Talent and timing hoist a Johnny-come-lately into top ranks of carmaking

Editor's note:

This is the first instalment of a two-part series looking at Xiaomi's successful transition from a consumer electronics producer to an electric carmaker.

China's tech titan Xiaomi on Thursday unveiled two new flagship products that highlight another watershed in its diversification and climb up the value chain – the SU7 Ultra electric sports sedan and the 15 Ultra smartphone.

According to founder and chief executive Lei Jun, these are "the most high-end products" in Xiaomi's 15-year history.

The Xiaomi SU7 Ultra electric car is priced at 529,900 yuan (US$72,727), down 35 percent from the pre-order 814,900 yuan (US$112,245), and roughly twice the price of its standard SU7 sedan.

Driven by the steep price drop, more than 10,000 buyers placed orders within two hours of the Ultra edition's debut on February 27, Lei revealed.

Together with the Xiaomi 15 Ultra smartphone, Lei hailed the launch as "the beginning of a new era."

Indeed it is. But more than smartphones, I believe it is Xiaomi's foray into automaking that marks a true milestone in its journey toward becoming a premium brand.

Fifteen years ago, Lei, who made his fortune in the software business, gathered with a handful of early employees around a rice cooker filled with millet porridge – Xiaomi translates as "little rice" or "millet" – to celebrate the company's founding.

Few could have imagined that this consumer electronics startup would one day venture into car manufacturing, let alone build its own factory and sell a sports car considered on par with BMW and Porsche.

For years, Xiaomi's smartphones, power banks, smart wristbands and home appliances became synonymous with affordability. Lei even once pledged to keep Xiaomi's hardware profit margin under 5 percent, relying instead on Internet services for revenue streams.

Yet, Xiaomi has consistently aspired to move up the value chain. From handsets to smart wearables and now cars, the brand has steadily worked its way up to shed the budget-friendly image.

And it wasn't until the launch of the SU7, a true best-seller in the electric-vehicle market, that Xiaomi's strategy to become a premium producer really took off.

Late entry

As of December 2024, less than nine months after the launch of the SU7, cumulative orders for vehicle neared 250,000 units.

This left the fledgling carmaker struggling to keep up with demand. About 113,000 SU7 orders were still pending delivery in December, Lei revealed at the global launch.

To meet the ambitious goal of delivering 300,000 cars in 2025, Lei reshuffled key executive positions to ramp up production.

Meanwhile, Xiaomi's factory in Beijing has been running at full capacity. Starting in January, it shifted to an intense production schedule, operating 24/7 with just one day off every two weeks for assembly-line workers.

Yet, Xiaomi's capacity bottleneck may only worsen with the anticipated launch of its first sport utility vehicle, the YU7, in June.

With a projected starting price of 230,000 yuan and an 820-kilometer range, the YU7 is being benchmarked against Tesla's Model Y and is widely seen as a serious Tesla challenger.

While grappling with growing pains, Lei may find himself occasionally reminiscing about Xiaomi Auto's humble beginnings just four years ago.

The consumer electronics juggernaut was a late entrant into the electric-vehicle industry, only announcing its plans to manufacture electric cars in March 2021.

By then, car companies founded by fellow Internet entrepreneurs had been around for a while. Pure-play electric carmaker Nio was founded seven years earlier, while upstarts Xpeng and Li Auto had been in the game for six years.

Additionally, the Chinese electric-vehicle market had already gone through waves of fierce competition and consolidation, with weaker players being knocked out of the race.

When Xiaomi, a company with no prior automaking experience, entered the space, it was met with skepticism and ridicule.

A widely circulated photo of Xiaomi Auto's 17-member executive team from that time revealed that 16 were from Xiaomi's consumer affiliate, with the only car industry hire an exterior designer. It all looked pretty feeble from a core engineering standpoint.

It took Xiaomi three full years to roll out its first car, the SU7, and breaking into the fiercely competitive 200,000-300,000 yuan price bracket didn't seem like a smart business choice when rivals were so firmly established in the market.

During the intervening years, prolonged silence about Xiaomi's carmaking progress led some analysts to predict that the company was doomed to fail.

After all, in China's cutthroat auto market, conventional wisdom suggests that without an early-mover advantage, it is nearly impossible to challenge industry frontrunners, much less disrupt the competitive landscape.

Yet, when the Xiaomi SU7 was launched early last year, it caught even the harshest skeptics off guard. Within 24 hours, pre-orders surpassed 88,898 units, and three months later, deliveries exceeded 10,000.

Xiaomi proved that sometimes, being a late mover can be an advantage.

Giving top talent free rein

So how did Xiaomi turn disadvantages into strengths and create a carmaking empire from scratch?

There's no simple answer, but one of the most widely discussed questions in the industry is this: Without Hu Zhengnan, would Xiaomi have been able to make such a dramatic leap forward?

Hu was formerly the president of Geely Automobile Research Institute. Before that, he had worked for multiple automakers, helping to design nearly a hundred models, including the iconic JMC Yusheng, BYD F3, Haval H8/H9 and Geely Boyue.

During his stint at Geely, Hu spearheaded the development of the Zeekr 001 shooting brake. Built on Geely's "sustainable experience architecture" platform, the model was an instant success. It garnered over 50,000 orders within 40 days of launch and marked Geely's pivot toward electrification.

Within Geely, Hu was recognized as one of the most knowledgeable figures in car development. The consensus was that any emerging auto brand that secured his expertise and service was already halfway to success.

Industry insiders told me that after spending nine years at Geely, Hu no longer found his job challenging. What's more, he found himself sidelined in internal power struggles, failing to secure the top job at Geely's most high-profile brands.

Geely's two flagship electric-car units were assigned to other executives. Zeekr was handed over to An Conghui, while Lotus, its luxury electric sports car affiliate, was entrusted to another Geely veteran, Feng Qingfeng.

Staying at Geely would have limited Hu's ability to pursue his bigger ambitions in carmaking.

At this turning point, Xiaomi's Lei approached the then 48-year-old with sincere respect for his talents, a big paycheck offer and substantial stock options, quickly convincing him to switch allegiance.

What happened next is now well-known. To sidestep industry non-competition clauses, typically lasting two to three years in the auto space, Lei first placed Hu at Shunwei Capital, Xiaomi's affiliated venture capital firm, where he was publicly introduced as an investment partner.

But behind the scene and staying within legal boundaries, Hu provided critical guidance and even leveraged his personal connections to bring many former Geely colleagues to join Xiaomi.

This transfer of Geely's expertise into Xiaomi extended beyond talent. Many aspects of Xiaomi SU7's technology, especially its chassis architecture and tuning, bear similarities to the Zeekr 001.

In many ways, Xiaomi Auto's success was built on the shoulders of giants. With an industry veteran like Hu overseeing engineering processes, standards and research and development, Xiaomi quickly sloughed off its late-entry handicap and became a runner that knew best how to sprint ahead.

(The author, a former Shanghai Daily opinion writer, now works as a business analyst and communication strategist. He has no conflict of interests to declare.)