HONG KONG -- Huawei Technologies is in talks to take control of a small domestic automaker's electric vehicle unit, two people with direct knowledge of the matter said, in what is seen as a strategic shift for the world's largest telecom equipment maker.
Huawei, which has been battered by U.S. sanctions, is in talks with Chongqing Sokon to acquire a controlling stake in the latter's Chongqing Jinkang New Energy Automobile, said the sources.
The move will allow Huawei to make intelligent cars bearing its own nameplate, they added. 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 EV 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 two years of U.S. sanctions that have cut its access to key supply chains, forcing it to sell a part of its smartphone business.
Underscoring the shift, the company's rotating chairman Eric Xu announced pacts with three 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 Beijing heavily promotes greener vehicles to reduce carbon emissions.
"As individual consumer demand for smart EVs has been picking up notably since mid-last year, the track is now clear and solid in front of the tech giants," said Yale Zhang, managing director of Automotive Foresight.
"Despite of their years of success and experience in smartphone markets, it will still take a few years for them to build a car brand acceptable in the EV sector."
As part of the deal, Huawei also plans to buy an undetermined stake in privately-owed Chongqing Sokon Holdings, the biggest shareholder of Shanghai-listed Sokon, said one of the sources.
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 EVs, is leading the talks with Sokon, said the two people.
The telecom giant looks to finalize the deal as soon as July, said the other source.