A month after the maker of the iPhone abandoned its decade-long project to build an Apple Car, its rival as the world’s third-largest smartphone maker has begun an audacious attempt to become a top-five auto manufacturer, with the debut of its first electric vehicle.
China’s Xiaomi heralded its greater ambition in EVs with a launch event in Beijing on Thursday night for its Speed Ultra 7 sports sedan, announcing a competitive starting price of Rmb215,900 (€27,686) and availability in its stores across the country from this week. That compares with the Rmb237,900 price tag of Tesla’s Model 3 standard version.
“If I were Tim Cook, I would’ve never done that,” Lei Jun, Xiaomi’s billionaire founder and chief executive, said recently about Apple’s decision to scrap Project Titan. He has called Xiaomi’s car project his final entrepreneurial venture but its first model is being launched amid a brutal price-cutting war in China and an abundance of choice for consumers that could make headway difficult.
While EVs now account for about a third of new car sales in the world’s biggest car market, analysts and executives have predicted a period of consolidation to hit both legacy carmakers and scores of newer entrants to the market. There are also fears in the United States and Europe that as domestic demand growth slows in China, a wave of Chinese EV exports will flood international markets, raising fears over unfair trade practices and national security.
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It has taken just three years for Xiaomi’s first car to come to fruition, emphasising the speed of development in China’s ultra-competitive and world-leading EV industry, and the eagerness of tech companies to gain market share. Another leading Chinese smartphone maker, Huawei, has also been gaining ground with its Aito marque, whose M7 model is the fourth-best-selling EV in China so far this year.
Xiaomi is facing challenges from more traditional carmakers, including Tesla, BMW, BYD and Geely’s Zeekr, who have been making price cuts, said Li Yanwei, a member of the China Automobile Dealers Association Expert Committee. “They didn’t leave much space for the SU7,” Li noted.
The SU7 is being positioned as a “dream car” set to rival Tesla and Porsche and capable of faster acceleration than both, according to Xiaomi’s Lei. He has pledged to invest $10 billion in its EV project over a decade, with the goal of becoming one of the world’s top-five carmakers in the next 15 to 20 years. “Xiaomi Auto is striving for the ascendancy of China’s auto industry,” Lei said.
“Chinese companies are not afraid to try something that hasn’t been done before ... while [groups] like Apple are too big to make quick decisions,” said Tycho de Feijter, an expert in the Chinese car market with Dutch think tank Clingendael.
Xiaomi’s five-seater boasts an operating system that also works with its smartphones and home appliances such as air conditioners and rice cookers, allowing users to control all types of devices while on the road.
“A company that has a smartphone product and a self-developed operating system indisputably enjoys an edge over traditional automakers in terms of car connectivity,” said Yale Zhang, founder of Shanghai-based consultancy Automotive Foresight.
However, analysts also point out the mismatch between Xiaomi’s existing value-conscious customer base and the SU7′s targeted buyers, whom Lei has described as a tech-savvy “elite” with selective tastes.
[ Apple cancels work on electric car, ending decade-long effortOpens in new window ]
Xiaomi, founded in 2010, has built a reputation as a value-for-money smartphone brand, still able to offer top-of-the-line specifications at an affordable price. It has been pushing into the high-end smartphone market in recent years, but still has a long way to go to change its image as a budget player.
“Do you think it is possible that a user of a Rmb1,000 Xiaomi phone can afford an EV worth more than Rmb200,000?” Zhang asked.
Xiaomi has the advantage of supply-chain expertise in consumer electronics manufacturing that is now helping its car business. The SU7 has a range of up to 830km on a single charge, a top speed of 265km/h and a zero-to-100km/h acceleration time of 2.78 seconds, which Counterpoint Research smartphone analyst Ivan Lam attributed to Xiaomi’s “perfect” partnerships with a range of suppliers, including battery giants CATL and BYD and electric-motor maker Inovance.
“Xiaomi doesn’t have much experience in the auto field,” said Lam. “But it is a supply-chain master ... and joined the race at a time when things have grown relatively established.”
The group’s full-year financial results also showed that its core smartphone business continues to generate robust cash flow that can support its loss-making EV initiative.
“It’s an absolute necessity for Xiaomi, a publicly listed company, to look for the next boom spot,” said Lam, adding that the size of the auto market is 10 times that of the smartphone business.
The company is also one of the few latecomers to China’s EV party to receive the blessing of Beijing. The Chinese government has responded to growing overcapacity in an industry now involved in a brutal price war by becoming stricter with licence issuance.
Xiaomi was still able to secure permission for its alliance with state-owned automaker BAIC to manufacture vehicles in a plant located on the outskirts of Beijing, with the capability of making an SU7 every 76 seconds.
“Being a latecomer can also bring a sense of freshness to people,” said auto analyst de Feijter. “China’s EV market is still very dynamic ... there is enough space for a new brand to grow.” – Copyright The Financial Times Limited 2024
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