Let's see if Huawei can once again help JAC Motor's new energy vehicles achieve a remarkable turnaround.

On the evening of July 15th, Dong Yuhui and Yu Chengdong held a live dialogue, during which Yu Chengdong responded to recent hot topics related to Huawei, such as Seres using 2.5 billion yuan to acquire Huawei's "Wen Realm" trademark and related patents.

Regarding this, Yu Chengdong explained that these transfers were required by national regulations, stating that brand owners and manufacturers must be integrated, and that the Wen Realm brand is worth at least ten billion yuan, "making the car factory a big winner." Notably, Yu Chengdong also revealed that the fourth "Realm" in Huawei's collaboration with JAC Motor is not the previously mentioned "Ao Realm," but rather "Zun Realm."

Yu Chengdong mentioned that the Zun Realm trademark and related patents, like those of the other "three realms," will be transferred to the car factory. Perhaps influenced by this statement, JAC Motor's share price suddenly surged by 7.73% on July 16th.

The market has high expectations for HarmonyOS Intelligent Driving's fourth "Realm." During this year's Beijing Auto Show, Yu Chengdong revealed that the fourth "Realm" would produce vehicles priced in the million-yuan range, "far surpassing the likes of Maybach and Rolls-Royce in luxury."

At present, there are three domestic million-yuan-level new energy vehicles: NIO's Elevation U8, Elevation U9, and Hyper SSR. So, what plans does Zun Realm have in the million-yuan new energy market?

Medium and large MPVs supporting Huawei's "luxury car dream"?

As early as August last year, analyst Ming-Chi Kuo posted on social media that Huawei and JAC Motor would jointly develop an MPV priced at 1 million yuan, with mass production expected in the second quarter of this year, targeting sales of 50,000 units within a year. Neither party responded to this news, and the "expected mass production in the second quarter of this year" has yet to materialize.

In the fourth quarter of 2023, according to a research report released by China Merchants Securities, the first smart model from Huawei's collaboration with JAC Motor will be a million-yuan-level Sedan (three-box car) targeting Maybach, with the code name X6, expected to be launched in the fourth quarter of this year. Undoubtedly, this will be the most expensive product under the HarmonyOS Intelligent Driving system, demonstrating greater ambition compared to other automakers.

In my opinion, neither of these pieces of information is particularly accurate. To learn more accurate information about Zun Realm, one must search for clues in reports released by relevant departments.

In early March, the Anhui Provincial Department of Ecology and Environment released the "Environmental Impact Report on JAC's Annual Production of 200,000 Mid-to-High-End Smart Pure Electric Passenger Vehicles Construction Project" (hereinafter referred to as "the Report"), which mentioned that JAC will invest nearly 4 billion yuan to build a factory with an annual production capacity of 200,000 new energy vehicles.

Specifically, the new factory will mainly produce medium and large pure electric vehicles based on the DE and X6 platforms, including C-class sedans, B-class sedans, A+-class SUVs, B-class SUVs, and MPVs. Among them, the DE pure electric platform is dedicated to new energy vehicles, focusing on sedans and SUVs, while the X6 pure electric platform is primarily for medium and large MPVs, clearly indicating the use of Huawei's intelligent technology.

In other words, although the first Zun Realm model is said to be targeting Maybach, it is more likely to be a medium and large MPV, and JAC has allocated 17.5% of its production capacity to this million-yuan-level MPV. This suggests that JAC has strong confidence in the first Zun Realm product.

However, confidence alone is not enough. As the first product of Zun Realm, this million-yuan-level MPV will affect consumers' initial impression of Zun Realm and to a large extent determine its position in the domestic market. Whether it will succeed remains to be seen through in-depth analysis.

Is there really a market for million-yuan-level new energy MPVs?

At present, there is not much information about this medium and large MPV, except for its dimensions of 5.2 meters in length and 3.2 meters in wheelbase. Nevertheless, it appears that the first Zun Realm medium and large MPV will be significantly larger than the Toyota Alphard but slightly smaller than the Li Auto MEGA.

Considering that this is a million-yuan-level MPV, comfort features such as "refrigerators, TVs, and large sofas," as well as Huawei's latest ADS intelligent driving system and HarmonyOS cockpit, are expected to be included.

Compared to joint venture MPVs like the Alphard, the first Zun Realm MPV is undoubtedly competitive, thanks in part to Huawei's technology and the absence of import tariffs and market markups, giving it a significant advantage in terms of cost-effectiveness.

