Wednesday, 2024 July 24

Xiaomi CEO Lei Jun expresses “unwavering confidence in victory” at SU7 launch

RMB 215,900 (USD 29,820). After much speculation, Xiaomi has finally unveiled the pricing of its first car, the SU7.

Xiaomi’s entry into the automotive business has long been a major topic of interest in China, with discussions swirling around its design, pricing, and technology, awaiting only the spark of pricing to ignite. Within just four minutes of the car’s launch, preorders for the SU7 exceeded 10,000. 27 minutes later, that number surpassed 50,000. The reception took the industry by storm, with observers remarking that Xiaomi sold almost half of its factory’s annual production capacity within half an hour. By comparison, this is a feat that typically takes other new car companies half a year or even longer to pull off.

At the age of 54, Lei Jun, CEO of Xiaomi, wouldn’t attribute this success to mere luck. On March 30, 2021, when Xiaomi first announced its foray into car manufacturing, Lei declared his intention to stake “all reputation and achievements” on this venture. Over the past three years, he meticulously orchestrated every move. “We approached this launch with unwavering confidence in victory,” Lei told media outlets, including 36Kr, in an exchange following the official unveiling of the SU7.

Xiaomi SU7 electric sedan

Lei’s demeanor was notably lean, his voice tinged with fatigue. Yet, he proceeded to spend close to an hour addressing members of the media, revisiting the darkest moments of car manufacturing, pricing considerations, insights into the price wars between automakers, artificial intelligence, and the interconnectivity of cars with homes. To hear news of preorders for the SU7 exceeding the 10,000-mark in four minutes was described as gratifying by Lei.

In December 2023, Xiaomi organized an event to unveil the technologies that would power its vehicles, sparking much discussion regarding the appearance, road testing, and pricing of Xiaomi’s cars. Lei accurately tapped into this pulse of anticipation. He not only invited the founders of fellow automakers Nio, Xpeng Motors, and Li Auto to the event but also exchanged cars with Wei Jianjun, chairman of Great Wall Motors, before the event began. Nevertheless, the core to ensuring Lei and Xiaomi’s “victory” still lies in product and technological prowess, entailing primarily the Mi Home ecosystem and a pricing strategy that strikes a chord with consumers.

The SU7 is available in three versions: Standard, Pro, and Max, priced at RMB 215,900, RMB 245,900 (USD 33,960), and RMB 299,900 (USD 41,420), respectively. Delivery of the Standard and Max versions is expected to commence by the end of April, while the Pro version will be available by the end of May. Lei admitted that Xiaomi’s car business is still losing a significant amount of money, but this pricing strategy is intended to “show sincerity to fans.”

Initially, the Standard and Max versions of the SU7 were priced at RMB 229,900 (USD 31,750) and RMB 350,000 (USD 48,340), respectively. Until 7:00 p.m. of the night preceding the launch event, Lei said that the team was still discussing pricing, before Lei settled on the notion of showing “sincerity” while also undercutting the Model 3 by RMB 30,000 (USD 4,140) “as a tribute to Tesla, its predecessor.” Previously, the SU7, resembling a Porsche, had already gained attention for its design. As a C-segment sedan, the vehicle’s sleek design appears low-slung and sporty, standing out among the bulky electric sedans with its harmonious proportions and stance.

Xiaomi had been grappling with a pricing dilemma for the SU7 since the beginning of 2024. Although the company indicated in January that the price point would likely exceed RMB 200,000 (USD 27,620), the exact pricing remained undisclosed until the recent launch. Promotional image of the SU7. Image source: Xiaomi.

In terms of performance, the SU7 competes directly with Porsche. For instance, the Max version is equipped with a dual motor and an 800V silicon carbide high-voltage platform, capable of achieving a 0–60 acceleration of 2.78 seconds, ostensibly outperforming even the Porsche Taycan. Regarding range, Xiaomi’s late entry and relatively limited investment mean it may not lead in every aspect, but it still managed to make an impression. For example, the SU7’s energy consumption has been optimized, particularly for the Standard version, achieving a range of 700 kilometers by expending only 73.6 kilowatts of electricity per hour. The official energy consumption of the SU7 is stated as 12.3 kWh per 100 kilometers, which is almost comparable to the BYD Seagull.

