Xiaomi is Why Apple Should Have Made a Car
Xiaomi roared onto global tech scene, raising the bar on what a Chinese smartphone should be. But when the phone market matured, the company executed a daring strategy shift. And then in March 2021, they announced they would make a freakin' EV. They did it. In this video, the rise of Xiaomi, its turnaround, its ride into EVs, and Apple. ## Beginnings Xiaomi cofounder, CEO and Chairman Lei Jun (雷軍) is one of Mainland China’s star technology entrepreneurs.
While still in university at Wuhan, Lei was inspired by Silicon Valley's success stories to found a small company making data encryption software. Graduating after less than two years, Lei joined a software development company called Kingsoft as its sixth employee, after meeting Kingsoft founder Qiu Bojun (求伯君). Qiu is a man of legendary coding ability, called the Bill Gates of China. Earlier, he had single-handedly developed China's first widely used word processing program, WPS, churning out over 1.2 million lines of code. Lei Jun recalls meeting Qiu for the first time: > I saw a very handsome young man, dressed in luxury brands, wearing a black wool coat, walking with confidence as if a celebrity had just made an entrance, passing right by me. In that moment, I thought, “Kingsoft’s programmers are truly amazing” In the early 1990s, WPS ruled the Mainland Chinese DOS market with 95% market share. It truly was a pioneer in the early Chinese software market.
And Lei himself quickly rose up the ranks at Kingsoft. By 1994, at the young age of 29, he became the general manager of their Beijing office. ## Microsoft Then in the mid-1990s, big bad Microsoft entered the Mainland Chinese market and its software was quickly adopted across the country. WPS lost share, and in response Lei led a ferocious three-year rewrite of the whole software - adding spreadsheets, dictionaries, and more. Kingsoft unveiled the new thing as "Pango" in 1995, only to find that it did not sell. Desperate, Lei Jun personally went to the shops himself to try to learn why. But the failure
persisted and eventually a large portion of Kingsoft employees had to be laid off. It was a horrific setback for the high-flying Lei Jun, and in spring 1996 he tried to resign. Qiu refused to accept it, asking him to instead take a six-month break. The break worked - Lei apparently surfed the web the whole time - and he returned in November.
In a 1999 editorial, now lost to the sands of the internet, Lei reflected on his failures leading the Pango team. In it, Lei wrote that Pango had been too forward thinking for its time. Seeing rising adoption of the cool and sexy new Windows OS, he came to believe that the text-heavy DOS was dead as a doornail. So he abandoned it and the still-successful WPS program so that the team can start over from scratch.
WPS and DOS, as it turned out, still had a few more years to go. But Pango, having no connection to WPS, could not capitalize on the WPS DOS user base or brand. Microsoft faced a similar situation as they evolved from DOS to Windows, but took painstaking care to preserve that existing DOS user base.
Kingsoft ended up adjusting their approach, bringing out a "WPS 97" office suite with features similar to Office 97. Subsequent versions over the years hewed quite closely to Microsoft's Office suite products. To Lei, the whole kerfuffle was a lesson to first learn what customers and the market actually wanted rather than immediately leaping to the technologically "cool" thing. Lei eventually became Kingsoft's CEO and led them through a difficult listing on the Chinese public stock markets. But he then resigned from that position in October 2007, citing health-related reasons after ten long years.
For the next three years, he did mostly angel investing. Then in 2010, Lei and seven cofounders, most of them his friends, launched Xiaomi, which literally means "millet". The registration officer thought that they were dealing with an agricultural company. ## Xiaomi Xiaomi made its first splash in smartphones. In the late 2000s, soon after the release of the iPhone, the Mainland Chinese market was flooded with what were called Shanzhai phones. Shanzhai (山寨) means "mountain fortress" and referred to small Chinese companies making cheap knockoff phones. A famous one was the SciPhone - which was a dead ringer for the iPhone.
