HUAWEI Technologies’ new smart car software and components firm is set for a valuation of up to 250 billion yuan (US$34.67 billion) after it sells stakes to investors including Chongqing Changan Automobile, sources with knowledge of the matter said.

Shenzhen-based Huawei said Sunday it will spin off its four-year-old Intelligent Automotive Solution (IAS) business unit, which aimed to become the equivalent of German automotive supplier Bosch of the intelligent electric vehicle (EV) era, into a new company that will receive the unit’s core technologies and resources.

Main auto partner Changan Auto and relevant parties will own up to 40% of the new firm, a Changan Auto statement showed Sunday. Neither Changan Auto nor Huawei disclosed financial details.

Changan Auto and its ultimate parent, State-owned China Ordnance Equipment Group, also known as China South Industries Group, are considering acquiring about 35% and 5% respectively of the new firm, which could be valued at 200 billion to 250 billion yuan, two of the sources said.

Potential minority shareholders include State-owned automakers FAW Group and Dongfeng Motor Group, which are also in advanced talks with Huawei to acquire up to 5% each, said the sources.

Huawei will likely remain the single largest shareholder with 40% to 50% for at least the next 2-3 years, said two of the sources.

Deal details, notably the ownership split and valuation, have not been finalized and are subject to change, the sources said. The transaction will also be subject to regulatory approval, said one of the sources as well as a fourth person with knowledge of the matter.

The spinoff is rare for Huawei, whose businesses, including telecommunications and consumer electronics, have been owned by founder Ren Zhengfei and close to 100,000 shareholding employees since the firm’s 1987 founding.

In 2020, a year after it was subjected to U.S. sanctions, it sold budget smartphone brand Honor to keep the brand alive.

Three of the sources said one reason for the planned sale is that Huawei has sought to grow the smart car business and needs to recoup capital to cover research and development (R&D) spending.

Huawei senior executives, including Ren, initially pinned high hopes on the unit to be a new growth driver, said the sources.

It has invested US$3 billion in the unit since its inception and grown its R&D team to 7,000 people, showed the company’s 2022 annual report.

The new firm, which Huawei has said will engage in R&D, production, sales and service of intelligent automotive systems and component solutions, will also absorb the group’s other auto-related assets and resources outside the IAS business unit, said one of the sources. (SD-Agencies)