Huawei and Thalys: “Breaked up” and “reunited” 15 days later, how to calculate this debt?

In the past half month, China’s automotive industry has staged a business drama of ups and downs.

On September 15, Huawei and Cyrus announced adjustments to their cooperation model regarding industry business, and public opinion quickly set the tone for a “breakup.” On September 30, Thalys (601127.SH) signed a new five-year cooperation agreement with Huawei in Shenzhen to further upgrade its interdisciplinary business. Public opinion changed its tone and called it “reunion”. After going back and forth, many people felt that this was like a “playing house” game.”。

Judging from the financial reports, prospectuses and announcements, a more accurate statement may be that there was no “breakup” in these 15 days.”, there is no “composite”, what happened was nothing more than a liquidation before the cooperation expired. Pricing power, channels, costs and risks were redistributed by both parties.

▲Wenjie Automobile booth Pictures from Visual China

From “New Division of Labor” to “New Five Years”

The story starts in April 2021. At that time, Huawei and Xiaokang Co., Ltd. (the predecessor of Thalys) began to cooperate. At the end of that year, AITO Wenjie was born. As of now, the number of Wenjie users has exceeded 1.2 million.

On September 15, Hongmeng Zhixing and Wenjie Auto released a statement simultaneously: Wenjie’s product definition, product design, brand marketing, channel retail and service system are led by Cyrus, with Huawei terminals participating in the empowerment; Zunjie, Xiangjie, Zhijie, and Shangjie are still led by Huawei throughout the entire process. The market’s reaction was very direct. Thalys’ A shares fell by 5.09% and H shares fell by 6.12% that day, both hitting new lows during the year. That night, the company announced the repurchase of approximately 70.31 million yuan in shares.

Over the next week, information was gradually added. On September 16, the channel dealer received a letter: the signing party of the distribution agreement was changed from Huawei Terminal to an affiliated company of Cyrus Automobile; the service fees for previous orders were still settled by Huawei, while new orders were settled by Cyrus. On September 17, there were rumors that Wenjie would withdraw from Huawei stores starting next year, and dealers could choose their own brands as agents. Cyrus immediately denied that it would “completely withdraw from Huawei stores.” On September 22, Cyrus Chairman Zhang Xinghai said: “We have not broken up, we have always been together.” Two days later, Yu Chengdong gave another statement: Cyrus’ capabilities have improved, and he offered to take the lead, and Huawei supported it.

On September 30, the two parties signed a contract in Shenzhen. The new agreement is for a period of five years, and the two parties will jointly establish a dedicated team for Wenjie business.

Looking at the two days together, the logic is not complicated: the new division of labor was announced on September 15, and the new division of labor was locked into a five-year period on September 30. The underlying reason behind this is that the original five-year cooperation is about to expire.

Why does Cyrus want to take back control?

To understand why Thalys insists on taking back the dominance at this time, we must first look at its account.

From 2022 to 2025, Cyrus paid a total of approximately 111.335 billion yuan to Huawei Systems, accounting for 29.29% of revenue during the same period. This set of figures is easy to associate, but it needs to be taken apart: According to the prospectus, the money is mainly for hardware purchases, trademarks and equity payments. It buys smart driving, lidar, Hongmeng cockpit, electric drive and chips. It is a transaction with a consideration.

The real crux lies elsewhere. In the old model, there were two fees calculated based on the vehicle price. Many reports cited the following: technology licensing fee of approximately 2% and channel marketing service fee of approximately 8%. They are linked to transaction volume. The more cars you sell, the more you pay. It has nothing to do with whether Cyrus makes money or not. When sales go up, no one cares about it; once sales go down and costs go up, the risk is all on the side of the OEM.

This trend is clearly visible in the 2026 semi-annual report. In the first half of the year, Cyrus’ revenue was 57.493 billion yuan, a year-on-year decrease of 7.87%; net profit attributable to the parent company was a loss of 1.717 billion yuan, compared with a profit of 2.941 billion yuan in the same period last year. The sales volume of the new energy vehicle segment increased by 3.87%, but the proportion of affordable models increased, and the gross profit margin dropped from 28.9% to 23.3%. The pressure on the cost side is also not small: in addition to lithium carbonate, the price of memory chips has also increased significantly. According to Zhang Xinghai’s calculations, the cost of Wenjie bicycles has increased by 15,000 yuan to 20,000 yuan. Cash flow is also thinning, with net operating cash flow in the first half of the year being -12.376 billion yuan, and book cash falling to 73.15 billion yuan. Fortunately, the family still has ample financial resources, with interest-bearing liabilities accounting for only 3.2% of total assets.