These phones ran modified/pirated copies of Windows mobile OSes on cheap MediaTek mobile CPUs. Later devices ran open source Android. Largely speaking, at this time what the domestic market offered were amped-up feature phones - basically junk. Enter Xiaomi. Xiaomi's first product was not a device but a low-level custom Android interface
software called MIUI, as in "me-you-I". Produced in two months and released in August 2010, MIUI v1 offered fan-friendly features like a customizable lock screen, folders, themes, and a fresh, polished look. The response from users was enthusiastic, and MIUI gathered 300,000 users in a year without any promotion. A longtime member of the famous Android developer XDA forums somewhat famously raved:
> Has anyone heard about this ROM? Its the MOST INSANE ROM IVE EVER SEEN...It runs SOOO damn fast and smooth ... Its INSANE. Its like they took parts of Android, IOS, added an insane Sense-like wrapper on it..and viola....PWNAGE. MIUI's success with enthusiasts set the stage for Xiaomi's first phone, the Mi 1. The phone had amazing specs. A 1.5 gigahertz dual-core Snapdragon S3 chip, a big 1930 milli-amp hour battery, and a 4-inch LCD screen from Sharp. Lei Jun recalled that the first visit to Sharp's office in Osaka took place in the immediate wake of the March 2011 earthquake and Fukushima. They
were a bit nervous but went anyway, which impressed the folks at Sharp. Flagship phones from HTC, LG, Sony or Samsung with specs like these were priced from 2,500 to even 5,000 RMB. When Lei Jun announced the Mi 1’s shockingly low price - just 1999 RMB or about $310 - the keynote crowd cheered for a good 30 seconds. Such prices were possible because Xiaomi cut their
margins hoping to make back that money by selling software, subscription services, and advertising. Flagship hardware performance. A very capable OS that ran smoothly and offered lots of custom options. And all at rock bottom prices. In addition, you could only buy the phone online,
often in big flash sales. Such events often went viral for free marketing. All of this was catnip for their core market of well-educated, tech savvy Chinese millennials living in the big cities. Xiaomi fans were known for their fervent brand support. Put it all together and you can see why Xiaomi’s phone business grew so fast early on. Xiaomi's emergence marked a floor-raising milestone for the domestic Chinese smartphone industry. And they easily rolled both the low-tier smartphone industry and the old phone makers like Samsung.
## Stalling Growth In late 2014, Xiaomi raised $1.1 billion in a VC round. It valued the four year old startup at $45 billion. Not a lot in today's context. Isn't SpaceX at $350 billion or something like that? But anyway. $45 billion was good enough to make them either the first or second mostly highly valued startup. Right up there with Uber. But the round marked something of a top for the company. In 2015, Xiaomi's revenue growth stalled at just 3%. They had aimed for 100 million handset sales that year, but ended up with just 70 million.
Some of this stagnation can be attributed to outside factors. Xiaomi fans loved the brand. But the majority of Chinese smartphone users were not very loyal, easily switching thanks to increasingly influential super-apps like WeChat and Meituan. By 2015, the competition had upped their game, catching Xiaomi in an awkward middle position between two rising giants. In their traditional budget-friendly price point, Xiaomi faced Oppo, OnePlus, Realme, and Vivo. These brands were all formerly owned by the Chinese device conglomerate BBK. BBK recently
dissolved itself, with their brands now their own independent companies. Xiaomi's model of online retail and flash sales worked for their fans in the big, tier-1 cities like Shanghai and Beijing. But it meant they lacked sufficient reach in China's lower-tier cities. Cities few have heard of but with massive populations like Harbin, Dongguan, Xi'an, and so on. So Oppo and Vivo - referred to as the "OV" siblings in China - gained share by entering brick-and-mortar offline retail, giving potential customers the chance to see the phones and get trained on how to use them in person.
And then on the high-end, you had Apple and Huawei. Huawei in particular. The technology company had been making phones since the early 2000s. But in 2009, they pivoted to Android and started working their way up. By 2012, they had their first flagship phones under the Ascend and Honor branding. Powered by their own Kirin custom silicon chips, they drove hard at Xiaomi and Apple.
