Xiaomi, a well-known smart consumer electronics maker in China, is joining the country’s burgeoning but crowded electric car market.
The technology company will begin taking orders for the SU7, a four-door sports sedan, following a launch event with founder Lei Jun in Beijing on Thursday evening. Analysts believe its price will be around 300,000 yuan ($40,000).
Government subsidies have helped make China the world’s largest market for electric vehicles, and a bevy of new manufacturers are locked in fierce competition. Most of the industry’s sales have been domestic, but Chinese manufacturers are moving towards foreign markets with lower-priced models, posing a potential challenge to European, Japanese and American auto giants.
Lei is not shy about that challenge, saying at the SU7 unveiling in December that Beijing-based Xiaomi aims to become one of the world’s top five automakers in the next 15 to 20 years.
“I believe that one day Xiaomi electric vehicles will be a familiar sight on roads around the world,” he said in a company press release.
Xiaomi, founded in 2010, is entering an overcrowded market that analysts expect to see a shakeout in the coming years and weaker startups to fall by the wayside.
The combined share of electric and hybrid vehicles in China’s auto sales is likely to reach 42% to 45% this year, up from 36% in 2023, according to Fitch Ratings. But the agency said in a December report that competition could put pressure on automakers’ market share and near-term profitability.
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Known for its affordable smartphones, smart TVs and other devices, Xiaomi aims to capitalize on that technology by connecting its cars with your phones and appliances in what it calls a “Human x Car x Home” ecosystem.
Tu Le, founder of consulting firm Sino Auto Insights, said Xiaomi is trying to close the loop by adding transportation to a mix of products already integrated into its customers’ personal and professional lives.
#China’s latest electric vehicle is a “connected” car from smartphone and electronics maker @Xiaomi. #ElectricVehicles #Xiaomi
“The ability to seamlessly be an ongoing part of someone’s life is the holy grail for technology companies,” he said in an emailed response. “You probably don’t know anyone in Beijing who doesn’t own at least one Xiaomi product, whether it’s a mobile phone, a computer, a TV, an (air) purifier or a tablet.”
As a newcomer to auto manufacturing, the company is making an educated guess that it can design and develop a car that will sell, he said. Given the sluggish Chinese economy and the ongoing EV price war, he predicted it would take a year or two to see if Xiaomi can adapt to correct any mistakes and succeed.
“They’re a technology company, so that’s their advantage, but they need to reconcile that with drinking from a fire hose to learn how to be a technology company that makes cars,” Le said.
CreditSights, a financial research firm, said it expects Xiaomi’s electric vehicle division to sell 60,000 vehicles in its first year and lose money for the first two years due to high marketing and promotion costs.
Chinese automakers are trying expand abroad face political headwinds.
The EU is investigating Chinese subsidies to determine whether they give Chinese-made electric vehicles an unfair advantage in the overseas market. The United States announced an investigation last month in connected cars made in China that it says could collect sensitive information about its drivers.
“China is determined to dominate the future of the auto market, including through the use of unfair practices,” President Joe Biden said when the US investigation was announced. “China’s policies could flood our market with its vehicles, posing risks to our national security. “I’m not going to let that happen on my watch.”
China retreated this week, file a complaint with the World Trade Organization which alleges that US subsidies for electric vehicles discriminate against Chinese products.
The US Department of Defense blacklisted Xiaomi in 2021 for alleged ties to China’s military, but I eliminate it a few months later, after the company denied the ties and sued the US government.