Seres’ 60% Stock Rout: Can the Huawei-Backed EV Maker Stand Alone?

Seres Group's A-share stock has shed more than 60% from its September 2025 peak, exposing a structural tension between surging revenue and collapsing core profitability—raising urgent questions about whether the automaker can sustain its premium valuation without Huawei exclusivity.

Shares of Seres hit a fresh 60-day intraday low on June 25, 2026, extending a rout that has wiped out more than RMB 180 billion (approximately US$25 billion) in market capitalization since the stock peaked at RMB 173.55 per share on September 30, 2025. By mid-June 2026, the stock had retreated to around RMB 66—a decline exceeding 60%, representing more than RMB 100 billion in lost market value.

The severity of the selloff is drawing attention not just because of its scale, but because of its timing: Seres posted full-year 2025 revenue of RMB 165.054 billion (US$22.9 billion), a record high and a 13.69% year-on-year increase. Yet the market is clearly looking past the top line.

Revenue Surges While Core Earnings Collapse, Alarming Investors

The financial divergence at Seres is stark. Full-year 2025 net profit attributable to shareholders reached RMB 5.957 billion (US$827 million), a near-flat 0.18% increase year-on-year. More critically, non-recurring-adjusted net profit—the metric that strips out government subsidies and one-time gains to reflect genuine operating performance—came in at RMB 5.136 billion, down 7.84%.

The deterioration accelerated into Q1 2026. Revenue climbed 34.46% year-on-year to RMB 25.746 billion (US$3.58 billion), yet non-recurring net profit cratered 73.87% to RMB 103 million (US$14.3 million). In plain terms: revenue grew by a third, but the money actually earned from selling cars shrank by nearly three-quarters.

Two cost lines are consuming the margin. Selling expenses in full-year 2025 reached RMB 24.194 billion, up 26.12% year-on-year. Research and development expenditure hit RMB 7.954 billion for the full year, up 42.41%, before surging a further 70.68% year-on-year in Q1 2026 alone to RMB 1.794 billion. Management attributes the non-recurring profit collapse primarily to this accelerated R&D spend.

The cash flow picture compounds investor anxiety. Q1 2026 operating cash flow turned deeply negative at -RMB 20.95 billion (US$2.91 billion), a dramatic reversal from the positive RMB 28.91 billion recorded at end-2025. Cash disbursements to suppliers are outpacing collections from vehicle sales—a working capital dynamic that typically signals either aggressive inventory build-up or deteriorating receivables. In the 10 trading days through mid-June 2026, institutional net outflows totaled RMB 1.87 billion. A buyback program announced in late March 2026—targeting RMB 1–2 billion in A-share repurchases for cancellation—has completed approximately RMB 320 million in purchases, yet has demonstrably failed to arrest the decline.

AITO Delivery Growth Stalls, Exposing Concentration Risk

The investment thesis for Seres has always rested on one product ecosystem: AITO, the premium brand co-developed with Huawei under the Harmony Intelligent Mobility Alliance. In 2025, AITO accounted for more than 82% of Seres' total deliveries.

That concentration is now a liability. AITO delivered 386,300 vehicles in 2024, representing growth exceeding 300% year-on-year. In 2025, deliveries reached 426,000 units—but growth decelerated sharply to 10.1%. The 2026 monthly data tells a more troubling story: January deliveries of 40,012 units were followed by a February collapse to 10,003, a partial recovery to 20,234 in March, 30,003 in April, and 30,187 in May. The trajectory remains well below the "monthly average exceeding 40,000 units" target publicly articulated by Huawei's consumer business chief Richard Yu.

Model-level erosion is broad-based. The M9—once the undisputed flagship of China's premium SUV segment, averaging 13,000 monthly deliveries in 2024—has seen volumes drop to a monthly average of just 3,794 units in the first four months of 2026. The M5 is losing relevance in the RMB 220,000–250,000 price band. The M7 faces intensified competitive fragmentation. Only the newly launched M6 has shown momentum, crossing 20,000 deliveries in its first month—but a single model cannot rebalance the entire portfolio.

Huawei's Ecosystem Expansion Dilutes Seres' Competitive Moat

The most structurally significant threat to Seres is not a competitor—it is its most important partner.