In 2014, Huawei pledged to spend $300 million on marketing to shift upmarket into the mid-range and premium handset segments. That year, they passed Xiaomi in market share. They backed this with a massive retail expansion of their own, adding 15,000+ new retail stores in 2015 and 2016. Most of which in Mainland China. The research firm Counterpoint remarked then that Xiaomi phones were seen as an "entry-level" phone. Customers start out with Xiaomi but often later "upgrade" to Huawei or Apple phones. ## Supply Chain Struggles Xiaomi's supply chain struggles did not aid their cause. Their flagship Mi 5 phone was long delayed for what were probably supply chain reasons. It eventually came out in February 2016 - nearly 18 months after the
announcement of the Mi 4. And then chronic supply shortages kept it widely unavailable until April. Then came a big supplier dispute. As the Mi 5 was set to release, Xiaomi executives got into a big shouting match with an executive from their supplier, Samsung. As documented in a Chinese-language biography of Xiaomi titled "To the Forefront" (一往无前), the insulted Samsung executive emailed their superiors detailing the humiliating event.
This led Samsung to unilaterally cut supply of critical AMOLED panels for Xiaomi's Mi Note 2 phablet - which were then scheduled for a June release. This triggered a frantic three-month scramble to find a replacement, which turned out to be LG. It came out in November, several months late, to somewhat middling reviews. Particularly about the screen. And Lei Jun had to get personally involved, flying to Shenzhen and meeting with Samsung executives over wine to smooth out the relationship. All this turbulence meant that in 2016, Xiaomi slid down to fourth place in the Chinese smartphone market. And in the
first quarter prior to the Mi 5's release, they were out of the top five entirely. In July 2016 at an executive event, Lei Jun publicly admitted fault, but insisted that not all was lost and personally promised a turnaround. He took direct control of the supply chain team, reassigning one of Xiaomi's original co-founders Zhou Guangping (周光平) out to a Chief Scientist position. The strong-willed Zhou was critical in developing Xiaomi's first phones, but the two clashed. The Chief Scientist role was essentially a sidelining,
and Zhou later resigned in 2018 for personal reasons. ## Xiaomi’s Shift: Offline Xiaomi responded with several major strategy changes. First, they - like Apple did many years previously - went offline. At the start, Xiaomi retained a few dozen physical locations for servicing repairs, "experiences" or in-person pickups.
In September 2016, they started converting these 33 outlets to full retail shops called Mi Homes. Just three months later, they expanded from 33 to 54 stores. Lei Jun then announced that Xiaomi would add 200 more stores in 2017 with the goal of having 1,000 stores in high traffic areas by 2019. To compare, Apple had about 500 stores globally, though that only counts their directly-owned shops. This was accompanied with an aggressive push to sign up third-party retail partners, particularly in the lower tier Chinese cities and counties. The goal was simple: Battle Huawei, Oppo and Vivo on the retail shelves. This ambitious retail rollout encountered problems in 2018. The company and its newly
appointed head of sales were anxious to hit their KPIs and return to the top spot. This resulted in an overextended expansion - quantity over quality. They had trouble signing up third party retailer partners. As I said earlier, Xiaomi sold their hardware at very low margins, about 2-5%. But such low margins
made Xiaomi phones less attractive for retail outlets and other distributors. And with the partners who did sign up, Xiaomi mismanaged relations. They pushed too much inventory to their partners. They did not give proper favor to the big distributors who could have sold high volumes. And frequent, unexpected online promotions undercut offline partners. After sales on the critical Double 11 sales day, 11.11.2018, failed to meet internal expectations, Xiaomi promised a reset.
The aggressive sales head, Wang Lingming, was sidelined to the head of the Africa business. A few months later, he was fired for "obscene behavior" and assault. Rough. With this retail reset, Xiaomi slowed their expansion, and started working with retail partners to generate demand through them via co-marketing and bonuses, rather than just throwing inventory over the wall. ## Xiaomi’s Shift: Going Upscale But to really incentivize retail outlets to sell more Xiaomi products, the company had to fundamentally change the product itself. This was one of the reasons why Xiaomi began repositioning itself as a higher end brand. In January 2019, Xiaomi spun off their low-cost brand Redmi, which had priced itself at less than 1,000 RMB, or $146. This allowed the company to move its flagship brand to a mid-to-high end price segment. A year later, Xiaomi launched its first high-end phone, the Mi 10 series of phones.
