Xiaomi founder Lei Jun said US sanction fears spurred smartphone maker's EV push
Lei Jun, founder and CEO of Chinese smartphone maker Xiaomi, said his fear of US sanctions in 2021 pushed him to build an electric vehicle (EV) business from scratch, revealing for the first time a key motivating factor in his decision to venture into a notoriously challenging business segment.
During a three-hour long speech on Friday, Lei recounted his initial response to seeing his company had been added to a US Defence Department blacklist in the final days of the administration of former president Donald Trump. He called an urgent board meeting, he said, to address the new rules that made it illegal for American investors to hold stock in the smartphone maker because of alleged ties to the Chinese military.
Xiaomi scored a rare legal victory four months later, getting its name scraped off the list - one of the first Chinese companies to do so. But the incident forced Lei to think about the future of the company he founded in 2010, the entrepreneur said during his 2024 annual speech.
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Visitors film around Xiaomi's first electric vehicle, the SU7, displayed at an event in Beijing on December 28, 2023. Photo: Reuters alt=Visitors film around Xiaomi's first electric vehicle, the SU7, displayed at an event in Beijing on December 28, 2023. Photo: Reuters>
Unlike Huawei Technologies, which has been targeted by harsh US sanctions, Xiaomi is not on any US trade blacklist and thus able to source the latest chips from Qualcomm, which are important to remain competitive in the global smartphone market, where Xiaomi competes with the likes of Apple and Samsung Electronics. It is also able to bundle Google services with its handsets, the omission of which all but killed Huawei's smartphone business outside China.
While just announcing its SU7 sedans in March, Xiaomi has already found some success in the market owing to its aggressive pricing strategy. It has delivered more than 30,000 of the vehicles so far, and Xiaomi said it is on track to meet its minimum annual target of 100,000 deliveries by November.
By comparison, Tesla has sold 603,664 vehicles in China last year, up by more than 37 per cent from 2022.
Xiaomi announced plans to launch an EV subsidiary in March 2021, just two months after it was blacklisted by the US.
Lei said Xiaomi turned down venture capital, instead ploughing US$10 billion of its own money into the business over 10 years. Lei called it "the last major entrepreneurship project" of his life.
Part of that investment involves 5.5 billion yuan (US$756.3 million) to build a sprawling EV factory in Beijing, covering 718,000 square metres (7.7 million sq ft), equivalent to 100 standard football pitches, according to the company.
China's EV market has become highly saturated, with numerous start-ups and entrenched carmakers flooding the market, pushing down prices.
Xiaomi's entrance to the market has cast the company - which got its start making budget smartphones - in a new light. As a late mover, Xiaomi has been competing with EV firms including Tesla, Xpeng and Nio on price to quickly gain ground. Lei said at the SU7 launch ceremony that the company was selling the cars at a loss, with a starting price of 215,900 yuan.
Xiaomi's so-called HyperFactory in Beijing switched to double shifts in June, as it ramps up production capacity to meet its maximum annual delivery target of 120,000 vehicles this year.
Xiaomi EVs are equipped with chips from Qualcomm and Nvidia, as well as its own S1, a mobile system-on-a-chip, and C1 image sensor, both designed in-house, according to the company.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.
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