In recent years, automakers have launched numerous new energy MPVs, such as the Tencent D9, Xpeng X9, Li Auto MEGA, Volvo EM90, and Zeekr 009. Excluding hydrogen-powered models, the most expensive is the Volvo EM90 with a guidance price of 818,000 yuan.

I have seen many possibilities in this product, and I can't help but be curious about the competitiveness of the Zun Realm million-yuan-level MPV. Of course, curiosity is only one aspect; I am also concerned about this new car.

JAC Motor, which started its business with commercial vehicles, has long realized the importance of the mainstream passenger vehicle market, but the Ruifeng series has not made much of a splash in this market. Entering the new energy era, the Sol brand in collaboration with Volkswagen has not made much progress either, including JAC Yiwei launched last year.

It can be said that apart from contract manufacturing for NIO, JAC has not shown outstanding results in the new energy market.

In the first half of this year, JAC Group sold a total of 206,200 vehicles, with commercial vehicles showing growth while passenger vehicles, including sedans, SUVs, and MPVs, saw varying degrees of decline. However, focusing on the new energy sector alone, JAC Group sold 13,000 new energy passenger vehicles, an increase of 15.28% year-on-year, but the sales base is not comparable to other traditional brands.

Unlike other HarmonyOS Intelligent Driving vehicles, the first Zun Realm MPV dares to directly enter the million-yuan market. It must be said that JAC Motor is very bold. The annual production capacity planning of 35,000 units is equivalent to an official monthly sales target of around 3,000 units for this million-yuan MPV.

Judging from the sales figures in June, let alone million-yuan-level MPVs like the Alphard, apart from the Tencent D9 DM-i, only four new energy MPVs had monthly sales exceeding 2,000 units: the ARCFOX HiKi, HOVOTO Dreamer PHEV, Besturn NAT, and Trumpchi E8 PHEV. It is almost impossible for the Zun Realm million-yuan MPV to achieve a monthly sales target of around 3,000 units. Allocating so much production capacity to this million-yuan MPV raises concerns about overcapacity.

Of course, sales are just one aspect. More importantly, how many consumers recognize the product strength of the first million-yuan-level Zun Realm MPV. Million-yuan-level vehicles are not meant for high volume sales, but if they can deliver surprises on the technical level like the NIO Elevation U8, they are likely to build a reputation and lay a solid foundation for future more affordable products.

JAC can only rely on Huawei

It is not uncommon for domestic brands to enter the million-yuan market, but whether it is million-yuan sports cars, SUVs, or MPVs, they all represent the upper limit of automakers' technology and design capabilities. These vehicles are not intended for high volume sales but rather to serve as the "crown jewels" of the brand, showcasing the brand's technical capabilities while gradually introducing the technologies carried by million-yuan products to lower-priced models.

Huawei does not make cars but helps automakers make good cars. Recently, Seres announced its first-half performance forecast for this year, having exceeded its doubling plan in the first half, with an expected net profit attributable to shareholders of listed companies ranging from 1.39 billion yuan to 1.7 billion yuan, finally achieving a turnaround from losses.

Yu Chengdong revealed that due to its weak cost control capabilities, HarmonyOS Intelligent Driving does not currently consider launching vehicles priced below 200,000 yuan, going so far as to say that models priced below 300,000 yuan are generally unprofitable. In the segment above 200,000 yuan, HarmonyOS Intelligent Driving already has products priced between 200,000 and 570,000 yuan. Launching million-yuan-level products first seems like a "big step," but it can help HarmonyOS Intelligent Driving establish a higher brand position to a certain extent.

Unlike Seres, JAC does not have a strong appeal in the new energy market, and its first model is a million-yuan-level MPV. Realistically speaking, even for BYD, not all products under a single automaker are "blockbusters." JAC needs to prepare for expectations in advance.

From another perspective, perhaps this is also a means of dislocated competition, as there are few MPVs priced below one million yuan that have outstanding sales. Instead, products targeting high-net-worth individuals may have new opportunities. For example, Toyota's Alphard has always been a standard companion car for celebrities and businessmen, and the Zun Realm MPV, which boasts of surpassing Maybach, still has a chance to seize a certain market share.

However, in my opinion, the product line planned by Zun Realm will certainly not be limited to just one medium and large MPV; sedans and SUVs are also expected to be involved, and there is a good chance that Zun Realm will fill the gap in the price range of 600,000 to 1 million yuan. Finally, I would like to say that to attract more consumers, JAC might as well give more rights and interests of Zun Realm to Huawei. After all, Huawei already has a successful case with the "Wen Realm" (which has also helped Thalys achieve a turnaround), increasing the likelihood of Zun Realm being recognized by the market.

Source: Leitech