Thanks to COVID, the company held its press conference online and via live TV. Reviewers complained about the higher prices and what they were getting for it, but the move finally gave retailers the margins they needed to sell the product. I must add. In 2020, Huawei temporarily fell out of the Chinese phone market when the US government cut them off from American semiconductors and software like Google Android. Apple was perhaps the most visible winner from this, as many conspiracy theorists like to point out, but Xiaomi benefitted from it too.
## Xiaomi’s Shift: Ecosystems The most impactful part of Xiaomi's strategy shift was their "ecosystem" of internet-connected products, with the smartphone at the center. There were dozens of products, ranging from scooters to rice cookers to Bluetooth speakers to air purifiers to toothbrushes. All these household items were given chips, sensors and software to communicate and be smart. Xiaomi did not produce these things themselves. They source startups - often from their own networks - and work with them to develop a Xiaomi-fied product. SVP Wang Xiang, who eventually rose to be president before retiring last year, explained in an interview with Caixin Global: > The model is: once we find a startup company, instead of hiring them or buying them to integrate them into our company, we invest in those startups > Then we are in charge of the product design, product definitions and ID design. We also help them on the supply chain ... if
their product can meet our requirements, we will sell it with our brand in our channel An example of this is fitness bands, where Xiaomi worked with their product partner to solve a customer pain point of bad battery life. Xiaomi then put it into their stores and became the top seller of budget fitness bands in China. Xiaomi investments in the partners also somewhat benefits them when the companies go public. An example is the Chinese company Ninebot, buyer of the Segway. Xiaomi partnered and invested in them for a self-balancing scooter. And Ninebot later went public on the Shanghai public markets in 2020, with the stock soaring 160% in the IPO. They are today valued at about $5 billion. The ecosystem can also help drive traffic to the retail stores as well. SVP Wang said in another interview with Wired Magazine:
> Buying a phone or TV is a low-frequency event. How many times do you need to go back to the store? But what if you also need a Bluetooth speaker, an internet-enabled rice cooker, or the first affordable air purifier in China? > Our ecosystem gives customers unusual new products that they never knew existed. So they keep coming back to Xiaomi’s Mi Home Store to see what we’ve got.
Does this approach work? There are a few Xiaomi stores here in Taipei and I visit them frequently. Personally speaking, I feel this shift turned Xiaomi into the Muji of consumer electronics, with a wide variety of good though not amazing things. Wang acknowledged this criticism early on, saying: > When we started with this new model, many people said we were not a focused company. They said we are like a supermarket, or a department store ... > "You’re a smartphone company,' they argued. "Why you do rice cookers? Why you do batteries or pens or luggage? Are you crazy?" But it’s not crazy. It works very well for us.
I would say that the Smart Home concept remains up in Mi-purified-air. But if the ecosystem keeps people coming to the stores and keeps them from switching off to another brand, that's a good thing. ## Turnaround Complete The strategic turnaround - plus a revitalized overseas expansion - worked. A remade Xiaomi returned to being one of the world's top five smartphone sellers in 2019. In 2020, they were third. Again, Huawei crashing out contributed to this. With the turnaround well under way, Xiaomi finally filed its IPO on the Hong Kong stock market in 2018. Early on, they wanted a $100 billion valuation, calling themselves a mobile internet and “new retail" company.
But investors pointed out that 70% of revenues still came from selling smartphone hardware. Thus in June 2018, Xiaomi went public at a valuation of about $70 billion. A bit below what they were looking for but nevertheless the biggest offering in two years. Not bad at all. ## A Sudden Emergency I have gone on for quite a while without a single mention of cars.
That is probably poor story-telling, but I am getting there. We are setting the table. Lei visited Elon Musk back in 2013 and he himself owned and drove a Tesla for a while. But until January 2021 he never seriously considered entering the EV business, seeing it as too hard and capital-intensive. Then suddenly out of the blue, he received a phone call from a friend saying that Xiaomi had been sanctioned by the United States government. On January 14th, 2021, the first Trump administration issued an executive order designating Xiaomi as a Communist Chinese Military Company.