AITO's premium positioning was built on a simple and powerful proposition: if a consumer wanted Huawei's Advanced Driving System (ADS), AITO was essentially the only option. That exclusivity is gone. Huawei's Harmony Intelligent Mobility Alliance has expanded to a five-brand architecture—AITO, LUXEED, STELATO, MAEXTRO, and a fifth brand SHANGJIE — distributing Huawei's engineering resources, software updates, and brand equity across a much wider surface area.

Yu himself acknowledged at a recent product event that since the M9's launch two years ago, more than 40 competing SUVs targeting the "9-series" premium segment have entered the market. Rivals including Li Auto with its L9 Livis, NIO with the ES9, and Zeekr with the 9X are all competing for a segment Citigroup estimates has a total addressable volume of only 100,000–150,000 units annually.

Citi, in a June 11, 2026 research note, cut its full-year 2026 AITO sales forecast for Seres to 468,000 units—a significant downward revision that reflects the bank's view that volume recovery will be slower than the company's internal targets imply.

The market's repricing logic is straightforward: if Huawei's ADS is now a multi-brand platform rather than an AITO exclusive, the "Huawei premium" embedded in Seres' valuation must be redistributed or discounted. The stock's decline is, in part, a mechanical adjustment to that new reality.

Gross Margin Leadership and Nascent Growth Vectors Offer a Counterargument

The bear case is well-documented. The bull case is less discussed but not without substance.

Seres' gross margin in 2025 reached 28.76% on new energy vehicles—the highest among all A-share listed automakers. In Q1 2026, that figure held at 26.24%, still the only listed Chinese automaker above 25%, and materially ahead of Xpeng at 20.58%, NIO at 19.03%, and BYD at 17.78%. Premium pricing power has not collapsed.

New product momentum is also visible. The next-generation M9 recorded more than 20,000 firm orders within 24 hours of launch, with cumulative pre-orders exceeding 70,000 units. Cumulative M9 deliveries across all generations have surpassed 290,000 units. The M6's first-month performance suggests the company retains the ability to generate launch-period demand.

Brand recognition is expanding internationally. In the Brand Finance 2026 Global Automotive Brand Value Top 100, AITO ranked as China's number-one luxury automotive brand by brand value at US$3.448 billion, and the only Chinese brand in the global luxury automotive top 10.

Overseas expansion represents a potential earnings catalyst. Seres has unveiled global variants of the AITO 9, 8, 7, and 5 series, with deep localization underway for Middle Eastern markets and overseas deliveries targeted to commence in 2026. Management has indicated that international vehicle margins are meaningfully higher than domestic equivalents.

The company is also making early-stage investments in humanoid, wheeled, and quadruped robotics. With R&D headcount at 9,019 employees—41.1% of total staff—the infrastructure for longer-term technology optionality is being assembled, even if near-term revenue contribution is negligible.

Sector-Wide Derating Provides Context, But Does Not Fully Explain Seres' Underperformance

Seres is not suffering in isolation. On June 22, 2026, Hong Kong-listed auto stocks experienced broad-based selling: Geely Automobile fell nearly 6%, Great Wall Motor dropped 5%, and BYD and NIO each declined more than 4%. Among China's leading new energy vehicle startups, Li Auto, Xpeng, NIO, and Leapmotor have all recorded maximum year-to-date drawdowns exceeding 20%. Xiaomi, whose SU7 sedan has been a notable market share gainer, is down 34% year-to-date.

Seres' 44% year-to-date decline, however, exceeds the sector average—reflecting the company-specific factors outlined above rather than purely macro or sentiment-driven pressure.

The central question for investors is whether the current valuation—implying a company with industry-leading gross margins, a dominant position within Huawei's ecosystem, and a nascent international business—has overshot to the downside. The answer depends heavily on whether Q1 2026's cash flow dynamics normalize, whether AITO's monthly delivery run-rate can sustainably return to 40,000 units, and whether the dilution of Huawei exclusivity has been fully priced in or still has further to run.

Capital markets, as a rule, overshoot in both directions. For Seres, the compression of the Huawei premium has been swift and brutal. What remains to be tested is the standalone value of what the company has built beneath it.

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