In recent times, the automotive industry has seen considerable buzz surrounding Huawei, a giant in the tech space, which has sparked a wave of interest in its alliance with the car manufacturer Seres, listed under the stock code 601127.SH. This partnership has led to the emergence of the new AITO Wenjie M7, a model that has quickly ascended to fame and success in the market.
The Wenjie M7, created in collaboration between Seres and Huawei, has reportedly achieved remarkable milestones within just 25 days of its launch, marking a total of 50,000 pre-orders and a staggering 7,000 orders on a single day. On October 8, data published by AITO Cars indicated an impressive daily average of 2,000 additional pre-orders since the M7’s debut on September 12, demonstrating a robust demand for this innovative vehicle.
This surge in sales has not gone unnoticed; Seres' stock prices have skyrocketed as a result. With consecutive trading days of price caps reached on September 28 and throughout the first half of October, Seres reclaimed a market capitalization exceeding 100 billion yuan. While there has been some fluctuation in the stock price following its peaks, as of October 15, Seres shares were valued at 73.19 yuan per share with a total market cap of 110.32 billion yuan, reflecting a pivotal turnaround within the company.
The continuous rise of orders for the Wenjie M7 can be attributed, at least in part, to the prevailing sentiment surrounding Huawei's leadership in the field. Huawei’s Executive Director and CEO of the Terminal BG, Yu Chengdong, shared on social media that the first sales cycle of the Wenjie M7 not only exceeded expectations but did so by a significant margin, setting new records for the brand.
According to the latest updates from the company, on October 6 alone, pre-orders surged by 7,000 units, leading to an overall impressive total of 55,506 orders by October 7 at 10 AM. Yu expressed his enthusiasm in a social media post by stating, “It’s truly not easy to come back from setbacks!” He further encouraged the team at Smart Select to expedite high-quality large-volume deliveries.
As a result of the impressive sales figures, Seres saw its stock prices locked at the maximum increase rate on multiple occasions. A press announcement from Seres noted that due to significant discrepancies in market performance over three consecutive trading days, the stock was flagged for unusual trading activity, a sign of the heightened interest and possibly over-exuberance among traders and investors alike.
When reviewing longer timeframes, it is notable that Seres stocks surged over 110% since August 28, significantly outperforming both the Shenehua Automotive Index and the Shanghai Composite Index during the same period. However, this rapid ascent may also indicate signs of over-enthusiasm among investors, resulting in potential risk due to inflated perceptions surrounding market performance.
Despite the positive sales for the Wenjie M7 providing a much-needed confidence boost to the market and to Seres’ stock prices, significant questions remain about the company's recovery. With ongoing losses and subdued overall brand sales, the question lingers: can Seres truly find a revival as optimistically stated by Yu Chengdong?
Seres, having rebranded itself successfully since its emergence, strives to position itself as a competitive force in the high-end automotive sector. The company underwent a name change in August 2022, with Zhang Xinghai, the Chairman and founder of Xiaokang Co., articulating this shift as a new starting point for the company's drive into high-end vehicle manufacturing.
The history of Seres plots a journey filled with transformations and challenges: from its establishment in 1986 as a parts manufacturer, to entering the vehicle manufacturing domain in 2003, and ultimately entering the electric vehicle segment in 2016. On August 2, 2022, along with the name change, Seres adopted a new symbol rooted in the meaning of the word “Silk,” denoting sophistication and a commitment to high-quality production.
Despite the ambitious plans, Seres has faced headwinds in recent months. In a September press release, the company disclosed that between January and September of 2023, it recorded a sales drop totaling 136,786 complete vehicles sold, a substantial decrease of 30.65% year-on-year. Particularly concerning were the sales figures for its electric vehicles, plummeting by 25.16% to 68,223 units during the same period. More alarmingly, in September alone, sales for electric vehicles fell by nearly 42% year-on-year, summing up a disheartening trend for the company.
While China's overall electric vehicle market continues to thrive—with transport figures showing increases of 37.5% for electric vehicle sales up to 6.27 million units—Seres’ performance starkly contrasts. The company finds itself in a challenging position, with its electric vehicles still not able to recover to levels seen in the previous year.
Recognizing the pressing need for innovation, Seres is actively launching new models amidst these deteriorating sales conditions. Along with the Wenjie M7, the company has other models in the pipeline slated for release this year. Notably, the anticipated Wenjie M9, which is designed on a cutting-edge platform, will incorporate advanced features such as ADS 2.0 for high-level intelligent driving, creating interactive emotional displays through AI technology, AR-HUD projection headlights, and the HarmonyOS 4.0 system.
Presently, Seres seems to be riding on the coattails of its partnership with Huawei, taking advantage of their technological advancements and support. However, it’s crucial to understand that Seres is not the only automotive company associated with Huawei’s initiatives. For example, during a release event earlier this year, Huawei unveiled additional partners focusing on automobiles, signaling a potential dilution of the competitive advantage that Seres currently enjoys.
Financially, Seres faces a challenging landscape with continuous losses over recent years. Data highlights that from 2020 to 2022, Seres’ operating revenue rose from 143.02 billion yuan to 341.05 billion yuan, yet each year was shadowed by deepening net losses, representing a troubling trend for stakeholders. The year 2023 hasn’t improved the situation, with a reported revenue decrease of 11.14% alongside a net loss widening to 13.44 billion yuan for the first half of the year.
In an attempt to navigate these turbulent waters, Seres is also pursuing the spin-off of its subsidiary companies. Recent announcements indicated the company’s full ownership of Chongqing Ruichi Automobile Industry Co., which is planning an investment partnership that includes sizable capital influxes and strategic shifts in focus towards electric commercial vehicles.
Market analysts remain divided on Seres’ trajectory. Some, like CITIC Securities, have positively assessed the potential for recovery, maintaining a “Buy” rating amid evolving priorities. In contrast, Haitong Securities has adjusted down its revenue expectations, projecting that Seres may struggle to achieve profitability in the short term, even as broader industry trends point towards a return to health.
As Seres simultaneously seeks innovation, navigates sustainability, and manages expectations in a rapidly evolving automotive landscape, the question remains—will its tie with Huawei prove to be enough to engineer a long-term revival?