All American citizens now must sell their Xiaomi stock within a year. The designation also set the stage for other, Huawei-like unpleasant things down the line. Within two weeks, Xiaomi challenged the executive order in court, citing insufficient evidence. A few months later, a US federal judge agreed and Xiaomi was eventually taken off the list. But during the ordeal, Lei Jun recalled thinking:
> If we could no longer make smartphones, what would our 30–40,000 employees do? During a subsequent emergency board meeting, a member of Xiaomi's board suggested that the company produce electric vehicles as a second major arm of the business. Lei liked the idea. But can Xiaomi afford to do it? Will it distract them from smartphones? And can they compete in what looked like an incredibly crowded space? To answer this, the board formed a research group to interview over 200 experts in cities across China. ## EVs Let me pause a bit to discuss the developing dynamics of the EV industry in 2021 Mainland China. By then, China had been nurturing their domestic EV industry for years. After 2009,
the Chinese government enacted a major policy push that included public purchases of EVs and then consumer subsidies. This matured the ecosystem - the number of charging poles went from 480 in 2009 to 159,000 in 2015 to 2.6 million in 2021. It matured the technology and its costs - EV lithium-ion battery pack and cell costs went from $806 per kilowatt-hour in 2013 to $165 in 2020. Then starting in 2017, the government started slowly adjusting those consumer-side subsidies with the ultimate goal of a full withdrawal. By 2021,
this withdrawal was nearly complete - there had been a two year delay due to COVID. As was desired, the withdrawal consolidated the industry, shaking out weaker players. At the same time, the Chinese government imposed EV production quotas on the carmakers that first went into effect in 2018 - later delayed to 2019. Basically forcing every carmaker to make EVs. So by 2021, the market had much growth ahead but things were ramping up. National penetration of Battery EVs at the end of 2020 was just 5%, growing to 22% by the end of 2021. Exports were starting to ramp too. In 2021, China would export 310,000 EVs,
a three-fold increase over the previous year. And by now, the EV car itself had sufficiently matured to be somewhat modularized. You can roughly map the situation to the American PC industry in the 1980s and the smartphone in the 2000s. Being made from modular, off-the-shelf parts, the PC and iPhone set market standards that others adopted. And in time, independent component suppliers emerged at certain high-value spots within the value chain. In the case of the PC, you can cite Intel's CPU and Microsoft's DOS operating system.
And in the case of the smartphone, you can cite Qualcomm's system-on-chips, or the Android operating system. And in the case of the EV, you can cite the Ningde-based EV battery maker CATL. Such modularity allowed new market entrants to rapidly put their own concept together and bring it to market.
Now in 2021, it had not yet reached the point where you can snap together a chassis, battery, and motor, sprinkle some software, and drive off into the sunset. But configurations - especially those involving the chassis and powertrain - were starting to get standardized. An example of this being Geely’s SEA EV and BYD’s e-Platform architectures, which enable an EV manufacturer to make different sized vehicles on top of a common platform. ## Intense Competition The Chinese EV market in 2021, on the brink of breaking out, had a great deal of diversity. There were over 200 models available in 2021. Of the cars sold that year, 38% were new models. And there were dozens of carmakers competing in the space.
First there were the established giants. Market pioneer BYD had been around since the early 2000s. Their vertically integrated supply chain anchored by their core competencies in battery technology. They would triple sales in 2021.
There was the American giant Tesla. By 2021, they had finished their Shanghai Gigafactory and was already working on expanding it. The Models 3 and Y were some of China's top ten selling cars. There were the established Chinese-American joint ventures. The leading one, SAIC-GM-Wuling,
offered a cheap boxy-looking EV that was one of China's top selling EVs in 2021. The Wuling Hongguang Mini EV cost just $4,500 and is excellent for city driving. Following them were the EV startups. Three in particular stand out: NIO, Xiaopeng or Xpeng, and Li Auto. Each of these companies would deliver 90-100,000 EVs in 2021. 2021 also saw some of China's tech giants partner with various carmakers in an attempt to upscale themselves. In January 2021, Baidu partnered with
the Chinese automaker Geely to create a smart EV joint venture called Jidu Auto. Jidu's CEO said that they expected to spend over $7.7 billion over the next five years. And of course, there was Xiaomi's arch-nemesis Huawei. After lurking around the space for a while, there were signs they were going to take the plunge too.