In terms of overall vehicle design, Xiaomi’s cars exhibit a maturity not typically seen in new car brands. “The car body is light, yet Xiaomi has managed to achieve higher body strength, which truly tests the overall vehicle design capabilities of the company,” a senior executive of an unnamed automaker told 36Kr.

Automotive intelligence, another notable aspect, constitutes familiar territory for Xiaomi. With a plethora of features like seamless integration with phones and smart homes, as well as a myriad of hardware and software applications within its ecosystem, it’s evident that Xiaomi’s foray into the automotive industry is backed by technological superiority.

The “human-car-home” ecosystem is the highlight of how intelligence has been incorporated into Xiaomi’s SU7. Features like seamless connectivity between Xiaomi phones and the car’s system, even allowing drivers to use digital assistant Xiao Ai to open payment QR codes quickly for highway tolls, exemplify this. With the integration of large models and vehicle perception functions, Xiao Ai can also inform drivers about the brands of vehicles ahead, which tunnel they are entering, and how long it is, among other details.

Previously, Apple also had the capability to build a similar type of ecosystem, but the company has since abandoned its car manufacturing plans. During the media exchange, Lei adamantly stated that he would never make such a decision, believing that “this is a strategy [Xiaomi] absolutely cannot abandon.”

Lei sees the car as a room, fully equipped with smart features. The foundation lies in Xiaomi’s HyperOS, complemented by chips, operating systems, and AI integration. Lei told the media that this has immense significance for Xiaomi’s strategy. After upgrading automotives to become a core focus of the company in 2023, Xiaomi has designed its human-car-home ecosystem to be a closed loop. Apple’s withdrawal from car manufacturing has provided Xiaomi with more opportunities in the automaking space, with its key goal to enable Apple users to access its ecosystem.

AI is also a crucial focus for Lei, who believes that AI will manifest its value in every facet of future vehicles. Currently, aside from introducing large models for Xiao Ai, Xiaomi is also leveraging AI to differentiate itself in the intelligent driving department. For instance, Xiaomi has introduced technology utilizing end-to-end perception decision-making models to park in narrow spaces, functional even in gaps as slight as five centimeters. “AI will bring revolutionary changes to intelligent driving,” Lei said.

From overall vehicle design to intelligence and ecosystem, Xiaomi’s entry into the automotive market exhibits a robust presence, leaving no stone unturned. And amidst the chaos of industry price wars, veteran Lei remains sober, delivering a pricing strategy that hits the mark.

At the event, executives such as Wei Jianjun of Great Wall Motors, William Li (also known as Li Bin) of Nio, He Xiaopeng of Xpeng, and Li Xiang of Li Auto were all invited by Lei with a humble attitude of “paying homage and learning.” Yet, the robustness of the SU7 highlights the lesson that Lei has delivered to the automotive industry at large.

In an interview with 36Kr, Lei shared more insights regarding the price war between automakers, recent AI developments, Apple’s decision to withdraw from the car manufacturing sector, and more.

The following interview is translated and has been edited and consolidated for brevity and clarity.

36Kr: What are your thoughts on the price reductions implemented by several new energy vehicle (NEV) companies? What distinguishes the SU7, and what advantages does it offer? Does Xiaomi plan to participate in the price war?

Lei Jun (LJ): My colleagues have informed me that within the first minute, 100,000 people added the SU7 to the wish list. I believe Xiaomi’s sincerity is ample.

The market today is undeniably volatile, with fierce competition that both culls and catalyzes innovation. Xiaomi has navigated the mobile phone industry for the past 13 years, weathering its fluctuations. We understand its unforgiving nature. Price wars are but one facet of competition. More crucial are the quality of products, technological prowess, and ecosystem. Therefore, I am confident that everyone has recognized Xiaomi’s strengths.

