Xiaomi, a Chinese technology company, is expanding its foray into the electric vehicle (EV) market by planning to produce a sport utility vehicle (SUV) similar to Tesla’s Model Y. According to insiders, Xiaomi aims to start manufacturing and selling the SUV by 2025 while simultaneously increasing production of its first EV, the SU7, to meet the growing demand.
The decision to develop an SUV comes as Xiaomi seeks to reduce its dependence on the smartphone market, which is dominated by Apple Inc. However, with EVs, Xiaomi is entering a competitive landscape, going head-to-head with established players like Tesla and BYD Co.
While the exact specifications and pricing of the Xiaomi SUV are yet to be revealed, SUVs are gaining popularity in China. Xiaomi’s production plans, initially reported by local media outlet Yicai, may also evolve based on capacity constraints and market dynamics.
According to sources familiar with the matter, discussions about the SUV began when Xiaomi co-founder Lei Jun announced in 2021 that EVs would be his final major entrepreneurial effort. However, the company decided to prioritize the production of the SU7 sedan before venturing into the SUV segment.
Xiaomi anticipates that mass production of the SUV will not commence until late 2025 when its assembly factory in Beijing completes its second phase of construction. Currently, the company’s focus is on ramping up SU7 production due to limited capacity, allowing it to make fewer than 10,000 deliveries per month.
The move into EVs is driven by Xiaomi’s desire to diversify its revenue streams due to sluggish device demand in China’s smartphone market. However, the company faces intense competition in the Chinese EV market, where margins have compressed as Tesla and BYD engage in a price war during a time of slowing growth. Notably, Apple discontinued its own EV project after facing challenges in adapting its technological expertise to manufacturing.
Despite the challenging market dynamics, Xiaomi’s SU7 series has received an overwhelming response, with close to 90,000 confirmed orders as of April. The debut of the SU7 has boosted Xiaomi’s stock price by approximately 30% since late March.
According to analysts at HSBC Qianhai Securities, Xiaomi’s EV business is projected to break even in 2026, two years earlier than previously estimated. This optimistic outlook is attributed to improving production capacity and a positive market reception for Xiaomi’s premium models. The analysts anticipate that shipments will more than double to 240,000 units in 2025 and expect the capacity bottleneck to ease by the third quarter of 2024.
In conclusion, Xiaomi’s ambitious plans to enter the EV market with a SUV reflect its determination to diversify from the smartphone industry. While it faces stiff competition and challenges, including the ongoing price war among established players, Xiaomi’s initial success with the SU7 sedan demonstrates promising prospects for its EV endeavor. With the company’s focus on increasing production capacity and offering premium models, Xiaomi aims to establish itself as a formidable player in China’s evolving electric vehicle landscape.
