Just two years after building its first car, China’s largest smartphone maker has already delivered 650,000 electric vehicles — on par with the number of Tesla vehicles sold last year in the world’s largest automotive market.
Xiaomi founder Lei Jun, who has earned comparisons with Steve Jobs, now aims to take on Elon Musk’s company in Europe with its premium EVs known for their breakneck acceleration and advanced features that even Ford chief Jim Farley fell in love with.
Since Lei announced his plan to build a car in 2021, Xiaomi stunned the global car industry with the launch of its first model — the Speed Ultra 7 sports sedan — just three years later with 50,000 being snapped up in the 30 minutes after orders opened.
After the SU7 became one of China’s best-selling cars, its second model, the $35,000 YU7 that rivals Tesla’s Model Y with designs resembling Ferrari’s Purosangue model, received 200,000 pre-orders in just three minutes at last year’s launch.
At the annual Beijing car show on Friday, Lei said the new YU7 GT model “can match the standards of a top-tier German car”. The model, expected to be launched in late May, was the first vehicle developed with its European engineers.
“In just five years, Xiaomi has achieved remarkable milestones,” the 56-year-old chief executive said. “Yet even today, many people still don’t fully understand Xiaomi cars, and some even hold certain biases.”
At a time when China’s crowded car industry is wrestling with overcapacity at its factories, demand for Xiaomi’s EVs has outstripped its ability to make them despite building 410,000 vehicles last year at its new factory in Beijing.
Since Xiaomi was founded in 2010, its revenue has grown rapidly, hitting Rmb457.3bn ($67bn) last year.
Yet analysts said the company was not immune to the intense price competition that has eroded profits and sales at BYD and other mass-volume brands, driving them to seek growth in international markets.
Following explosive expansion in the past decade, sales growth of EVs in China is also expected to slow. “They need to find a growing market elsewhere and it’s a rational decision made by Xiaomi,” said Ernan Cui, analyst at consultancy Gavekal Research.
Xiaomi is Europe’s third most popular smartphone brand. Citing its experience of selling consumer electronics overseas, Cui added: “Xiaomi has a stronger global sales branch than the EV start-ups in China, while its products are more competitive compared to traditional carmakers.”
Lei Xing, founder of Chinese consultancy AutoXing, added Xiaomi’s main rivals would be Tesla, Porsche, BMW and Mercedes-Benz. “There is a brand foundation for consumer electronics in Europe, which is a significant advantage to other Chinese brands,” he said.
Xiaomi has not revealed which European market it will first enter but it established an EV research and development centre in Munich last year, hiring more than 75 engineers. Many Chinese brands have rapidly expanded into Europe with prices roughly double those in China, yet they remain affordable due to advanced software.
“The European market really matters to us,” its chief marketing officer Xu Fei said in her first presentation of strategy to the international media ahead of the Beijing auto show. “We would like to really provide products with better quality and high performance.”
At its only EV factory in China, Xiaomi has deployed its own manufacturing methods and materials to bring down production costs while strengthening the durability of its vehicles. The plant, which produces a car every 76 seconds, has a 91 per cent automation rate with hundreds of robotic arms to assemble the cars while “autonomous mobile robots” carry car parts around the factory.
In terms of design, the company still looks to rivals such as Tesla and Porsche. But European carmakers lacked “smartness of the car” and the ability to connect EVs with a wider ecosystem including to Xiaomi’s smartphones and home appliances, Xiaomi’s chief financial officer Alain Lam recently told Nicolai Tangen, the head of Norway’s $1.8tn oil fund.
Noting frequent visits by European carmakers to its factory, Lam added: “I think you’ve already seen . . . European collaboration with the Chinese players . . . I think that’s what’s going to be helpful in driving the industry forward.”
But analysts say it will be challenging for Xiaomi to export its success in China to European markets where there is still strong brand loyalty especially for premium German brands.
In the first three months of the year, Chinese brands had 8.6 per cent of the new car market in the UK and Europe, but the share was much lower in countries such as Germany and France, according to Schmidt Automotive Research.
“The rite of passage to enter the premium market is extremely long,” said Schmidt’s founder, Matthias Schmidt. “Xiaomi can still be a success in Europe, but more likely at the expense of volume carmakers rather than German premiums.”
Chinese regulators last year tightened oversight of the deployment of unproven self-driving technologies after three people were killed in a crash involving a Xiaomi SU7 with semi-autonomous driving capabilities.
Chris Liu, a Shanghai-based analyst at consultancy Omdia, said Xiaomi would also lose the advantages it enjoys, such as supplier co-ordination, which have allowed the Chinese group to develop a car with advanced features so quickly and cheaply.
“A lot of their competitiveness is tied to China’s ecosystem and that’s not easily portable to Europe,” Liu said.