Chinese automakers hit by production issues with Huawei computing unit, sources say

[January 31, 2024]  SHANGHAI (Reuters) - Some Chinese automakers have had to delay deliveries of flagship models due to production issues with a computing unit made by tech giant Huawei, five people with knowledge of the matter said.

Changan Auto and Chery Auto - both of which have partnered with Huawei in developing their premium electric vehicle (EV) brands - have lodged complaints and are in talks to resolve the issue, two of the people said.

Seres, a smaller carmaker, has also been affected, one person said.

The computing unit, called the MDC 810, powers advanced driver assistance systems and is central to Huawei's ambitions to become the dominant supplier of software and components for smart electric vehicles.

The production issue relates to a shortage of a component that goes in the MDC 810, according to one of the sources.

The problems come at a time when Huawei is seeking to secure more investors for its four-year-old Intelligent Automotive Solution (IAS) business unit that it plans to spin off. Changan Auto has said it plans to own up to 40% of the new company.

Huawei, Chery and Seres did not respond to Reuters requests for comment. Changan referred the request to its Avatr division, which did not respond.

The three models that sources say have been affected were launched in the last quarter of 2023.

Changan's Avatr 12 sedan, priced from 300,800 yuan ($41,880), had orders of more than 20,000 as of Dec. 1, according to the company.

Avatr Vice President Li Pengcheng at an event last week cited "challenges in key component supplies" as a factor in delivery delays of two weeks on average. He did not name Huawei.

Avatr plans to compensate buyers by as much as 15,000 yuan for late deliveries.

Chery's Luxeed S7 sedan - the first model for its Luxeed brand - had orders of about 20,000 as of Nov. 28. Luxeed said this month that buyers could be reimbursed by up to 10,000 yuan if they were unable to pick up the S7 as promised. The S7 is priced from 249,800 yuan.

Visitors walk past the Huawei booth during a media day for the Auto Shanghai show in Shanghai, China April 19, 2021. REUTERS/Aly Song/File Photo

The brand was only recently launched in November and had been much hyped by Huawei with Executive Director Richard Yu claiming the S7 would beat Tesla's luxury Model S in performance and at a price lower than the Model 3.

Seres, which launched its Aito M9 SUV in December, had been expected to deliver its first batch of 2,000 vehicles by Jan. 26 to buyers but has missed this target, said one person with direct knowledge of the matter. The vehicle is priced from 469,800 yuan.

BAIC ARCFOX's Alpha S sedan, launched in 2021, also uses the MDC 810. Two people said that short supplies of the MDC 810 had affected production of the Alpha S in the past.

Bluepark New Energy Technology, a subsidiary of BAIC Motor which owns the ARCFOX brand, did not respond to requests for comment.

The MDC 810 allows the automakers to offer so-called intelligent driving features that include autonomous driving on highways and helping drivers navigate traffic jams, similar to what Tesla's Autopilot provides in North America.

In China - the world's biggest auto market - where hundreds of EV and gasoline-hybrid hybrid vehicles are competing for consumer attention, such features have become a major selling point and are a key reason why automakers have sought to partner with Huawei, analysts have said.

($1 = 7.1815 Chinese yuan)

(Reporting by Zhang Yan, Zhuzhu Cui and Brenda Goh; Editing by Edwina Gibbs)

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