I believe our intelligence and ecosystem capabilities constitute our most robust advantages. It’s not solely about offering an aesthetically pleasing, sun-resistant, and user-friendly car—it’s also about presenting a fresh competitor within the RMB 500,000 (USD 69,060) range.

36Kr: How do you think smart connected vehicles and NEVs should be promoted?

LJ: Lately, I’ve been contemplating the significant strides the government might take, particularly in the realm of charging infrastructure—its construction, quality standards, and efficiency. Initially, these public charging networks may operate at a loss, necessitating government subsidies to alleviate concerns and encourage widespread adoption of electric vehicles.

For instance, while the SU7’s Standard version initially touts a range of 700 kilometers, the power consumption of EVs is considerably higher on highways. Based on our tests, they may only manage about 500 kilometers. However, with energy replenishment facilities along the way and high-quality, high-power charging stations, all reservations about purchasing EVs can be allayed.

Thus, enhancing the charging network serves as a pivotal strategy to further popularize pure EVs. It not only promotes environmental sustainability but also stimulates consumption. Once you’ve experienced the convenience of an intelligent EV, reverting to gasoline-powered cars seems antiquated.

Gasoline incurs costs, whereas driving an electric car is virtually cost-free. Moreover, the inclusion of large screens for music, videos, and navigation enhances the overall driving experience. To be candid, when I used to drive gasoline cars, I didn’t perceive EVs as particularly advanced. However, after becoming accustomed to EVs, gasoline-powered cars seem outdated in comparison. Hence, I firmly believe that even 30-year-old users should give them serious consideration. In fact, the technology incorporated into Chinese EVs is exceptionally advanced.

36Kr: The development of AI models has been rapid over the past year. How does Xiaomi perceive this new wave of AI revolution and capitalize on the opportunities it presents?

LJ: In 2016, Xiaomi introduced the “All in AI” initiative and established an AI laboratory, kickstarting the journey. Last year, we further refined Xiaomi’s strategy, infusing AI into every facet of our business operations.

In the SU7, numerous cutting-edge models are deployed. For instance, by enhancing Xiao Ai’s model, we can amalgamate data from all vehicle sensors to discern the name of the preceding vehicle, tunnel identifiers, and their respective lengths. Hence, the inclusion of generative AI in the car may seem superfluous.

Moreover, for ultra-narrow parking scenarios, we’ve implemented an end-to-end perception and decision-making large model. Initially, our assisted driving algorithm comprised three steps: perception, decision-making, and execution. However, discerning objects within a five-centimeter margin posed challenges even for our cameras—a feat beyond human capability, especially in underground parking facilities. To overcome this, our model mimics human vision by initially analyzing broader perspectives before fine-tuning its calibration—a pioneering approach globally, enabling direct end-to-end computation. As a result, the transformative impact of large models on autonomous driving can be regarded as significant, heralding revolutionary advancements in the field.

Once an intelligent driving system is established with a supplier, maintaining pace with technological advancements necessitates unwavering investment. Failure to invest may impede progress. Presently, both Huawei and Xiaomi are fully committed to investing in intelligent driving. Traditional automakers may feel pressured to allocate substantial funds to a complex product with uncertain outcomes. Consequently, we witness a surge of entities channeling their efforts toward intelligence. In essence, AI is poised to permeate every aspect of automotive functionality in the foreseeable future.

Furthermore, we’ve leveraged AI to calculate materials for our large die casting. The strides made by AI in material science are remarkable, presenting myriad possibilities. Initially reliant on trial and error, material development now entails physical modeling, followed by AI-driven analysis, identifying 5–10 potential solutions for subsequent experimentation. This accelerated R&D pace mirrors contemporary drug development methods. Thus, the multifaceted impact of AI on human society is poised to unfold across various domains.