In January 2021, Chinese automaker BAIC started selling the Arcfox Alpha-S. That car was equipped with a near-total Huawei stack like the HarmonyOS operating system, Kirin chipsets, imaging radar, lidar, and 5G connectivity. BYD, Tesla, Nio, Xpeng, Li Auto, the joint ventures, and Huawei. This is the market that Xiaomi wanted to enter.
## Announcement After a whirlwind 75 days, the research team recommended to move forward in March. Lei Jun backed them, saying: > The automobile industry is converging with the consumer electronics industry. I feel Xiaomi must do it. The board agreed on the condition that Lei personally lead the EV team. After a week of deliberation, he agreed to this condition and they announced it that same day.
Xiaomi published a filing noting an initial 10 billion RMB or $1.5 billion USD investment. Over the next ten years, they intended to invest some $10 billion to become one of the world's top five automakers in the next 10-15 years. The then-52 year old Lei Jun told the press: > This is the last major entrepreneurial project of my life. I fully understand the significance of this decision, and I am willing to stake all my accumulated achievements and reputation to fight for Xiaomi Auto ## Responses The response to Xiaomi's declaration was mixed. On one hand, people appreciated what Xiaomi can bring to the table.
Xiaomi fans were known for their rabid devotion to the brand. They were likely to buy whatever the company produced at the outset. And EVs can be integrated into the overall Xiaomi product ecosystem. Business outlets pointed out that Xiaomi was a digital native, a software-first company. Such experience can give them the leg up on BYD, then seen as a more traditional automaker. Xiaomi did have its share of skeptics. Not only because of the industry's intense competition
but also its reputation for burning cash. Even $15 billion might end up just being table stakes, Geely spent $2.4 billion alone on its new SEA EV architecture. Delays in mass-production and delivery can vaporize their hopes.
But there was also criticism over the nature of the pledge. Xiaomi had so little prior experience in cars, yet Lei Jun was making big flashy promises about going all in. And can they handle the distraction with the smartphone market still so competitive? A year after its ban, Huawei phone sales had dropped down in the dumps, but the company was ramping up for a phoenix-like rise from the ashes. Lei Jun responded to the criticisms one by one. To the cash burn concern,
he said that Xiaomi had plenty of cash in the bank - 108 billion RMB or $16.5 billion USD. To the concerns about distraction, he said the car project would run alongside the current R&D efforts in phones. And they were still going to hire 5,000 engineers for new phone R&D. About the competition, he said that there was still enough growth in the market for everyone. And perhaps to prove that point, he said that William Li and He Xiaopeng - respectively the chairmen of NIO and Xpeng - urged him to take the leap. Some sort of brotherly invitation.
## Launch In December 2023, Lei Jun introduced their first car, the SU7 at the Xiaomi EV Technology Launch event. The SU stands for super ultra. The car is a nice sleek mid-size sedan with a nice external design produced by a team led by Li Tianyuan, a designer poached from BMW. During the launch event, Lei demonstrated some of the car's key features, many of which were called "self-developed" but manufactured by partners. Like the motors. Xiaomi chose aspects like rotors, cooling systems, etc, but the manufacturing is done by partners like United Automotive Electronic Systems - a JV between Bosch and Zhong-Lian Auto.
They showed some of innovations with regards to manufacturing, like a hyper die-casting method somewhat analogous to what Tesla bragged about at some point. Xiaomi bought some land in Beijing for what will eventually be its own factory. And I guess they will do the casting there. But for now, the first SU7s would be manufactured by contract in a Beijing factory owned by the old-fashioned automaker BAIC.
And then they talked about their self-driving stack, the Xiaomi Pilot as it was called. Much of this Xiaomi did from scratch, presumably working off a technology base from an August 2021 acquisition of the self-driving tech startup Deepmotion. Finally, Xiaomi detailed HyperOS, a new Linux-based OS that the company was rolling out to all of its smart home devices and smartphones. HyperOS would replace the company's old Android skin MIUI, which had been with them since the very beginning. Some people anticipated a very cheap EV. After all, Xiaomi first entered
the smartphone market with high performance at low prices. And there had been reports that Xiaomi would keep component margins tight and rely on "software" to make money. But Lei Jun refuted rumors of extremely low prices. Prices were announced in March 2024.
