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Xiaomi is betting heavily on the ‘four-door smartphone’ despite huge challenges in the electric vehicle market
When Lei Jun took the stage this week to announce Xiaomi’s entry into China’s highly competitive electric vehicle (EV) race, the company’s founder and CEO compared smart cars to “four-door smartphones”. He called the initiative his “big final business project,” taking a confident tone, and described electric vehicles as a “natural choice” for the Chinese device maker to expand its so-called artificial intelligence of things (AIoT) ecosystem, a vision that Lei has. been trying to sell to investors for years. Lei has long promoted Xiaomi as an internet company that also makes hardware. Have questions about the hottest topics and trends from around the world? Get the answers with SCMP Knowledge, our new curated content platform with explanations, FAQs, analytics, and infographics from our award-winning team. “I call him [Xiaomi] the triathlete of the new economy, where Xiaomi manufactures hardware and devices, sells its products through e-commerce and offers services on the Internet, ”he said in an interview with the South China Morning Post in 2018. At that time, the latest financial results from Xiaomi speak for themselves. The Beijing-based company doubled its profits in 2020 from the previous year, raising more than 20 billion yuan (US $ 3 billion). Internet service revenue increased nearly 20 percent; IoT and lifestyle products revenue increased 8.6%. Xiaomi’s foray into electric vehicles reflects the company’s origins: It was founded in 2010, when consumers were moving from feature phones to smartphones. Xiaomi was able to differentiate itself from its early rivals by presenting affordable products. Its first phone cost just 1,999 yuan and reportedly received 300,000 orders in the first 34 hours after launch. “If you compare [the automotive industry] With mobile phones, it is at a critical juncture similar to the transition from feature phones to smartphones, ”said Li Lianfeng, research director at market research firm IDC. “The barriers to entry [in the EV industry] they are actually lower now with the advancement in battery technology and infrastructure construction. Consumer acceptance is not a big obstacle either, ”Li said. “The next competition is for players to meet the specific needs of different consumers.” The key for all players is to develop something unique, according to Danny Chen, an associate who focuses on the auto industry at Hong Kong-based credit rating agency Pengyuan International. “Automakers are racing to develop that landscape-changing product, like the way the iPhone changed the mobile phone segment,” Chen told the Post in January. China’s electric vehicle market has also been boosted by significant government subsidies in recent years as the world’s largest auto market moves toward its ambitious goal of becoming carbon neutral by 2060. Hundreds of companies have attended call. “We don’t think it is too late to enter this market,” said UBS analyst Paul Gong, adding that the Chinese market for electric vehicles is expected to grow tenfold over the next decade. Different companies could gain market share by leveraging their own strengths, he said. However, despite the potential of the market, analysts warn that making an electric vehicle is very different from assembling a smartphone. “The electric vehicle market requires a long-term investment and a different set of capabilities,” said Charlie Dai, principal analyst at market research firm Forrester. “The technological complexity, the business models and the ecosystem of the supply network are very different … not only for the vehicle itself, but also for the investment in the whole ecosystem, such as the battery, motor control, charging batteries and after-sales services. ” “For cars, the technological requirements, especially in security, are much higher than those of a mobile phone … the whole ecosystem requires a large investment,” echoed Li from IDC. Time is also of the essence for Xiaomi. Due to the complexity of the supply chain and strict safety standards in the automotive industry, it generally takes years to bring a new vehicle to market. Right now, Chinese consumers already have a host of electric vehicle options to choose from, ranging from premium Teslas to budget vehicles that cost as little as 30,000 yuan, like the HongGuang Mini EV from Wuling Motors. Both manufacturers were behind China’s two best-selling electric vehicle models last year, according to market research firm Canalys. Also in the game are domestic manufacturers like BYD, SAIC, and GWM, as well as startups Xpeng and NIO, both backed by Lei. Several tech giants, including search engine company Baidu and telecommunications giant Huawei Technologies Co, are also considering entering the arena. Additional competitive pressure could come from foreign brands. By the time Xiaomi launches its electric vehicle, traditional automakers such as Volkswagen, Toyota, Honda and Nissan will already have a multi-year lead, said Chris Jones, Canalys chief automotive analyst. “A lot will happen in the market between now and when the first Xiaomi EV hits the road in the future,” Jones said. 17 Things You May Not Know About China’s EV Industry However, Xiaomi’s Lei sees the opportunity to seize a piece of the fast-growing market too tempting to give up. “Smart electric vehicles represent one of the biggest business opportunities in the next decade and represent an indispensable component of smart life,” Lei wrote in an internal letter after Tuesday’s product launch. The CEO said he took an interest in the electric vehicle industry after meeting Tesla founder Elon Musk in 2013 and purchasing his own electric vehicle from the brand. He hopes that Xiaomi electric vehicles will one day become prized possessions among Mi fans, a community of Xiaomi enthusiasts that the company has been actively cultivating. Great Wall Motor opens the door to technology partners in electric car companies in China One way that Xiaomi could reduce the cost of producing electric vehicles is to partner with established manufacturers. Apple supplier Foxconn Technology Group, for example, struck a deal with China’s leading automaker Zhejiang Geely Holding Group in January to assemble made-to-order electric cars. In any case, Xiaomi has indicated that it is willing to splurge regardless of the result. During Tuesday’s product event, Lei said the company had 108 billion yuan in cash reserves by the end of 2020. It also had more than 10,000 engineers working in research and development, and plans to hire 5,000 more in 2021. ” We can afford to miss More from South China Morning Post: Xiaomi’s new ‘squircle’ logo becomes the butt of jokes online with many claiming they could have done it for a lot less money. The Long Arm of Its Law in Xiaomi and Huawei’s International Patent Battles China’s Tesla competitors post record first-quarter sales, but still face an uphill battle to ensnare the world’s leading electric vehicle electric vehicle war. China: Top 5 EV Fundraisers to Watch Out For in 2021 This article Xiaomi is betting big on ‘four-door smartphone’ despite huge challenges in the EV market first appeared on South China Morning Post For the latest news from the South China Morning Post, download our bile mo app. Copyright 2021.