Xiaomi SU7 provides two sets of Xiaomi Pilot options: Pro and Max. Image courtesy of Xiaomi

36Kr: Apple recently decided to abandon the Titan project and exit the car manufacturing sector, while Huawei has reiterated its stance of not engaging in car manufacturing. Similarly, as a smartphone manufacturer, Xiaomi has entered the car manufacturing arena and opted to launch the SU7 at this juncture. What factors influenced this decision?

LJ: I believe Xiaomi’s strategy revolves around its ecosystem, fostering seamless interaction between phones and cars, as well as between cars and the broader ecosystem. Consider this: isn’t a car essentially a mobile room? It embodies a fully integrated smart home, underscoring the profound significance of Xiaomi’s strategy.

Furthermore, at the core of this strategy lies HyperOS, complemented by cutting-edge chips, operating systems, and AI. What does the full ecosystem entail? Essentially, it encompasses a suite of functionalities applied across diverse scenarios. Following the strategic overhaul in 2023, automotives have emerged as a central component, completing the “human-car-home” closed loop.

Whether it’s Xiaomi or Apple, both entities have ventured into car manufacturing. Despite Apple’s decision to abandon this endeavor—a query I’ve encountered countless times—personally, I wouldn’t have made the same choice. I understand Apple’s decade-long struggle and the challenges encountered along the way. However, from my perspective, this venture is indispensable, irrespective of Apple’s perceived obstacles.

Naturally, with Apple’s withdrawal from the automotive sector, there’s a sense of relief, with one less potential competitor in the mix. Apple loyalists will remain faithful to the brand, while Xiaomi cars will seamlessly integrate with the Apple ecosystem. Given the substantial Apple user base in China, my current objective is to position Xiaomi cars as the preferred choice for Apple users.

36Kr: What is your vision for the ultimate form of Xiaomi’s interconnected ecosystem?

LJ: Every component, from chips to the underlying operating system, should seamlessly integrate whether in the car or at home. The goal is uniformity across environments.

Currently, we’re researching the disparities between automotive standards and consumer standards, aiming to elevate the quality of consumer products to automotive standards, ensuring usability across all settings.

Many of our products are not only intended for use in the SU7 but also for other cars, homes, and offices. For instance, I demonstrated how Xiaomi’s tablet devices can be utilized in the car. It’s not just equipped with additional pin ports. The battery is reinforced, and its heat resistance is enhanced—all tailored for automotive use.

Overall, I believe Xiaomi’s strength in ecosystem development for cars is formidable. These resources are readily available to us. We’re not solely focused on laptops and tablets—we also manufacture home appliances like air conditioners, refrigerators, washing machines, and even television screens. Consequently, Xiaomi’s full ecosystem capabilities are gradually being integrated into cars, representing our true core competitive advantage.

36Kr: The intelligent cockpit is a segment where competition among automakers for new cars is highly standardized. Does Xiaomi’s integration of people, cars, and homes provide sufficient leading advantages? In the future, which do you anticipate will be the primary variable for smart cars: intelligent driving or intelligent cockpits?

LJ: I consider all facets of intelligence to be variables. [During the launch], we’ve only touched on four areas: intelligent driving, the intelligent cockpit, Xiao Ai—which essentially embodies AI—and deeper integration with Xiaomi’s ecosystem. I have yet to delve into discussions about chips, operating systems, and electronic architecture, which I perceive as Xiaomi’s strengths, bringing us back to our origins.

From a technical standpoint, automotives and smartphones can be fundamentally identical. However, I believe there are still significant distinctions between them.

Firstly, in terms of developing systems that run smoothly, I’m confident we’re among the best.

Secondly, the applications we develop undoubtedly rank among the finest, seamlessly intertwining with smartphones.

Then there’s the compatibility of our software ecosystem. If you have an unusually shaped screen, software adaptation becomes an immense undertaking. We’ve been navigating this issue for a decade, enduring our fair share of setbacks with tablets. Standardized sizes are imperative, and those who neglect this aspect fail to grasp its significance.

