Huawei and Changan Automobile signed a Memorandum of Investment Cooperation in Shenzhen on November 25, 2023. Following negotiations, Huawei plans to establish a new company to focus on R&D, production, sales and service of intelligent driving systems and incremental components for intelligent connected vehicles. According to the memorandum, Huawei plans to integrate the core technology and resources of the smart car solutions business into the new company.

Southwest Securities believes that, relying on three platforms and five major intelligent system solutions, Huawei has the layout of the entire automotive intelligent connectivity industry chain. Empowered by Huawei, the market competitiveness of car companies has increased, and in the short to medium term, Huawei has cooperated intensively on the launch of new models, and product sales are expected to exceed expectations.

Relevant constituent stock information:

1) Changan Automobile

Reason for selection: The company signed a “Memorandum of Investment Cooperation” with Huawei, and Huawei plans to establish a company engaged in R&D, design, production, sales and service of automotive intelligent systems and component solutions. The transaction company and its related parties plan to invest to obtain shares in the target company, with a ratio of no more than 40%

2) Hunan Tianyan

Reason for selection: China Changan Automobile Group Co., Ltd. is the controlling shareholder of the company

3) Dongan Power

Reason for selection: China Changan Automobile Group Co., Ltd. is the controlling shareholder of the company

4) Dongjian Technology

Reason for selection: The company's core categories of smart cockpits such as electric side doors (electric limiters), electric tailgates, electric pedals, and electric scissor doors have entered the target of many new energy vehicle OEMs and traditional OEMs such as Changan Automobile

5) Xing Min Zhitong

Reason for selection: The company's wheel industry is a first-class supplier to more than 10 domestic and foreign automakers including Changan Automobile

6) Zhejiang Xiantong

Reason for selection: The company is the core supplier of Wuling and Changan Automobile. The company supplies 12 parts of Changan Avita products

7) Traceable shares

Reason for selection: The company focuses on the design, development, production and sales of automotive fluid pipelines and automotive plastic parts. The company said during a survey by reception agencies in September 2023 that Changan Automobile is one of the company's top five customers

8) Huayang Group

Reason for selection: The company's cockpit domain control, LCD instruments, screen displays, digital acoustics, HUD, wireless charging, digital keys, electronic exterior rearview mirrors, driving domain control and other products have won the target of customer projects such as Changan and Changan Mazda

9) Chuanhuan Technology

Reason for selection: The company has established long-term and stable cooperative relationships with automakers such as Changan Automobile, Changan Ford, and Changan Mazda, as well as new energy vehicle manufacturers such as Changan New Energy (deep blue series) and Jinkang Celis (Quanjie M5, M7, etc.)

10) Bethel

Reason for selection: Since 2011, the company has entered the supporting system of Changan Automobile. The company has successively developed and provided wire-controlled WCBS, electronic parking braking systems, brake assemblies, electronic actuators EPB-i, intelligent driving assistance systems, cast aluminum steering joints, electric power steering systems and other products for CS95, Yidong, Yida, UNI-V, UNI-K, Z6, X7P, Avita, X7P, Avita, Deep Blue, Qiyuan, etc.

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