Chinese smartphone vendor Xiaomi on Tuesday officially filed with the Hong Kong Stock Exchange that it will start a smart electric vehicle business, “to steer clear of any rumors,” according to its CEO and chairman Lei Jun, following the footsteps of internet giant Baidu into the sector.
Xiaomi will set up a wholly-owned subsidiary, with Lei as CEO and a total investment of USD 10 billion over the next 10 years. “All money will come from Xiaomi,” Lei revealed during the launch event, adding that he turned down investors that were willing to pour money into the new business. Xiaomi has a cash balance of RMB 108 billion (USD 16.4 billion) at the end of 2020 and can afford the initial losses, he said.
Analysts contacted by KrASIA reacted surprised. Zhang Xiang, a researcher with a government-affiliated think tank, expected the firm to partner with other automakers. “With their initial investment of RMB 10 billion (USD 1.5 billion), Xiaomi can come up with model vehicles in the pre-mass production stage,” he predicted, based on the expenditure of other startups including Byton, Xpeng, and Nio. He believes that Xiaomi will spend the initial money mostly on software R&D as the hardware—batteries and other EV parts—are rather mature now.
“This could be a heavy financial burden for Xiaomi and affect its earnings as well,” said Ke Yan, lead analyst at DZT Research. Ke doesn’t expect the company to build its own manufacturing plant, which could be very costly. Xiaomi could come up with vehicles priced above RMB 100,000 (USD 15,000), which are comparable in performance with those currently available in the RMB 200,000 to RMB 300,000 range. That would be in line with their past strategy of offering “value for money.”
In addition to the EV announcement, Lei also introduced the company’s first-ever foldable phone, Mi Mix Fold, as well as an in-house developed chipset, the Surge C1, also known in China as Pengpai C1. The image processing chip will be built into the new phone to optimize photography. It comes four years after Xiaomi unveiled its first chip, the Surge S1, which powered the Mi 5c phones in 2017.
In the past seven years, Xiaomi has never given up investing and exploring the domestic chip industry, said Lei. The Surge C1 is the first step in the company’s pursuit to produce its own chips over the next ten years.