When you’re developing just two or three software components, the challenge might not be evident. But what happens when you’re dealing with two or three hundred, two or three thousand, or even twenty thousand? The crux of a software ecosystem lies in its compatibility, and our track record in this domain is strong because we recognized early on the need to avoid many pitfalls. Every manufacturer values these two aspects, yet few truly excel at them.

Certainly, companies like Nio, Huawei, and Xiaomi are operating at a different echelon compared to other car manufacturers. While it might be premature to discern differences among the five of us, I firmly believe Xiaomi stands among the best. Given our late entry into the scene, if we don’t surpass them, how can we expect to thrive?

36Kr: Xiaomi currently boasts cash reserves of RMB 136.3 billion (USD 18.7 billion). What portion of this is earmarked for the impending price war in the automobile industry? Additionally, considering expenditures on AI, chips, and large models, how do you intend to allocate these resources?

LJ: Last year, our R&D expenditure amounted to RMB 19.1 billion (USD 2.6 billion), and this year it’s RMB 24 billion (USD 3.3 billion). At this pace, our RMB 130 billion (USD 17.9 billion) reserve should sustain us for at least another five years. Therefore, I don’t consider this a concern.

I firmly believe Xiaomi possesses ample cash reserves to navigate any intense battles over the next five years. This resolve was cemented three years ago when we committed to entering the automotive sector, prompting us to steadily accumulate reserves since then.

In the past three years, we’ve bolstered our cash reserves by RMB 30 billion (USD 4.1 billion). As long as opportunities persist in the future, we’ll continue to accumulate reserves and ensure we possess the requisite capability to rank among the top five global car manufacturers within the next 15–20 years. This journey has only just begun.

Now, regarding the intensity of price wars in the automotive industry compared to the smartphone sector? We started from modest volumes and ascended to significant volumes— we are the kings of volume. Are we daunted by volume? We recognized this from day one. Despite the presence of 300–400 companies manufacturing NEVs, we’ve long understood that only 5–8 will endure.

It’s imperative for everyone to witness our approach: commencing from core technology, every aspect is fortified, with every detail supported by a tenfold investment.

36Kr: In regard to the SU7’s pricing, what internal considerations were taken into account, what stories are behind it, and what processes were undergone?

LJ: We initially unveiled the plan in late December 2023, and within three months, we hosted just two launch events, swiftly releasing the product—an achievement undoubtedly placing us at the forefront among Chinese automakers today, achieved within an incredibly short timeframe.

Typically, a pre-launch buildup takes anywhere between six months to a year, but we condensed this into just three months. I’m not sure how this efficiency was portrayed, but in actuality, we were hesitant even to unveil the pricing.

Internally at Xiaomi, our true quandary laid in determining the pricing. We were well aware we were already operating at a loss. The breakeven point for the Model 3 stands at RMB 223,000 (USD 30,800), and our configuration surpasses this significantly. It’s not because I possess more capabilities than Elon Musk—it’s because we’ve made substantial investments.

[Xiaomi doesn’t] possess that capability, Tesla’s energy efficiency is far superior. It required significant investment for us to reach the same level. Undoubtedly, Tesla is a worthy example to learn from, at least for the next 3–5 years.

So, I’m aware of our breakeven point and that we will certainly incur losses initially, but the question is, how much exactly? Our loyal Xiaomi users can perceive our efforts and sincerity, so it’s crucial to find that sweet spot.

Our initial plan was to set it at RMB 229,000 (USD 31,630), but later, it turned into a nationwide phenomenon, and we ourselves became uncertain—we lost sight of what a reasonable price entailed.

Thus, at 7:00 p.m. on the night preceding the launch event, we initiated discussions. I proposed, “If we make it RMB 30,000 cheaper than Tesla, wouldn’t that be sincere enough?” It’s significantly better than the Model 3, and RMB 30,000 cheaper. Why wouldn’t the cars sell? I suggested we position a car next to Tesla’s entrance for comparison. I believe the average consumer isn’t naive.

