A Chinese phone maker did something Apple couldn’t: Make an EV

Visitors film around Xiaomi's first electric vehicle, the SU7, displayed at an event in Beijing, China. (File Photo: Reuters)
Visitors film around Xiaomi's first electric vehicle, the SU7, displayed at an event in Beijing, China. (File Photo: Reuters)

Summary

Xiaomi makes rice cookers, smartphones, lamps and now a car, showing how low the barriers to entry have become in the world of electric vehicles.

BEIJING—Xiaomi is a Chinese company known for its rice cookers, robot vacuums, air purifiers and smartphones. Now, it has pulled off what Apple, its longtime rival, couldn’t: Make an electric car and bring it to market.

And it did it in three years.

In its home market, Xiaomi—pronounced SHAU-mee—is cranking out its SU7 sedan to a waiting list of buyers after its launch in late March. Since early April, the Beijing-based company said it had delivered more than 10,000 of the electric vehicles and received nearly 90,000 binding orders.

Priced between $30,000 and $42,000, the company says the SU7 can go up to 500 miles on one charge, undercutting comparable versions of the Tesla Model 3 in China by around $4,000 and outrunning it by around 200 miles per charge.

Xiaomi’s feat illuminates a new reality in the century-old automotive business: The barriers to entry for making a car have shrunk in recent years with the emergence of electric vehicles. And in this new reality, China is speeding way ahead.

As the hardware has become simpler, the focus for what makes an appealing product has shifted decisively to software and features.

“New EVs are more like computers with batteries on wheels," said Paul Gong, head of China autos research at UBS. “Chinese carmakers are now ahead of almost everyone else along the entire EV supply chain."

To save on time and costs, the company adopted practices from Tesla and other automakers, mined its own product-development know-how and plugged into China’s fast-moving car supply chain. Years of honing laptops, blenders and petcams helped it develop features tailored to a fickle consumer base, including a detachable panel of physical buttons that magnetically clips on below the 16.1-inch center screen for those who don’t like to control their volume or seat via touch screen.

Consumer-product expertise also helped in the integration smartphone, car and household devices. For example, the phone screen can be mirrored on the touch screen. When the car is in a “going home" mode, once it reaches a set distance from home, smart lights and air conditioners switch on inside the residence.

In April, at China’s biggest annual car show, executives from the world’s largest car brands crowded around the Xiaomi stall. Wang Chuanfu, chief executive of Warren Buffett-backed BYD, China’s biggest EV maker, told Xiaomi CEO Lei Jun that he had initially doubted Xiaomi could pull it off, but said he had been proved wrong. “That’s no small feat. Respect!" he said, according to video footage of the exchange.

Eyeing Tesla

Xiaomi is the world’s third-largest smartphone maker, after Apple and South Korea’s Samsung Electronics. But making cars required a whole new level of complexity, Lei told state broadcaster China Central Television in an April interview—even without having to make the internal combustion engine that has made traditional cars so nettlesome to produce.

Xiaomi brought on some 6,000 people to work on the car project, Lei said. Some were recruited from foreign carmakers such as Porsche and BMW; others were transferred from other departments, said Ma Yingbo, a member of Xiaomi’s marketing team. Among the cars Xiaomi looked to for inspiration was Tesla’s Model 3.

To simplify development and reduce costs, Xiaomi adopted Tesla’s process of “gigacasting," which employs large-scale, high-pressure aluminum die-casting to create the car’s frame. The process combines hundreds of manufacturing steps into one, saving on components, weight, cost and time.

Xiaomi also had to innovate. The liquid aluminum that gets injected into the die-casting machine has to be a certain variety that can withstand an extraordinary amount of pressure. Xiaomi had to come up with its own material, building an artificial-intelligence program that used a method known as deep learning to simulate how different materials would behave when placed inside the die-cast machine, Ma said.

