China’s Huawei Technologies is in talks to take control of a small domestic automaker’s electric vehicle (EV) unit, two people with direct knowledge of the matter reported, in what is seen as a strategic shift for the world’s largest telecom equipment maker.
Huawei, which has been struck by U.S. sanctions, is holding talks with Chongqing Sokon to acquire a controlling stake in the latter’s Chongqing Jinkang New Energy Automobile, the sources said.
They added that the move will allow Huawei to make intelligent cars bearing its own nameplate. Jinkang counts U.S. EV brand Seres, formerly known as SF Motors, as its main asset.
It would also provide the first evidence that Huawei is looking to go beyond just offering auto operating systems and have an end-to-end presence in the electric vehicle business.
Huawei and Sokon did not immediately respond to requests for comment.
The push into smart cars, if finalized, would signal a major shift in business focus for Huawei after 2 years of U.S. sanctions that have cut its access to key supply chains, compelling it to sell a part of its smartphone business.
Highlighting the shift, the company’s rotating chairman Eric Xu announced pacts with 3 state-owned Chinese carmakers, including BAIC Group, to supply “Huawei Inside”, a smart vehicle operating system, at the Shanghai Auto Show earlier this month.
Huawei’s foray into EVs comes as technology firms such as Xiaomi Corp have been stepping up efforts in the world’s biggest market for such vehicles, as China heavily promotes greener vehicles to reduce carbon emissions.
As part of the deal, Huawei also plans to purchase an undetermined stake in privately-owed Chongqing Sokon Holdings, the biggest shareholder of Shanghai-listed Sokon, one of the sources said.
Richard Yu, head of Huawei’s consumer business group who led the company to become one of the world’s largest smartphone makers and has recently shifted his focus to electric vehicles, is leading the talks with Sokon, the two people reported.
The telecom giant looks to finalize the deal as soon as July, said the other source.