Ever since he co-founded Xiaomi in 2010, Lei Jun, the chief government of the Chinese language tech big, has pulled off feat after feat of salesmanship. A decade in the past he earned a Guinness World File for promoting 2.1m smartphones on-line in 24 hours. Today, although, he is not only flogging low-cost telephones. Final month Xiaomi bought greater than 200,000 of its first electrical SUV, the YU7, inside three minutes of bringing it onto the market.
Xiaomi’s rise over the previous few years has been vertiginous. Solely Apple and Samsung promote extra smartphones worldwide. The corporate additionally peddles an enormous array of units that connect with its handsets, from air-conditioners and robo-vacuums to scooters and televisions. After a stoop in 2022, which it attributed to “cut-throat competitors” in China for shopper electronics, Xiaomi has roared again to progress, with its income growing by 35% final 12 months. For the reason that starting of 2024 its market worth has practically quadrupled, to HK$1.5trn ($190bn; see chart).
With the profitable launch of the YU7—its second electrical car (EV) after the SU7, a sporty sedan launched in March final 12 months—Xiaomi has pulled off a feat that eluded Apple, which ditched plans to make its personal EV after burning billions of {dollars} on the trouble over a decade. Xiaomi, which introduced its carmaking ambitions in 2021, has put greater than 300,000 of its EVs on Chinese language roads over the previous 15 months, and has a backlog of orders that can take greater than a 12 months to fill. Though its EV division has misplaced cash up to now, Mr Lei has mentioned he thinks it is going to change into worthwhile later this 12 months, a powerful feat in China’s brutally aggressive automotive market.
Xiaomi now has its sights set on world domination. Over the approaching years it intends to open 10,000 outlets overseas, up from just some hundred final 12 months, which it is going to use to point out off its modern new automobiles alongside its shopper electronics. Can something cease its gorgeous ascent?
Xiaomi’s success in EVs is partly all the way down to being in the proper place on the proper time. China lately is awash in carmaking know-how; Mr Lei was in a position to nab high expertise from quite a few different firms. Costs for elements and equipment have plummeted, given the oversupply of each. Getting a manufacturing facility accredited and constructed might be completed much more rapidly in China than most different locations.
However Mr Lei additionally deserves loads of credit score. Insiders word that, in contrast to Apple’s Tim Cook dinner, he took private management over his firm’s carmaking challenge. Success required deep adjustments to how the corporate operated. Previous to its foray into EVs, Xiaomi didn’t personal factories; like Apple, it outsourced the manufacturing of its telephones and different units. But it selected to construct its personal EV manufacturing facility in Beijing, which it’s at present increasing, with a purpose to guarantee strict oversight. It’s now adopting the strategy elsewhere in its enterprise: final 12 months it started producing smartphones itself at one other facility in Beijing, and is constructing a plant in Wuhan the place it is going to make different related units, beginning with air-conditioners.
Xiaomi’s advertising technique—which depends closely on Mr Lei’s cult following in China—has additionally aided its growth into EVs, a lot as adoration for Steve Jobs helped Apple promote its first iPhones. Wuhan College is alleged to have loved a surge in curiosity because of Mr Lei’s attendance there some 30 years in the past. “Mi Followers”, as diehard Xiaomi clients are identified, acquire firm memorabilia and race to get their fingers on each new product. Xiaomi has even managed to maintain the thrill round its EVs regardless of a horrific accident in March during which three college college students had been killed in an SU7 that was being piloted down a motorway by the corporate’s autonomous-driving system. The episode led to criticism of Xiaomi’s security requirements and a brief sell-off in shares, however they didn’t quell demand for the YU7 when it was launched three months later.
It additionally helps that Xiaomi has an enormous buyer base to which it might probably hawk new merchandise. On the finish of final 12 months it claimed 700m month-to-month customers throughout its units globally, up by about 10% from the 12 months earlier than. A lot of them play video games bought on Xiaomi’s app retailer and think about adverts bought by the corporate (these generate a half of the corporate’s whole revenue, in line with Bernstein, a dealer). And a sizeable share of customers purchase their Xiaomi merchandise straight on its app. The corporate has already proved adept at persuading them to improve to costlier telephones. It wants solely a small fraction of them to purchase a automotive for the endeavour to be an enormous success. A lot of Xiaomi’s Chinese language clients had been of their early 20s once they purchased one in every of its first smartphones just a little over a decade in the past. They’re now of their mid-30s, the goal demographic for Xiaomi’s EVs.
Mr Lei is trying past China, too. Practically half of the income the corporate makes from smartphones and different related units comes from abroad, primarily in creating markets similar to India and Indonesia. Mr Lei needs Xiaomi to start out promoting its EVs overseas by 2027. These will most likely not benefit from the form of rapturous reception they’ve at house: Xiaomi doesn’t command something near the identical model loyalty in international markets, and few abroad clients may have heard of Mr Lei. That helps clarify why Xiaomi is investing in constructing an enormous community of bricks-and-mortar outlets overseas, which ought to elevate its profile.
On the similar time, the corporate plans to proceed increasing into new strains of enterprise. It has developed its personal humanoid robotic, CyberOne, and in Could unveiled a sophisticated three-nanometre chip it had designed itself. Roughly half of its employees work in analysis and improvement, spending on which grew by 26% final 12 months, to $3.4bn—greater than the corporate generated in internet revenue. The pondering inside the enterprise is that by creating applied sciences from the bottom up, it might probably establish efficiencies and lift obstacles to competitors.
Maybe the most important threat for Xiaomi is that it’s preventing on too many fronts, contemplating its many merchandise. The worth battle amongst Chinese language EV firms continues to accentuate, and regardless of its progress, Xiaomi stays a small participant. It at present sells round 20,000 automobiles a month, in contrast with greater than ten occasions that for BYD, the market chief. Competitors in smartphones can be heating up as Huawei, one other Chinese language tech big whose handset enterprise was hobbled by American sanctions in 2019, makes a comeback. Nonetheless, Mr Lei’s salesmanship is to not be underestimated.
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