The Seres Group Co.,Ltd. (ASX: 601127) released its preliminary results for the first half of 2026 on July 12, forecasting a net loss attributable to shareholders of between 1.5 billion and 1.8 billion yuan, marking a swing from profit to loss year-on-year.
Breaking down the quarterly figures, the company reported a profit of 754 million yuan in Q1, but anticipates a substantial single-quarter loss of 2.25 billion to 2.55 billion yuan for Q2. This sharp sequential volatility in performance has rapidly drawn market scrutiny.
Discussions surrounding the "Huawei car-making model" and "profit distribution" have subsequently intensified, with narratives like "Seres suffers huge losses while Huawei wins steadily" gaining traction.
However, a closer examination reveals that simplistic binary narratives of "who loses and who gains" often obscure the true logic of industrial specialization.
Only by dissecting the causes of the loss and clarifying the respective risks and rewards for each party can we discern the genuine development trajectory of China's new energy vehicle sector behind the performance fluctuations of a single company.
Multiple Factors Behind the Loss
The shift to a loss for Seres was not due to a single factor but rather the combined result of three elements: upstream cycles, end-market competition, and the company's own operational cadence.
This mix includes pressures common to the entire industry as well as specific, temporary disruptions unique to the company.
The rise in prices of raw materials explicitly mentioned in the announcement, such as memory chips, industrial metals, and lithium carbonate, was a core driver of the weaker Q2 performance and a challenge faced by all automakers in the second quarter of 2026.
On top of this, intensified competition at the consumer end and the further squeezing of gross margins under a "price war" were significant contributing factors.
The domestic new energy vehicle market in Q2 2026 continued to escalate its battle for existing customers, with price cuts, promotions, and enhanced benefits becoming the norm across brands, pushing the entire industry into a low-margin phase of "trading price for volume."
To maintain market share and new vehicle sales momentum, the AITO brand offered multiple promotional incentives at the retail level.
Against the backdrop of rising costs, these consumer concessions directly compressed product gross margins.
This dual pressure of "rising costs and falling prices" is an operational strain borne by all vehicle manufacturers.
For Seres, the impact on gross margin elasticity was further amplified because its main sales models, the AITO series, are positioned in the mid-to-high-end segment with advanced intelligent driving configurations.
An important yet often overlooked aspect in market discussions is that this loss includes a significant proportion of non-operational, one-time impairment charges.
For instance, as new AITO models are successively launched, dedicated molds for older models, inventories of outdated intelligent driving hardware, and some production line adaptation assets have lost their reuse value, leading to a concentrated impairment provision under accounting standards.
This type of loss is a routine financial practice in the automotive industry during model changeovers.
It does not consume the company's operating cash flow, will not recur in subsequent quarters, and does not signify a deterioration in normalized operational capability.
Risk and Reward in a Specialized Ecosystem
The prevalent online reaction to this earnings report has largely been the narrative of "Seres' huge loss, Huawei's steady gain."
However, this perspective essentially reduces industrial specialization to a zero-sum game.
From an objective standpoint, both cooperating parties have their respective rewards and bear corresponding risks; there is no one-sided "loss" or "gain."
In the short term, Seres is the party directly bearing the pressure from this performance fluctuation.
As the vehicle manufacturing entity, the company shoulders all the risks associated with heavy-asset factory operations, raw material price volatility, inventory impairment, and end-market price wars.
During an industry downturn, its profit elasticity is naturally the first to be impacted.
Concurrently, with over 90% of its revenue coming from the AITO series, its high dependence on a single cooperative brand introduces structural concerns for its business.
However, over a longer timeframe, Seres is also a core beneficiary of this cooperative model.
Leveraging Huawei's technological empowerment and channel support, Seres has accomplished a leap from traditional commercial vehicles and low-end passenger cars to a premium new energy brand in the 300,000 to 500,000 yuan range.
Its annual sales volume has entered the top tier of domestic new automakers, and its revenue scale has surpassed the 100-billion-yuan mark.
Without this deep cooperation, it would have been nearly impossible for Seres, relying solely on its own technological and brand accumulation, to achieve such a high-end breakthrough within just a few years.
The premium vehicle manufacturing capabilities and supply chain management expertise it has built have become core assets for the company's long-term development.
Huawei's Intelligent Automotive Solution business has indeed demonstrated stronger resilience to cycles within this cooperation model.
Through technology licensing, smart hardware supply, and channel service sharing, Huawei's revenue stream exhibits greater rigidity.
Hardware procurement is settled per order, and service shares are calculated based on a fixed percentage of the selling price, insulating it from the direct impact of raw material fluctuations and vehicle impairment.
