Xiaomi, one of the world’s largest smartphone makers, has jumped into the electric vehicle market, releasing a model that is priced at less than half that of EVs offered by Tesla of the US and Porsche of Germany, despite offering better performance than those prestigious brands.
Envisioning a “dream car,” Xiaomi CEO Lei Jun spoke passionately about his company’s first EV, the SU7, for three hours at an event in Beijing on March 28. The climax of his presentation came near its conclusion. The audience erupted into applause when the price of the sporty vehicle was revealed on screen—along with specs that leave the American and German cars behind.
The Max, the high-end model of the SU7 family, has a range of 800 kilometers and a top speed of 265 kilometers per hour, meaning it can driver further, faster, than its rivals, the Porsche Taycan and the Tesla Model S. It hits 100 kilometers per hour in 2.78 seconds, delivering quicker acceleration than the German and American cars.
While Apple of the US has canceled its Apple Car project, Xiaomi has come from out of the blue, seemingly pulling off what the US gadget maker could not.
The SU7 Max also carries an attractive price tag of RMB 299,900 (USD 41,500), compared with RMB 698,900 (USD 96,700) for the Tesla and RMB 1,518,000 (USD 210,000) for the Porsche.
Following the price announcement, the cameras zoomed in on the faces of rival EV manufacturers invited to the event, including Nio CEO William Li and Li Auto CEO Li Xiang. Their chagrin was obvious.
It was only about five years after its founding that Xiaomi became a leading smartphone maker, selling handsets with features comparable to Apple’s iPhone for less than half the price.
Then, in March 2021, Xiaomi announced it was moving into the EV business, vowing to spend USD 10 billion over ten years on R&D. Partnering with Beijing Automobile Works Group on production, Xiaomi released a new EV in just three years that in many ways outperforms its more seasoned rivals. Lei says Xiaomi will become “one of the world’s top five automobile brands in 15–20 years.”
Xiaomi entered the EV market with a high-performance model, adopting the same strategy taken by Tesla and other emerging EV makers: to win over drivers keen on cutting-edge performance, then to move into the mass market of less expensive cars. Xiaomi said it received more than 50,000 advance orders for the SU7—short for Speed Ultra 7—a mere 27 minutes after its release.
Xiaomi will provide products “in all EV categories,” and is developing new vehicles, Lei said, suggesting the company has more models in the pipeline.
An analysis of the SU7 showed that, while Xiaomi makes use of some technologies pioneered by Tesla and China’s BYD Auto, it is seeking to develop a high-performance EV with its own technologies, some of which are more advanced than its rivals.
The SU7’s motor operates at 21,000 revolutions per minute, comparable to Tesla’s and the world’s fastest rotation speed. Motors used by other EV makers usually operate at around 10,000 rpm. Xiaomi said it has achieved that speed through its R&D efforts, such using a high-strength magnetic steel sheet. Xiaomi has announced a plan to develop a 27,200 rpm motor by 2025 and will aim for 35,000 rpm in the future.
For the battery, which accounts for 30–40% of an EV’s cost, Xiaomi makes use of “cell-to-body” technology, which radically reduces the number of components–and therefore costs–by using the battery pack as part of the car’s body.
BYD adopted the same technology earlier in EVs, but the SU7’s battery outperforms BYD’s.
Xiaomi turned to the Qilin battery developed by Contemporary Amperex Technology (CATL) of China. Theoretically, the battery offers a range of more than 1,200 kilometers on a single charge, compared with BYD’s battery range, estimated at around 1,000 kilometers.
Xiaomi is also attempting to overtake Tesla in terms of self-driving technology. The American EV maker is developing an autonomous driving system that incorporates artificial intelligence into all driving inputs and outputs. Xiaomi said it is now capable of producing self-driving software similar to Tesla’s, although it is limited to parking, paving the way for its use in mass market EVs in the future.
How can the SU7 deliver all this technological wizardry so cheaply? One way is through “gigacasting,” a form of aluminum die-casting that combines multiple components into a single large piece. While Tesla maintains an edge over its rivals in gigacasting, Xiaomi manages to cut costs by combining 72 components into one piece. Using cell-to-body battery technology also helps Xiaomi reduce the number of parts.
But these tricks alone do not tell the whole story. In fact, Lei admits that at the price Xiaomi is selling the car, it is not profitable.
“Possibly, Xiaomi may not be considering earning profit from the vehicle alone,” said Sanshiro Fukao, a senior research fellow at Itochu Research Institute.
The Chinese company plans to build a “Xiaomi sphere” that will bring its technological ecosystem into every corner of modern life by connecting its EVs to its smartphones and home appliances.
By incorporating its HyperOS operating system, which is used in smartphones, home appliances and devices, into the SU7, Xiaomi may be seeking to make money from its tech ecosystem. It will offer services by connecting the car to other gadgets, according to Fukao.
Many of its customers’ daily activities will be tied to this ecosystem in some way, through more than 200 devices, including the SU7, Fukao said. The EV is central to expanding the Xiaomi sphere. “Xiaomi is launching services that Apple may have wanted to offer,” he said.
Xiaomi differs from other new EV manufacturers in that it already has a large customer base as a top global smartphone maker. According to US research specialist IDC, Xiaomi shipped 145 million smartphones worldwide last year, making it the third largest manufacturer, behind Apple and Samsung Electronics of South Korea.
In the business year ended in December, Xiaomi logged sales of RMB 270.9 billion (USD 37 billion). It is already a much bigger company than Suzuki Motor, which posted sales of JPY 4.6 trillion (USD 30 billion) in the year to March 31.
Analysts attributed Xiaomi’s rapid growth to its Mi Fan Club. Lei’s “Just for Fans” philosophy has won the company a large following on social media. It hosts events aimed at these fans, many of whom it hopes will want to get behind the wheel of a Xiaomi EV.
At the SU7 launch event in Beijing, Lei said Xiaomi will support Apple’s CarPlay, iPad and other Apple products, stressing that the Chinese company understands its place in the US tech company’s schema. In other words, Xiaomi plans to entice users of Apple products with its EVs as well.
While Tesla is trying to combine EVs and renewable energy, Xiaomi is looking to integrate the data generated by people’s lives. Lei said Xiaomi will complete the “human-car-home smart ecosystem.”
Although EV sales in China rose by roughly 20% in the first two months of 2024 to 550,000 vehicles, EVs’ share of total auto sales in the country dropped to just over 15%, down from more than 20%, according to Tokyo-based researcher MarkLines. In the US and Europe, subsidies for EVs are being cut, even as purchases by early adopters, who prefer the latest gadgets, slow.
In response, American, European, and Japanese automakers are downshifting in their push to introduce EVs. But if they drop their guard on the assumption that long-term market trends have changed, Chinese manufacturers such as Xiaomi may seize their opportunity.
The history of innovators upending previously cozy industries offers a cautionary tale for the wary
This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.