China speed

Xiaomi joined with Beijing Automotive Group to begin its plant project using the state-owned company’s car-making license. From there, it took Xiaomi half a year to design the plant and an additional 15 months to build it, with the remainder of the three-year road to launch spent dealing with approvals, quality control and standards.

The company only seriously started looking into entering the car sector after the U.S. government blacklisted it in January 2021 for what it said were ties to China’s military, prohibiting Americans from investing in Xiaomi, Lei told CCTV. (In May 2021, Washington agreed to remove the company from the blacklist.)

On the day of the blacklisting announcement, Lei recalled gathering board members for an emergency meeting, worried that Xiaomi could soon lose access to American components and would no longer be able to make smartphones. In short, Lei said, Xiaomi needed to find new ways of making money.

In March 2021, Xiaomi declared its intention to join the ranks of Chinese EV makers and pledged to invest $10 billion over the next decade.

From one model to mass production

Xiaomi’s entry catapulted it into the top 10 EV newcomers in China and intensifies a drawn-out price war in China’s EV market, where more than 100 brands are vying for a slice of the world’s biggest auto market—many of them unprofitable.

Lei expects only five to eight companies to survive and said that Xiaomi is currently selling at a loss. To turn a profit, Xiaomi would have to produce 300,000 to 400,000 of the SU7 each year, he told CCTV.

Xiaomi needs to quickly increase production to meet demand. Customers who ordered the car in late April will have to wait 40 to 50 weeks for delivery.

There have been reports in Chinese-language media of the car being involved in minor crashes and an SU7 breaking down shortly after delivery. The company didn’t respond to requests for comments on those reports.

Last week, the U.S. increased tariffs on Chinese EVs to roughly 100%. Xiaomi has said it would focus on the China market in the next three years. The company didn’t make Lei available for an interview.

Know thy customer

As the hardware for electric vehicles becomes simpler, what increasingly determines success in China is a car’s software and features, executives say.

For that, Xiaomi could rely on its in-house expertise of household products and gadgets. The company is intimately familiar with customers’ lifestyle preferences and tapped those insights for its product development, said Tu Le, who splits his time between China and the U.S. and is the managing director of the industry research firm Sino Auto Insights.

When Lei showed the SU7 to BYD’s Wang, he said that from the start Xiaomi spent a lot of time trying to make the car appealing to female buyers. “We figured out who calls the shots," said Lei, according to the video footage, explaining that it was usually women who made the final buying decision.

One feature that was particularly popular with female customers, he said, was the car’s sun protection on its glass roof. Xiaomi said that the fortified tinted glass keeps the car cool in the sun and blocks UV rays—a feature appreciated by Chinese women eager to shield their skin from the sun.

The SU7’s dashboard can also plug into Xiaomi’s wider software ecosystem, showing the driver’s Xiaomi phone display and allowing anyone with other Xiaomi devices to control them through the car.

“In that sense, SU7 feels more like another gadget in the Xiaomi world," said Sino Auto Insights’ Le.

Earlier this year, Apple ended its yearslong push to create its own electric vehicle, daunted by the increasing difficulty the company faced as it spent billions trying to catch or exceed the capabilities of existing carmakers.

Upon learning of Apple’s exit, Lei said he instructed employees to ensure the SU7 would work with Apple’s proprietary CarPlay software, which displays iPhone screens on car dashboards, he told CCTV.

Ma Xiaoyun, a student from the northern Chinese city of Tianjin, said he bought a Xiaomi phone in addition to the car just so he could experience their seamless integration with his household devices, such as his water filter and robot vacuum cleaner.

But what appeals the most to the 21-year-old Ma is the car’s acceleration, advertised as 0 to 62 miles an hour in 2.78 seconds—a pace of acceleration reminiscent of some versions of the Porsche Taycan, which costs at least four times as much as the SU7. “I’m getting a lot for the money," he said.

Write to Sha Hua at sha.hua@wsj.com and Yoko Kubota at yoko.kubota@wsj.com

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