Xiaomi released its high-end model SU7 Ultra this week. The New York Times published an article on Friday analyzing the reasons why Xiaomi was able to build a car in a short period of time while Apple failed, pointing out China's supply chain dominance and Xiaomi's ecological integration advantages. After nearly a decade of trying, Apple finally gave up on its efforts to build an electric car last year, canceling a $10 billion project.
Yet last year in China, electronics manufacturer Xiaomi developed its first electric car in just three years and delivered 135,000 units. The company vows to double this delivery figure by 2025.
China's supply chain advantages
Xiaomi's ability to succeed where Apple failed shows how thoroughly China has come to dominate the electric vehicle supply chain. Chinese companies have mastered the technology to make electric cars. By leveraging this supply chain infrastructure, Xiaomi is able to obtain parts quickly and cheaply.
Policy support has helped Chinese electric car companies control all aspects of the supply chain, including car battery minerals. That early advantage helped two Chinese companies, BYD and CATL, become the world's top two battery makers.
Xiaomi has taken advantage of this supply chain, using batteries from BYD and CATL for its cars. Thanks to its cooperation with BAIC, Xiaomi was able to quickly start production. Currently, construction workers in Beijing are working around the clock to build the second phase of Xiaomi's car factory.
Stephen W. Dyer, head of the Asia automotive business at consulting firm Alix Partners, said that all the above-mentioned manufacturing capabilities help Chinese electric vehicle companies spend far less time from development to production than China's traditional automakers, allowing them to quickly bring new models to the market and focus on developing software that can be continuously updated.
Now, more and more Chinese electric car companies are beginning to turn a profit, including Leapmotor, Li Auto and Cyrus. For many years, they have been fiercely competing for China, the world's largest auto market, and have invested heavily in this effort.
Xiaomi isn't the only Chinese consumer electronics company dabbling in electric vehicles. Huawei is also developing self-driving systems, and the company has partnered with several Chinese automakers, including Thales, SAIC, BAIC and Chery.
Ecological integration
Xiaomi makes a variety of electronic products, from robot vacuum cleaners to air conditioners, that are connected through its operating system and controlled through its apps. To a certain extent, Xiaomi Auto SU7 is just another electronic product. It can use data collected from other devices about the owner's daily habits to determine the best time to charge the car's battery.
"Xiaomi has really started to integrate into your home," said Gary Ng, senior economist at Natixis. "Everything is connected in a way that no other company can."
While sales of the SU7 account for only a fraction of sales by China's top electric carmakers, it and other Chinese companies have dealt a heavy blow to foreign manufacturers that have long dominated China's luxury car market. Within a year of the SU7 being launched, Porsche's deliveries in China dropped by nearly 30%.
On Thursday night in Beijing, Xiaomi unveiled a high-end version of its car, the SU7 Ultra, as well as a top-of-the-range version of its latest smartphone. The company test-drove a prototype of the SU7 Ultra on the Nürburgring track in Germany, a grand warm-up for the launch of the car. Xiaomi says it set a record for the "fastest four-door sedan" there. Regulatory documents show that Xiaomi also plans to release a sports utility vehicle YU7 this year.
Understanding Chinese consumers
The popularity of Xiaomi's consumer electronics products gives it a deep understanding of Chinese consumer preferences. On the first day of SU7 delivery, buyers can go to Xiaomi's app store and purchase accessories to spruce up the car, such as an analog dashboard clock and a row of physical switches connected to the touchscreen panel.
"The advantage of the brand puts Xiaomi ahead of many competitors," said Tu Le, managing director of consulting firm SinoAutoInsights. "This is what is needed to sell cars globally because it is not just a consumer product but an emotional product."
Fierce competition at home has prompted many Chinese automakers to export large quantities of affordable electric vehicles to the global auto market. Last year, BYD sold more than 4 million new cars globally.
Cui Dongshu, secretary-general of the China Passenger Car Association, said it is only a matter of time before Xiaomi cars go abroad.