Xiaomi chose a market position similar to Xpeng's: A tech-focused car at the mid to high end. The base model was just above 200,000 RMB or $30K, which then undercut the Tesla Model 3 price by about $4K USD. That is probably losing money for them. There are also accompanying Pro and Max models that go up a little higher to 300,000 RMB or $41.5K USD. They include upgraded batteries for additional range and more equipment for better autonomous driving.
So few hardware components of this first SU7 were actually Xiaomi-manufactured. But the company was deeply involved in component design. Lei Jun himself personally drove it 5,000 kilometers across China to test it. They integrated it into its ecosystem via software, and sold it through its retail channels. ## Sales Lei Jun asserted from the very beginning that if the company produced a car, then its fans would buy it and that is what happened. The company officially started taking orders on March 28th, 2024.
They received 50,000 orders in the first 27 minutes after launch, and had 100,000 orders by April. The first deliveries began a few days later, which is astonishing in my opinion. Xiaomi's journey in cars is not over. But the initial signs are good, with nearly 140,000 SU7 deliveries in 2024. This likely beat their earlier target delivery goal of 130,000. Per Xiaomi's financial statements up to Q3 2024, which is what I have as of this writing, the car business generated over 15.7 billion RMB or $2.1 billion in revenue.
And improving manufacture of the more premium Pro and Ultra lines helped average selling price rise 4% from Q2 to Q3, which in turn improved gross margin to about 17%, which admittedly is not great but better than the 11% in their smartphone division. EVs are also delivering Xiaomi's long-awaited product diversification. In Q1, over 60% of revenues came from smartphones. By Q3, just 51%. EVs in turn represented about 10.5% of quarterly revenue. Xiaomi continued its upscale journey in late 2024 by introducing a new "Ultra" line car with extremely high performance. They marketed it as a road-legal race car - with three onboard
motors capable of a total of 1,500 horsepower. It does 0 to 100 kilometers an hour in 1.98 seconds. Confusingly they created three versions of the Ultra, selling at a range of $72-114,000 USD before taxes, shipping and all that. Which is rather affordable. Deliveries began in February 2025 and people are buzzing over the car's insane capabilities and price tag.
Oh and the stock is up 295% in the past year, as of this writing. ## Conclusion Sometimes I think a company just needs to go for it. There are some parallels between Xiaomi and Apple. Visionary marketing-oriented cofounder. Fervent fans. Breakthrough in smartphones. Focus on user experience,
software and ecosystem as a differentiator. Similar aesthetic taste. Apple made unprecedented profits out of the iPhone. The App Store and its ecosystem lock-in. The steady diversification of the product line, with varying prices for all
types of wallets. The steady in-sourcing of components to capture value from suppliers. Kids in business school should study the iPhone. Not only as a case study on how to make a breakthrough product, but also how to squeeze the absolute most money out of it over the span of nearly 20 years. Perfect business school curriculum. But sometimes you just have to go for it. And I think Xiaomi out-Apple'd Apple. Apple should have made a car. They studied the industry for a decade, cycling through what seemed like an endless array of slick, expensive designs. They looked at buying Tesla. They
looked at making autonomous driving happen. They kept working on their CarPlay product. In the end, persistently low gross margins, distant self-driving dreams, vicious competition, and internal discord within the executive ranks caused Apple to wind down that project. Then they made the Vision Pro instead. To me, the issue is that Apple no longer has its Lei Jun. John
Gruber said it best in a September 2024 post that resonated with me: Apple misses Steve Jobs. They needed someone like him to push the company and just go for it. Lei Jun said about Apple at a March 2024 launch event in Beijing: "I didn’t expect Apple to quit ... Xiaomi will support Apple users just as well." Yes, EVs are a competitive space. Yes, the margins are small. Yes, EVs seem different from iPods. Yes, Americans buy cars every 10 years. And yes, saying no was the financially prudent choice for
the shareholders. But I reckon Jobs would have still done an EV. It is a smartphone on wheels. Who knows what lies ahead for Xiaomi and their foray into the car business. But I admire that Lei Jun put it all on the line to make a car. I feel like Jobs would have done the same,
and Apple is all the worse for not having him around to go founder mode one last time.
2025-03-24 18:24