In 2025, Huawei's Intelligent Automotive Solution business achieved revenue exceeding 45 billion yuan, reaching scale profitability, with the AITO series being a core revenue source.
This does not mean Huawei is "risk-free and winning effortlessly."
On one hand, behind the 45 billion yuan in revenue are years of Huawei's own multi-billion-yuan R&D investments in areas like intelligent driving, HarmonyOS cockpit, and automotive-grade chips.
The company bore the full risk of the前期 technology development phase, and its current profitability represents the scaled monetization of these long-term investments.
On the other hand, the core revenue of Huawei's automotive business is highly tied to the AITO foundation.
If Seres' operations experience volatility, Huawei's revenue and reputation would be directly affected.
Fundamentally, the two are deeply bound as a community of shared interests, not merely a simple client-contractor relationship.
Three New Challenges for China's Auto Industry
Seres' swing from profit to loss is not merely an operational issue for a single company but a microcosm of China's automotive industry entering a new phase of development, reflecting the deep-seated transformations the entire sector is undergoing.
Firstly, this can be seen as a marker of China's new energy vehicle industry formally entering a "profit restructuring period."
After over a decade of rapid growth, domestic new energy vehicle penetration has reached a high level, shifting the industry from incremental expansion to competition for existing market share.
The normalization of price wars, upstream cyclical fluctuations, and persistently high R&D investment are jointly pushing the industry into an era of thin margins.
The difficulty for vehicle manufacturers to turn a profit has significantly increased, and the past logic that "sales growth necessarily leads to profitability" no longer holds.
Secondly, the mismatch between risk and reward brought about by the refinement of industrial specialization has become a new subject that the automotive industry must seriously study and address.
The "technology empowerment + vehicle manufacturing" model, exemplified by the AITO collaboration, is a typical product of the specialization within China's auto industry.
Technology companies focus on intelligent R&D, while vehicle manufacturers concentrate on production and supply chain management, which is fundamentally about efficiency gains.
However, simultaneously, the risk-bearing capacities of the asset-light technology side and the asset-heavy manufacturing side differ significantly during cyclical downturns.
The alignment between profit distribution and risk assumption has become a core issue requiring continuous磨合 in such cooperative models.
Lastly, it is imperative to acknowledge that the price transmission mechanism between upstream and downstream in the automotive supply chain remains immature.
During the recent round of raw material price increases, the fierce price war at the consumer end left vehicle manufacturers almost unable to pass on cost pressures downstream.
They were forced to absorb the impact by compressing their own gross margins, leading to a period of imbalance in profit distribution across the industrial chain.
This also reflects that China's new energy vehicle industry has yet to form a stable profit distribution system, and the ability for upstream and downstream players to协同抗周期 still needs improvement.
Positive Signals Amidst Short-Term Pains
Short-term performance pains are not the end point of industry development.
Viewed from the long-term perspective of China's new energy vehicle industry, clear positive directions remain evident behind this round of volatility.
The cooperation between Seres and Huawei, as a典型案例 of the "technology empowerment + vehicle manufacturing" model, provides a valuable observation window.
In the future, it is believed such models will undergo dynamic optimization through磨合.
Deeply bound partners will not maintain a long-term格局 of "one-sided risk bearing."
As cooperation enters deeper waters, both parties will gradually adjust mechanisms for benefit sharing and risk pooling, moving from simple supply and sharing arrangements towards deeper cost-sharing and profit-sharing, making the cooperative model more resilient to cycles.
Furthermore, competition in China's automotive industry is shifting from price wars to value wars.
With the continuous iteration of intelligent driving and smart cockpit technologies, the technology premium and brand value of high-end models are gradually taking shape.
Future industry competition will transition from单纯的价格比拼 to comprehensive value competition based on technology, product, and brand, allowing quality companies to regain profit margins and escape the internal消耗 of "low-price卷."
We believe the long-term value of Chinese automotive manufacturing remains solid.
The large-scale, high-efficiency, and high-quality vehicle manufacturing capabilities possessed by companies like Seres Group are still the cornerstone of the global new energy vehicle industry.
In the final analysis, Seres' shift to a loss reflects not a zero-sum game of "who loses and who gains," but rather the inevitable growing pains as China's new energy vehicle industry transitions from high-speed growth to high-quality development.
Short-term performance fluctuations are merely a phase of磨合 in the industrial upgrading process and will not alter the global competitiveness of China's automotive industry.
As the industry bids farewell to野蛮生长 and enters a new stage characterized by refined specialization and profit restructuring, the协同磨合 between the technology and manufacturing ends will propel the entire sector towards a more mature and healthier development path.
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