A little over a decade after founding Xiaomi as an Apple copycat, Lei Jun has finally upstaged his Silicon Valley rival.
While Apple this year quietly abandoned a decade-long, multibillion-dollar project to build an electric vehicle, the Chinese group now has EVs rolling off Beijing production lines every couple of minutes.
Lei’s marketing flair and penchant for turning ideas into products has earned comparisons with Steve Jobs for Xiaomi’s chief executive and chair, and the moniker “Lei Jobs” in China. Last week, he took to a Beijing stage in a teal blazer to gush over his triumph of making a car just three years after unveiling his ambition.
“It was so difficult [to build a car] — so difficult that even a giant like Apple gave up,” he told hundreds of cheering fans.
The hard work shows signs of paying off: Xiaomi shares rose 12 per cent on Tuesday in response to strong demand for its SU7 model after the launch event. The company has received more than 100,000 pre-orders, though many of those are refundable deposits.
Since founding Xiaomi with seven colleagues in 2010, Lei, 54, has built the company into the world’s third-largest phonemaker and assembled a product line so diverse that Xiaomi’s logo adorns everything from suitcases to “smart” washing machines.
In 2021, Lei made the group’s most audacious bet yet, announcing a plan to mass-produce cars in 2024 on the back of an initial Rmb10bn ($1.5bn) investment in what he said would be his “last big entrepreneurial endeavour”. The new car slots into Xiaomi’s product universe, allowing drivers to turn on everything from home lights to the rice cooker from their centre console.
“Trying to make a car these past three years, every day I’ve been trembling with fright,” he said last week. “It’s been a huge weight on my mind.”
A person briefed on the initiative said Lei has devoted 70 to 80 per cent of his time over the past year to Xiaomi’s car project, starting at the office at 7am and working until 10 or 11pm. “Lei has an ambition to turn Xiaomi into one of China’s top three EV makers,” the person said.
That would also make Xiaomi one of the world’s largest EV manufacturers. Its plant on the outskirts of Beijing can make 150,000 cars a year, with expansion plans that would double capacity, according to state media. Executives have said Xiaomi’s global footprint, with smartphone distributors and stores around the world, would accelerate overseas car sales.
Yet it is launching in a highly competitive Chinese market that is in the midst of a price war. The country’s vast supply of sleek, cheap and high-quality electric cars has made Citi analyst Jeff Chung less sanguine on the prospects for Xiaomi’s new offering, which closely resembles the Porsche Taycan and has a starting price of Rmb215,900.
“Ultimately everyone could be a loser within the Rmb200,000-Rmb300,000 [pure battery-powered vehicle] segment,” he noted.
The group’s rapid transition from EV wannabe to mass production has been aided by the rise of a mature supply chain in China for the electric car industry. Domestic EV makers, along with Tesla, which has a major factory in Shanghai, have fostered a huge talent pool and a new breed of suppliers from battery giants such as CATL to aluminium parts maker Wencan Group.
A supplier of automation equipment to Xiaomi’s factory said there were dozens of former Tesla employees working inside the plant. “Tesla is like the Whampoa military academy of EVs,” he said, referring to the 1920s training ground for Chinese forces that would go on to unite the country. Similarly, Apple also raided Tesla’s Silicon Valley talent in the early days of its car project.
A spokesperson for Xiaomi said the company received 30,000 résumés from people with experience at major carmakers soon after announcing its EV business, with 3,000 engineers now on staff in the unit.
Lei began his career as a programmer in college in the central Chinese city of Wuhan. In 1989, along with an older alumnus, he released his first product: encryption software sold on a floppy disk.
His next company, started in a local hotel room, sold computers and software, along with printing and photocopying services. “As the business grew in different directions, it became harder and harder to make money,” he recalled during a recent Xiaomi event.
Eventually, he became head of Kingsoft, a Chinese software maker that produces productivity tools similar to Microsoft Office. He continues to hold 23 per cent of the shares of the company, which is listed in Hong Kong and valued at HK$31bn (US$4bn).
Three years after Jobs released the first iPhone in 2007, Lei assembled a team to build a smartphone with similar features. Xiaomi’s handsets became known for their high specifications yet affordable prices. Heavily marketed by Lei, they quickly gained a legion of fans.
But the image of being a value player has been hard to overcome. Lei has repeatedly tried to make premium phones but failed to find many buyers at prices close to Apple’s. It has left Xiaomi selling top-notch products at razor-thin margins: the group’s profit margin was 6.4 per cent last year compared with Apple’s 26 per cent. Investors value the group at just under $50bn, or about one-fiftieth of Apple’s market capitalisation.
Frank He, a tech analyst at HSBC, said Xiaomi made about half its profits from services sold to users, especially from the group’s app store in China, which takes the place of the banned Google Play store.
He said he expected Xiaomi’s cars to sell at a loss for the next two years as the carmaker scaled up but that eventually the group would turn a small profit on each car sold and profit from services sold to drivers.
“Chairman Lei wanted to have a new growth engine with a bigger addressable market,” he said. “The unique advantage for Xiaomi is the brand power. It’s both in China and outside of China.”
Christoph Weber, general manager of engineering software company AutoForm, has worked with Xiaomi’s car unit in Shanghai and said Lei appeared poised to repeat his success in starting with a high-quality car.
“They think as a tech company, not a traditional auto company,” he said.
Additional reporting by Wenjie Ding in Beijing and Edward White in Shanghai
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