We shouldn’t even consider RMB 229,000. It’s meaningless. Tesla is a trailblazer and a global standard-bearer. Let’s start by reducing it by RMB 30,000 out of respect. Once the pricing was finalized, everyone acknowledged the validity of my reasoning, and thus, we proceeded with it.

Initially priced at RMB 350,000, our top configuration was ultimately repriced to RMB 299,900. Given the constrained production capacity, we opted to demonstrate sincerity wholeheartedly, despite incurring losses.

36Kr: What was the most challenging moment for you in the past three years, the moment when you came closest to wanting to give up or feeling the most difficult?

LJ: During 2021, the most frustrating moment for us was when we announced our venture into car manufacturing. We had dedicated a year to design, and our approach was truly cutting-edge; we had even developed two models.

However, during discussions, there were concerns that our designs were too forward-thinking, fearing user acceptance issues. Consequently, we scrapped everything, and our timeline became severely constrained. We pivoted toward a design that could withstand the test of time because failure was not an option with our inaugural car—we couldn’t afford a “Cybertruck moment” that would invite criticism.

The initial design for our first car was quite radical, and the subsequent backlash left us feeling disheartened after investing nearly half a year. What you see today is a complete reboot. We started afresh at the onset of 2022. Amidst the pandemic, pressure mounted, and during the toughest times, I held hour-long video meetings with the design team every morning, even on weekends. I was deeply involved in every aspect, pushing us to rush and complete the entire redesign.

While we’ve recently garnered numerous compliments, my objective back then was simple: the car had to exude visual appeal because that’s how you sell cars. Crafting sleek and low-profile designs for NEVs, given their bulky battery packs, is no small feat. Many electric sedans tend to resemble SUVs, but the SU7 stands out distinctly. We poured our hearts into it, and given the opportunity, we’ll delve deeper into its intricacies.

36Kr: Xiaomi is a prominent company born and bred in Beijing. With the establishment of the super factory, what plans and considerations does Xiaomi have for fostering the development of Beijing in the new energy vehicle industry and the enhancement of the entire industry chain for smart manufacturing?

LJ: I’m very grateful for Beijing’s support for Xiaomi. We are born and raised in Beijing, so in February, we built Xiaomi’s smartphone factory in Changping, and in March, we built the automotive factory in Yizhuang. Both of these factories are very modern and require significant investment.

Xiaomi EV factory in Beijing. Image courtesy of Xiaomi.

Our aim with these investments is to propel smart manufacturing in Beijing. Taking the automotive industry as an example, given that cars are primarily equipped within a 50-kilometer radius, our presence will attract component manufacturers to cluster around Xiaomi. We strategically positioned ourselves near Mercedes-Benz to leverage shared supply chains.

Upon analysis, I found that two-thirds of our suppliers are also suppliers to BBA (Mercedes-Benz, BMW, and Audi). I believe that if Xiaomi’s cars can achieve success, more suppliers will gravitate toward us.

Beijing currently hosts Mercedes-Benz, BAIC Group, Li Auto, and Xiaomi. If these four entities can collaborate and advance collectively, Beijing’s smart manufacturing sector will experience comprehensive growth.

Regardless of who emerges as the leader, the development of surrounding components, ecological chains, and industrial networks will all witness enhancement. Additionally, the integration of Beijing, Tianjin, and Hebei is a significant aspect. Wei Jianjun attended our launch event, and we are keen on collaborating with Great Wall Motors. While the industrial foundation in the Yangtze River Delta and the Pearl River Delta may be more robust, northern companies must exert more effort.

As a northern-based company, we also have our advantages. We’ve certified our entire winter range, making Xiaomi’s EVs a preferred choice for drivers in the north. As for drivers in the south, well, they should also consider Xiaomi—after all, our EVs offer excellent sun protection. Just kidding.

KrASIA Connection
KrASIA Connection
KrASIA Connection features translated and adapted high-quality insights published on 36Kr.com, the largest and most influential technology portal in Chinese language with over 150 million readers across the globe.
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