(Yicai) July 3 -- Huawei Technologies sold the trademarks and patents for Aito, the electric vehicle brand it co-developed with Seres Group, to the automaker to re-emphasize that it has no plans to make cars itself, according to an informed source.

Huawei arranged the sale of the trademarks and patents developed under its Harmony Intelligent Mobility Alliance to reassure potential partners that it will not do any business that could compete with them, the source told Yicai.

Huawei needs more automakers to join the alliance so as to establish a healthy cash flow mechanism for its smart car business, the person added, noting that it has worked carefully to avoid any conflict of interest.

The Shenzhen-based tech giant will not make cars on its own but will continue to support Seres in producing and selling Aito models, it reiterated yesterday after the news of the sale emerged. Huawei will provide intelligent connected vehicle technologies to carmakers so that they can make smart vehicles, the firm added.

In January, Huawei set up Shenzhen Yinwang Intelligent Technology with a registered capital of CNY1 billion, according to corporate information platform Tianyancha. The new company, which is dedicated to developing smart car systems and components, aims to solidify Huawei’s intelligent auto business.

Huawei plans to bring in its car industry partners as Yinwang’s shareholders to build an open technology platform with a diversified equity structure, the source said, adding that Changan Automobile will be the first carmaking partner to be introduced.

Changan Auto is negotiating the final details of its tie-up with Huawei, Yicai learned from the record of an investor exchange event released by the Chongqing-based automaker yesterday.

It is worth noting that Huawei also has transferred the trademarks of the Luxeed and Stelato brands to its partners Chery Automobile and BAIC BluePark New Energy Technology since May, according to corporate information.

Downside for Seres

While the sale of the Aito trademarks and patents can help Huawei advance its smart car business, an analyst who preferred not to disclose the name of the brokerage he works for told Yicai that almost all of the auto industry analysts at his firm believe this is a major negative for Chongqing-based Seres.

Following the transaction, Huawei will contribute less in terms of product promotion to Aito, while Seres’s industry status and capabilities are not of the same magnitude as Huawei's, he pointed out.

The stock market highly valued Seres previously due to its deep business ties with Huawei, viewing Aito's potential as comparable to Huawei’s, the analyst said. But as Huawei no longer owns the Aito brand, the market will no longer have a reason to give Seres a premium compared with Huawei’s other auto partners, he noted.

In fact, Seres [SHA: 601127] closed down 1.7 percent at CNY88.45 (USD12.16) a share in Shanghai today, after earlier plunging by as much as 4.5 percent.

Another analyst was not as pessimistic for Seres, saying Huawei’s share of Aito sales revenue will now shrink, boding well for the carmaker’s next earnings report. But the market should worry more about Seres’s operating capabilities after the deal, because as long as Huawei keeps its promise of treating each partner equally, the transaction will be bearish for Seres.

Editors: Tang Shihua, Futura Costaglione