligent driving subsidiary, securing a 10% stake and a board seat. This move aims to transform Seres from a mere OEM into a capital partner, hoping to offset high technology procurement costs and gain preferential access to Huawei's evolving tech and channel resources for AITO. However, the article notes the limitations of a 10% stake in influencing overall strategy and the continued need for substantial investment in manufacturing and operations.
The second, more radical, strategy is the independent incubation of a new high-end AI automotive brand, AIVA, by spinning off its loss-making Landian Technology (now Saidou Technology). AIVA is designed to operate entirely outside the Huawei ecosystem, forging new partnerships with ByteDance for AI models, Yuanrong Qixing for intelligent driving, and CATL for batteries. This ambitious pivot seeks to shed the "Huawei OEM" label and establish an autonomous brand and technology stack. Yet, this path is fraught with its own challenges, including the immense capital required for brand building and channel development without Huawei's established network, and the uncertainty of consumer acceptance for this new technology alliance. The success of these divergent strategies, and Seres' ability to manage the inherent resource allocation and technical fragmentation, will determine its long-term viability.
Key points
- Seres reported a net loss of 1.5-1.8 billion RMB in H1 2026, a sharp reversal from 2025 profits.
- The AITO brand, a partnership with Huawei, is the primary source of losses, with Seres losing at least 20,000 RMB per AITO car sold in Q2 2026.
- Rising raw material costs, intense market competition, and significant payments to Huawei for technology and components are cited as key reasons for the losses.
- Seres is pursuing two self-rescue strategies: investing in Huawei's intelligent driving subsidiary (Yinwang) and independently launching a new AI-focused brand, AIVA, with partners like ByteDance and CATL.
- These dual strategies create challenges in resource allocation, brand synergy, and technical route fragmentation, leading to uncertainty in Seres' short-term and long-term outlook.
Seres' dual strategy, involving a capital tie-up with Huawei's intelligent driving subsidiary and the independent launch of the AIVA brand, could provide a path to long-term sustainability. The investment in Huawei's subsidiary might secure preferential access to technology and resources for AITO, while AIVA offers a chance to build an autonomous brand identity and diversified tech stack, potentially leading to new growth engines and reduced reliance on a single partner.
The company faces significant financial pressure with high debt and ongoing losses, making both its existing AITO business and the new AIVA brand capital-intensive endeavors. The internal competition from Huawei's expanding automotive partnerships and the unknown consumer acceptance of AIVA's independent tech stack pose substantial risks, potentially leading to continued financial strain and a failure to establish either brand effectively in a cutthroat market.
