AITO Maker Seres Swings to Loss as Input Costs Gut Huawei Partnership's Profitability
Seres Group has swung from a RMB 2.94 billion (US$408 million) first-half profit to a projected net loss of RMB 1.5–1.8 billion (US$208–250 million) in the same period of 2026, exposing the fragility of China's electric-vehicle boom when commodity cycles turn hostile.
The profit reversal — disclosed in a preliminary earnings warning filed July 12 — marks the sharpest financial deterioration for the Chongqing-based automaker since it achieved breakeven in 2024 on the back of its Huawei-co-developed AITO brand. The swing represents a year-on-year earnings delta of roughly RMB 4.7 billion (US$653 million) in six months, a magnitude that caught analysts off-guard given the company's RMB 59.6 billion (US$8.3 billion) revenue base recorded in full-year 2025.
Seres shares listed on the Shanghai Stock Exchange (601127.SH) have already priced in considerable distress: the stock has shed more than 57% from its intra-year high of approximately RMB 130, trading near RMB 55 as of July 13. The Hong Kong-listed vehicle (09927.HK) faces parallel pressure.
Rising Input Costs Erase AITO's Operating Leverage
The company attributed the loss to two structural cost shocks that compound each other. First, memory chip prices surged roughly fivefold — from approximately RMB 20 per unit to close to RMB 100 — while lithium carbonate costs nearly doubled year-on-year to RMB 180,000 per tonne from RMB 80,000. Seres Chairman Zhang Xinghai quantified the impact at the 2026 China Auto Chongqing Forum in June: per-vehicle costs for the AITO lineup have risen RMB 15,000–20,000, compressing a margin structure that had appeared durable as recently as year-end 2025, when Seres reported a new-energy vehicle gross margin of 28.8%.
Second, the company applied a write-down on legacy assets rendered obsolete by accelerating model cycles — a one-time but telling acknowledgment that the pace of technology iteration in China's EV market is now fast enough to strand capital within a single product generation.
The combined effect is most visible at the subsidiary level. Seres Automobile, the legal entity operating AITO, is guiding for a first-half net loss of RMB 1.05–1.3 billion (US$146–181 million) on an attributable basis, with an adjusted loss (excluding non-recurring items) of RMB 1.7–1.95 billion (US$236–271 million). Critically, the second quarter alone is expected to generate an attributable net loss of RMB 1.9–2.15 billion (US$264–299 million), implying the deterioration accelerated sharply after a relatively contained first quarter.
Volume Decline Compounds the Margin Squeeze
The financial deterioration does not exist in a vacuum — it is reinforced by a volume contraction that limits the company's ability to spread fixed costs. Seres reported June new-energy vehicle sales of 33,669 units, down 26.94% year-on-year. AITO's deliveries fell 30.19% to 30,331 units in the same month. For the full first half, cumulative group sales reached 196,580 units, a 1.02% year-on-year decline, while AITO's 160,779-unit tally represented only a 5.6% gain — a deceleration from the double-digit growth rates that justified the brand's premium positioning.
The contrast with 2024's trajectory is stark. That year, Seres' revenue vaulted from roughly RMB 30 billion to RMB 145 billion as AITO volumes scaled, making it only the second domestic new-energy startup to achieve profitability. The 2026 reversal suggests that the operating leverage that turbocharged margins on the way up is now working in reverse.
Q1 2026 data provided an early warning that the market underweighted: while revenue rose 34.46% year-on-year to RMB 25.75 billion (US$3.58 billion), attributable net profit grew a negligible 0.89% to RMB 754 million (US$105 million), and adjusted net profit collapsed 73.87% to just RMB 103 million (US$14 million). The Q2 implosion was therefore a continuation, not a surprise inflection.
Portfolio Restructuring Signals Strategic Pivot Away from Low-End Drag
Beyond the headline numbers, Seres is executing a deliberate balance-sheet triage. The company has been divesting its Blue Electric budget brand, launched in March 2023 to target the RMB 100,000–150,000 segment. Blue Electric's flagship E5 plug-in hybrid SUV debuted at RMB 139,900 but required a RMB 40,000 price cut within nine months of launch; full-year 2025 retail sales reached only 20,400 units, down 48.36% year-on-year.
In May 2026, the underlying entity was recapitalized through a RMB 6.671 billion (US$926 million) equity expansion and rebranded as Saido Technology. Post-transaction, Chongqing state-asset platform Shaci Zhiyuan became the largest shareholder, while Seres' stake fell to approximately 32.96% — effectively deconsolidating the loss-making unit from Seres' group accounts. Contemporary Amperex Technology (CATL) and other supply-chain investors also participated. Saido Technology subsequently launched an AI-focused vehicle brand, AIVA, in partnership with ByteDance, with the first production model AIVA ME7 targeted at the RMB 200,000-plus segment and slated to debut before year-end 2026.
An automotive industry investor cited by Jiemian News assessed the strategic logic plainly: stripping out Blue Electric removes a chronic earnings drag from the consolidated P&L and should improve gross margin and return on equity metrics — the very metrics institutional investors use to benchmark Seres against peers such as Li Auto and BYD.
Liquidity Adequate, But Cost Relief Timeline Remains Uncertain
Seres stated it maintains "ample cash reserves and a sound liability structure," with sufficient resources to fund R&D — which reached RMB 12.51 billion (US$1.74 billion) in 2025, up 77.4% year-on-year — and strategic investment. The preliminary figures remain unaudited and are subject to revision in the formal interim report.
The more pressing question for investors is whether commodity cost relief arrives before the second half of 2026. Lithium carbonate spot prices and memory chip procurement cycles are both driven by factors largely outside Seres' control. Without a meaningful reversal in either, the company's ability to restore AITO's unit economics will depend on either passing costs through to consumers — a difficult proposition in China's price-war environment — or absorbing them via further margin compression. Neither outcome is constructive for a stock already trading near multi-year lows.
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