Xiaomi smart EV is “ALIVE”: what’s next?
A new identity.
A slew of new products.
And a huge decision.
The biggest ever made in the history of this young company.
A week from its 11th anniversary, Xiaomi officially announced its expansion into the smart EV sector after rumors swirled over the past month or so (and intermittently over recent years, for that matter) and repeated denials from senior execs.
First came the official statement released by the company late on March 30. Then came the announcement from Founder, Chairman & CEO Lei Jun himself later in the evening at Xiaomi’s 2021 New Product Launch II event (it was supposed to be announced on March 29 but Lei pushed it back a day and made it a two-part event because he was under the weather, or so he says).
As Lei (who now has a new Chinese nickname “雷布斯克” or “Leibsk,” which combines Chinese names of Steve Jobs 乔布斯and Elon Musk马斯克, two men who changed the phone and car industries, respectively, into his own Chinese name雷军) puts it: “Smart EVs represent one of the largest business opportunities in the next decade and an indispensable component of smart living. Entering this business is a natural choice for us as we expand our smart AIoT ecosystem and fulfill our mission of letting everyone in the world enjoy a better life through innovative technology.
“We want everyone in the world enjoy smart living anytime and anywhere through high-quality smart EVs,” promised Lei.
The industry was sort of looking forward to this moment all along, with the likes of tech giants including Apple, Baidu, Huawei, Google, Tencent, Aliababa, Microsoft and others all having been increasingly involved in one way or another with the auto industry. Baidu confirmed earlier this year that it will be moving into the smart EV sector by teaming up with Geely. So it was only a matter of time before Xiaomi made a move.
Then came March 30, 2021, which will be remembered as one of the biggest days in the history of the Chinse auto industry (and globally for that matter): Lei Jun and his 11-year-young Xiaomi with no car making experience whatsoever make the plunge into the smart EV business. It felt significant even though the industry half expected it to happen. Maybe because it was the long lead-up to the actual announcement, where Lei talked in detail about his trials and tribulations before and after founding Xiaomi 11 years ago which nearly had him tear up, and that he was putting his personal reputation on the line, that made it all the more significant.
The only other event in the history of the Chinese auto industry worthy of more significance that I can think of is probably Geely’s acquisition of Volvo Cars 11 years ago.
“The decision was made after numerous rounds of deliberation among all our Partners, and this will be the final major entrepreneurial project of my life,” he said, emphasizing Mi Fans’ continuous support and trust in Xiaomi’s values as a reason prompting the company’s final decision. “I am willing to put all my personal reputation on the line and fight for the future of our smart electric vehicle. I am determined to lead my team to fight for the success of the Xiaomi EV.”
Somehow I am not surprised at all that Xiaomi eventually made this decision. It has the fan base (that none of the other Chinese smart EV startups had when they were founded), the ecosystem, the cash and the knowledge/ability/experience to integrate hardware/software with its existing products ranging from phones, tablets, laptops, TVs, speakers, and every other smart device or appliance you can think of inside or outside the home except the smart EV, the ultimate IoT device. It was only natural that Xiaomi made the move and by doing so beating Apple to the punch.
The best way to put it perhaps is that famous adage: a journey of a thousand miles begins with a single step. That single step — making the decision to move into the smart EV business — is the easy part.
But now comes the hard part: making a quality smart EV is not the same as making a smart phone. And Lei knows it.
“I am prepared to go all in for at least the next 5–10 years,” said Lei. “We are going to take this journey with huge investment, abundance of respect and lasting patience.”
So what’s next?
It’s still very early in the process. Here are some of the details that we know so far:
· Xiaomi is committed to investing an estimated $10 billion over the course of the next 10 years with an initial investment of RMB10 billion;
· Xiaomi’s smart EV business will be operated under a Xiaomi wholly-owned subsidiary funded entirely by Xiaomi’s own cash flows. That means no outside investors, for now;
· Lei will concurrently serve as the CEO of the smart EV business (but reportedly Chief Strategy Officer Wang Chuan will be Lei’s right-hand man doing all the execution);
· Xiaomi had cash and cash equivalents of about RMB108 billion as of the end of 2020. That is more than what the three public-listed Chinese smart EV startups — NIO, Xpeng & Li Auto — had as of the end of 2020, COMBINED. (NIO had RMB42.45 billion, Xpeng RMB35.342 billion, and Li Auto RMB29.87 billion);
· Xiaomi made the decision 75 days after the board decided to look into the possibility of making cars. During that time, the executive team conducted 85 meetings with over 200 industry experts and had four internal management debates, while the board met twice;
· Xiaomi has a R&D team of more than 10,000 people, and plans to add 5,000 more, probably a majority of those will be involved with the smart EV business;
· A survey conducted by Xiaomi on Weibo showed that 95% of the respondents supported Xiaomi making smart EVs;
So Xiaomi has the money, the team, the ecosystem and the fan base. The only thing left is the car itself and technology, as well as the who, when, what, where and how, to make it happen.
Xiaomi is starting from a clean sheet of paper and Lei knows that it will take about 3–5 years before a “Mi EV” can emerge in any shape or form. So it will probably be around mid-decade before we see an actual car and the second part of this decade to accumulate any meaningful volumes. This is the “when” part.
I suspect the “what” part of it would be along the lines of the Wuling Hongguang MINIEV, not the exact shape and form, but something affordable with clean, minimalistic design yet enough smart features (some of which you won’t find in established EVs) that cater to Xiaomi’s fan base, just like its existing product portfolio which sell on design and price performance. Personally I don’t think it will be the RMB30,000–40,000 price range that the Hongguang MINIEV is in, but perhaps around RMB100,000.
For the “who, where and how” part, though Great Wall Motor has denied that it was in any discussions to contract manufacture EVs for Xiaomi, that doesn’t mean Great Wall Motor or other established OEMs won’t in the future be utilized by Xiaomi. There is certainly plenty of quality capacity sitting around. In fact, it wouldn’t be out of the question for Xiaomi to acquire capacity such as that idling at Borgward, which has a nice state-of-the-art manufacturing facility on the outskirts of Beijing, where Xiaomi is headquartered. Even the Geely Foxconn joint venture announced earlier this year could be a potential suitor. I would be really surprised if Xiaomi decides on a greenfield manufacturing facility instead of utilizing available capacity.
In the coming weeks and months, expect Xiaomi to start (if it already hasn’t done so) poaching technical and management personnel from established Chinese & foreign OEMs as well as Chinese smart EV startups, and more meetings with these potential “frenemies” by Xiaomi’s senior executive team. It also has to make a decision whether to develop its own EV platform or utilize existing ones such as Geely’s SEA platform or even Foxconn’s MIH Alliance platform which are open to others. Another huge task is actually defining its first product, its shape and form and how much utility it wants that product to have as far as owning, subscribing or even sharing is concerned.
So in a sense, a lot of scouting, not only for personnel but for product definition, manufacturing footprint, and technology. And the ultimate test is figuring out an R&D, manufacturing, sales & branding system that work for Xiaomi and its fans. If Xiaomi can do this and ultimately come up with a quality car as promised that plays into its current ecosystem, I wouldn’t worry about the market because its fan base will buy them in a heartbeat.
It looks like it’s all or nothing for Lei Jun and Xiaomi. Though the prospects of success are slim at this point and I’m not holding my hopes high, don’t underestimate “Leibsk” and co.
