Xiaomi's Triumph in the Electric Vehicle Market Over Apple's Unsuccessful Venture
Xiaomi, the Chinese tech giant known for its smartphones and consumer electronics, has made a splash in the electric vehicle (EV) market, a sector where other tech giants like Apple have faltered. The Xiaomi SU7, their latest offering, shares the Xiaomi operating system and can be controlled by the company's app, setting it apart from many traditional automakers.
But what sets Xiaomi apart from the pack?
Supply Chain Mastery
Xiaomi's success can be attributed to its mastery of the supply chain. By tapping into China's highly developed and integrated EV supply chain, Xiaomi can acquire components quickly and cheaply, leveraging China's dominance in raw materials, battery production, and component assembly.
Vertical Integration and Industrial Ecosystem
Chinese firms like Xiaomi benefit from a vertically integrated supply chain, where companies control resources from mineral extraction to vehicle assembly. This provides insulation from supply bottlenecks and scale advantages difficult for foreign firms to replicate. Apple, on the other hand, lacked such integration and close ties to this industrial ecosystem.
Business Model Adaptation
Xiaomi has taken a practical approach, producing high-quality, connected EVs at competitive prices and moderate margins (6%-12%), fitting their expertise from smartphones and consumer electronics. Apple, however, sought to develop fully autonomous vehicles, an ambitious and risky move that demands different capabilities. Apple also pursued the car project covertly for over a decade, ultimately failing to bring a product to market.
Digital Ecosystem Integration
Xiaomi’s advantage includes strong digital synergies—using a unified OS ("HyperOS") across phones, homes, and cars, enabling seamless device integration. This ecosystem approach appeals to existing Xiaomi users and bolsters user experience and brand loyalty, which Apple could not replicate in cars.
Manufacturing and Speed to Market
Xiaomi executed faster, delivering products like the SU7 and YU7 SUVs that compete effectively with Tesla models in China at lower prices, despite long wait times due to high demand.
Looking Ahead
Xiaomi is expected to sell its cars outside of China in the future, and its popularity as a consumer electronics brand has given it an advantage in selling cars, as it connects with consumers on an emotional level.
The Future of EV Manufacturing
China's dominance in the EV supply chain is founded on vertical integration, state support, and a comprehensive industrial ecosystem enabling rapid innovation and scale. The US, on the other hand, has promised $90 billion to tech billionaires to dominate artificial intelligence, but this requires a focus on education, which the US has de-emphasized.
Intense competition in China's car market has pushed many domestic carmakers to explore export markets. With Xiaomi's success, it's clear that understanding consumer preferences, leveraging digital ecosystems, and mastering the supply chain will be key to success in the global EV market.
[1] The Information
[2] Bloomberg
[3] Reuters
[4] Forbes
[5] TechRadar
- Xiaomi's dominance in the electric vehicle market could be attributed to their mastery of the supply chain, tapping into China's highly integrated EV supply chain for quick and cost-effective component acquisition.
- The business model of Xiaomi in the electric vehicle industry follows their expertise from smartphones and consumer electronics, focusing on producing high-quality, connected EVs at competitive prices with moderate margins.
- The future of EV manufacturing might heavily rely on efficiently understanding consumer preferences, leveraging digital ecosystems, and mastering the supply chain – lessons that can be gleaned from Xiaomi's success in the global market.
- In the newsletter, Forbes highlights the vertical integration of Chinese firms like Xiaomi, where resources are controlled from mineral extraction to vehicle assembly, providing insulation from supply bottlenecks and scale advantages.
- The Financial Times' podcast discusses the role of technology in the automotive business and the future faceoff between China and the United States in the electric vehicle industry, with China's dominance hinging on vertical integration, state support, and a comprehensive industrial ecosystem.