Against this background, the actions on September 15 were not unexpected. In 2024, Thalys first spent 2.5 billion yuan to buy the AITO Wenjie trademark and related patents, then purchased 10% of Yinwang’s equity for 11.5 billion yuan, and also purchased Longsheng New Energy, the core production base of Wenjie, for about 8.2 billion yuan. The right to speak in brand, manufacturing, and technology has been taken back piece by piece, and channels and operations are the last piece of the puzzle. Judging from this line, Yu Chengdong’s sentence “Sales took the initiative” is logically logical.

Why did Huawei agree?

What did both sides pay?

Thalys wants to take it, but will Huawei give it to it? The answer lies in Huawei’s own positioning.

Huawei’s strategy has always been not to build cars, but to position itself as a smart car solution provider. This business will generate revenue of 45.018 billion yuan in 2025, a year-on-year increase of 72.1%, making it Huawei’s fastest growing segment.

Questioning the world has two sides to Huawei. On the one hand, it is the largest source of shipments: Hongmeng Zhixing delivered 42,101 vehicles in August, accounting for about half of them. The other side is risk sharing: if a brand with millions of vehicles is still managed by Huawei throughout the entire process, when the auto market goes down, Huawei will have to bear the pressure along with it.

At the same time, Huawei has more cards in its hands. Zhijie, Shangjie, Xiangjie and Zunjie are also increasing their sales volume. The five “spheres” share a set of channels and resources. The larger the realm, the more obvious the squeeze on other brands. By returning operating and brand risks to car companies, Huawei retains technology supply and revenue. This account is called weight loss, not departure.

Another layer is the transfer of power. From “leading” to “enabling”, with just one word difference, the say in product definition, pricing, and channel management all returned to Thalys. This happened after the cooperation was about to expire and Cyrus had gradually taken back its right to speak on the brand, manufacturing and technical levels. Huawei’s concessions were more or less passive.

Let’s look at the cost to both parties. On the Cyrus side, dealers and car owners have entered a period of uncertainty, and the pressure on channels and operations has shifted to themselves. On Huawei’s side, Wenjie is the most important example of “Huawei builds cars”. After giving up its dominance, Huawei has turned into a supplier role in this largest market, and its control over sales, channels and users has subsequently weakened.

Another shared loss for both parties is certainty. The value of this combination lies in “stability”, and the rumors and fluctuations in the past 15 days have caused the outside world to question its stability. This trust discount will be borne by both parties.

after new agreement

How should Cyrus answer the question?

The information that has been disclosed is: within a five-year period, a dedicated team will be jointly established, exclusive franchise will be maintained, user rights will remain unchanged, and the technical base will continue to be supplied. The parts that have not yet been made public are equally critical: how to set rates, how to settle channel fees, and how to transition Huawei stores. There is currently no answer.

According to public information, it is speculated that next, the two companies’ technologies and brands will most likely continue to be bound, and operations and profits and losses will begin to be separated.

For Cyrus, Huawei’s endorsement is still valuable. For Huawei, it retains technology supply and no longer has to cover the entire vehicle operation. The interests of both parties overlap on the point that “the technology will continue to be used, and each operation will be responsible.”

The division of labor has been decided, but a question has arisen. Whether Siris can settle the accounts after taking over depends on how he answers later.

The transition of channels cannot be delayed. Dealers and car owners need a clear timetable. Information gaps will create speculation, and speculation will discourage orders.

Next down are costs. Channel marketing service fees originally paid for Huawei’s channel, marketing and traffic services. Now you have to do it yourself or pay separately. How much you can save depends on the efficiency of self-built channels. In the first quarter, Cyrus’ sales expenses reached 3.719 billion yuan, a year-on-year increase of nearly 40%, higher than the revenue growth rate of 34.46%. Cash should be spent on channels, products and brands, rather than subsidies, while keeping an eye on operating cash flow.

The most difficult thing is to gradually replace the “Huawei halo” with “asking for one’s own reputation in the world.” The exclusive team in the new five years is designed for this purpose.

【結語】

Looking back on these 15 days, it is not an emotional drama, but a re-pricing of costs, channels, brands and risks. Huawei wants technological certainty, Cyrus wants profits and autonomy, and the new agreement is a compromise acceptable to both parties.

The real exam questions have not yet begun. What is worth keeping an eye on next is the delivery pace of the new M8, the gross profit margin, sales expense ratio and operating cash flow in the third quarter report, as well as whether the terms of the new agreement will be disclosed.

(This article does not constitute any investment advice, please operate at your own risk)

Red Star Capital Bureau Intelligent Financial Reporting Studio Liu Mi Zhou Yi

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