Xiaomi builds cars faster than Apple, and “smartphones on wheels” are on the way

According to news on October 17, Apple has been working on a secret project called "Titan" since 2014, aiming to build a true electric car. Apple has replaced four Project Titan leaders and changed its vision for the car multiple times. Apple has spent more than $1 billion on the project over the past few years but has yet to launch an electric vehicle. To make matters worse, Apple's proud tradition of confidentiality has also been broken, resulting in a lot of negative information being exposed by the media.

In the same year that Apple engineers began developing the Titan car, Xiaomi invested 84 million yuan in the map company Kay Rucker. This is Xiaomi's first investment in electric vehicle-related technologies, and has since expanded into fields such as batteries, chips, charging, lithium, and autonomous driving. At the same time, Xiaomi announced in 2021 that it expects to invest US$10 billion in its smart electric vehicle business in the next 10 years. Xiaomi is currently planning to release its first electric car, codenamed MS11, or Modena. Xiaomi plans to go public in the first half of next year once it gets final approval from Chinese regulators.

It’s unclear whether Xiaomi’s foray into electric vehicles will be successful. But judging by the company's rabidly loyal fans, it's likely that Modena will sell well out of the gate. According to Xiaomi, 13 million people in China own at least five different Xiaomi devices or appliances, and that doesn’t include smartphones. These people may become early adopters of Modena.

Although Apple is Xiaomi’s strongest competitor in smartphones, Xiaomi may steal Apple’s thunder in the automotive field. Apple has been trying to gain a foothold in the automotive space for years, and Xiaomi, despite its mistakes, has built a car manufacturing unit covering the entire manufacturing chain and seems likely to become the first smartphone maker to produce electric vehicles. Neither Xiaomi nor Apple commented.

However, the author of this article said that he rarely hears people around him discussing Xiaomi’s electric car plans. This view can be short-sighted and dangerous. First, as the first electric car from an electronics manufacturer, the Modena may end up being a true "smartphone on wheels." This phrase means that electric vehicles are expected to become the main source of revenue and driving force for electric car manufacturers in the future.

Apple makes hundreds of billions of dollars a year from the iPhone business and is the most valuable company. Therefore, automakers are likely to have the same success with electric vehicles. However, traditional automakers have only vague descriptions of the revenue streams that electric vehicles will bring. It can be said that there are currently no electric cars that can be called "smartphones on wheels", they are still just cars.

However, if Xiaomi’s goal is to produce a “smartphone on wheels”, then Xiaomi, which has achieved great success in the smartphone business, seems more likely than traditional car manufacturers to lay out the blueprint for Internet connectivity.

Before Xiaomi, another equipment giant also tried to enter the field of electric vehicles. In 2015, vacuum cleaner designer James Dyson announced that he would build an electric car powered by his own solid-state batteries and assembled a team in a British laboratory. However, four years later, Dyson canceled the project, despite having spent $612 million by then. He said that it is too difficult to make money in the field of electric vehicles! Most players entering this industry find it very difficult to scale, compete and make money.

Xiaomi founder Lei Jun sold online bookstore Joyo to Amazon for $75 million in 2004 and later founded Xiaomi and ran a series of other companies before becoming a venture capitalist. Just four years later, Xiaomi became the world's third-largest smartphone seller, behind Samsung and Apple, a position it has maintained ever since.

In the next few years, Xiaomi acquired or invested in BYD Semiconductor, autonomous driving startups (including Geometry Partner, Zongmu Technology, Shenzhen Technology, Black Sesame Technology, etc.), battery manufacturers (Honeycomb) Energy and WeLion), lithium producer (Ganfeng Lithium Industry), electrolytic salt manufacturer (Xinchen New Materials), etc. Analysts said Xiaomi had acquired stakes in a total of 74 electric vehicle-related companies as of the middle of last year.

In a 2021 filing with regulators, Lei Jun announced that Xiaomi would enter the field of electric vehicles and planned to invest $10 billion in developing electric vehicles and launch its first model in the first half of 2024. Lei Jun said at the time: "I am willing to bet all the achievements and reputation I have accumulated in my life to fight for Xiaomi Motors. And Xiaomi Motors will also be ready to sprint for 5-10 years."

Analysts said, Lei Jun seems to be really interested in electric vehicles and self-driving capabilities. But another reason for his decision is that smartphone sales growth is slowing. Analysts say smartphone sales are close to saturation. Lei Jun believes that electric vehicles will become the basis for Xiaomi’s next growth spurt.

In February, two grainy spy photos of purported Modena cars appeared on industry website RushLane. The first photo shows a sleek white sedan with a full glass roof. Another photo shows the battery identification plate. If true, this means the battery capacity is quite large at 101 kWh, which is similar to the Tesla Model S battery. This suggests that Xiaomi's cars could have a range of well over 300 miles (about 480 kilometers) per full charge. Daniel Ives, an analyst at Wedbush Securities, said: "Xiaomi has sounded the alarm for Tesla and other Chinese companies."

People who follow China's consumer electronics products suggest, To understand Xiaomi, focus on its smartphone strategy of embedding most of its rivals' bells and whistles into its own phones, adding highlights like a Leica dual wide-angle lens camera, and doing so at prices well below those of its main local rivals Huawei, Oppo and Vivo sell. Although Xiaomi sells about 150 million smartphones a year, it makes very little profit. This is intentional as it attempts to gain market share by competing with other vendors. Instead, Xiaomi's biggest profits come from the services it offers on its phones, such as cloud storage, music streaming, TV show, movie and game subscriptions, and lending apps.

Bill Russo, a Shanghai-based automotive industry consultant and former Chrysler executive, predicts that Xiaomi will adopt a similar strategy in the field of electric vehicles. The company will equip the Modena with various features and sell it at a much lower price than Tesla and BYD models. Rosso explained: “This is their brand differentiation, so we’ll see!”

So, what features will Xiaomi cars have? Xiaomi's press releases, acquisitions and investments starting with Lei Jun's initial stake in Kay Rucker in 2014 show that the company has put a lot of effort into developing self-driving capabilities, while Apple and Tesla also take the technology seriously.

In a press release in August 2022, Xiaomi said that the company had established an R&D team of more than 500 people to specialize in the autonomous driving functions of its electric vehicles and develop chips, sensors and algorithms. . Therefore, Modena will support autonomous driving, subject to approval from Chinese regulators. Currently, Chinese consumer cars are allowed to be equipped with Level 2 assisted driving systems, which means autonomous driving on mapped highways is possible as long as the driver keeps his eyes on the road. Analysts expect Modena to have at least L2 autonomous driving capabilities.

Xiaomi is awaiting final regulatory approval from China’s Ministry of Industry and Information Technology, and analysts believe Xiaomi’s application is highly likely to be approved. During an earnings call in August, Xiaomi President Lu Weibing said the electric car would be released next year. Analysts expect Lei Jun to unveil the model at the Beijing Auto Show, scheduled to be held from April 25 to May 4.

Rosso believes that if traditional car manufacturers want to succeed, they must pay close attention to Xiaomi's operations in the electric vehicle business and strive to follow suit. As it stands, he finds their view of the car industry to be "very similar to how Nokia and Motorola view phones," viewing mobile phones as just phones, a one-dimensional product sold by Nokia and Motorola.

Instead, Rosseau said, modern business models involving mobile phones and electric vehicles should focus on earning revenue from services provided to users or drivers.

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