Lei and Xiaomi’s “charisma, brand recognition and ecosystem cannot be underestimated,” Yale Zhang, the managing director of Shanghai-based consultancy Automotive Foresight, said. “It’s a big influence on young consumers who have filled their homes with Xiaomi products. When it comes time to buy an EV, they naturally think of Xiaomi.”
But building cars is a far more complex, capital-intensive challenge than making phones or rice cookers. It requires mastering safety regulations, global logistics and production at scale, all while competing against legacy automakers with long histories and large model line-ups. Any international expansion will also require navigating complex geopolitical landscapes. As one of the first tech giants to actually manufacture a car, Xiaomi is in uncharted territory.
Apple’s failings
Apple’s car project, internally dubbed Project Titan, failed in large part because it wasn’t just an EV – it was at one point an attempt to leapfrog the auto industry with a fully autonomous, Level 5 self-driving machine. Its goals were lofty and the direction constantly shifting, the result being over a decade of effort with nothing to show.
Lei, 55, was comparatively stingy with time and resources and staked his personal reputation on the endeavour, claiming that making cars would be his “last entrepreneurial project”.
Xiaomi’s public narrative is that Lei and his team learnt by visiting multiple Chinese automakers, including Zhejiang Geely and Great Wall Motor, and talked to more than 200 industry experts in some 80 meetings.
A Xiaomi YU7 electric SUV on display at a showroom in Shanghai.Credit: Bloomberg
The reality is also that he used Xiaomi’s reputation as an innovative consumer behemoth to get close to China’s large carmakers and pick off their top talent. Geely and its billionaire founder Li Shufu welcomed Lei to the automaker’s research institute in Ningbo in the months leading up to Xiaomi’s announcement that it would enter the car business, to discuss topics including potential collaboration.
It’s Geely lore that Lei added the WeChat contacts of many staff at the institute, including then-director Hu Zhengnan. Hu later joined Shunwei Capital Partners, the investment firm co-founded by Lei.
Xiaomi headhunters also courted Geely staff intensely, according to people familiar with the matter. While it’s common for talent to move between companies in the same industry, it was unusual to see this level of aggressiveness around recruitment, the people said, asking not to be identified discussing information that is private. Geely didn’t respond to a request for comment.
Hu, known for his love of the German luxury marque Porsche, was one of the team members credited as being instrumental to developing Xiaomi’s EV business, Lei said at the SU7 launch in 2024. Lei added that Hu left his previous employer after his contract ended.
Other executives who joined Xiaomi came from companies including BAIC Motor, BMW, SAIC-GM-Wuling Automobile Co – the General Motors joint venture with SAIC Motor Corp and Wuling Motors Holdings Ltd – and auto supplier Magna Steyr LLC.
Besides assembling top Chinese automaking talent, Lei made a prescient bet on investing in a self-controlled supply chain – insulating Xiaomi’s operation from manufacturing vagaries. This came from painful lessons learnt in Xiaomi’s early smartphone-producing days, when external suppliers would cut off components unpredictably.
In 2016, some members of Xiaomi’s supply chain team displeased Samsung representatives and the South Korean firm threatened to halt supply of its industry-leading AMOLED screens.
To mend the fractured relationship, Lei flew to Shenzhen to meet with Samsung’s China head at the time. The pair drank five bottles of red wine during their dinner meeting, according to a Xiaomi company biography, and Lei also made multiple trips to Samsung’s headquarters in South Korea to apologise and negotiate the resumption of supply. Representatives from Samsung declined to comment.
After Xiaomi went into the car making business, it invested into almost all parts of the EV supply chain, from batteries and chips to air suspension and sensors. It pumped more than $US1.6 billion via Shunwei or other Xiaomi-led funds into over 100 supply chain companies between 2021 and 2024, according to data compiled by Chinese analytics firm Zhangtongshe and Bloomberg.
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The components from some of the companies that Xiaomi invested in have ended up in its cars, such as lidars from Hesai Technology Co. and onboard chargers and voltage converters from Zhejiang EV-Tech Co.
With the 10 billion yuan ($2.1 billion) it committed to the first phase of its EV venture, Xiaomi also built its own factory, rather than going down the contract manufacturing route that some Chinese makers, including Nio and Xpeng, did when they started out.
“Among tech companies that now build electric vehicles, those who previously had hardware products seem to be more successful than those who only had software products or information services,” said Paul Gong, UBS Group AG’s head of China autos research.
Copycat allegations
Despite its early success, there are many who argue Xiaomi’s one-hit car is copied from elsewhere – and that a sole successful vehicle does not a successful auto producer make. Lei’s aggressive approach has also raised hackles in China’s car industry.
Yu Jingmin, vice president of SAIC’s passenger car division, reportedly described Xiaomi’s approach as “shameless” in a critique of the SU7 resembling Porsche. The SU7 has been colloquially dubbed “Porsche Mi” by netizens. SAIC didn’t respond to questions about Yu’s remarks. Xiaomi’s design team, led by former BMW designer Li Tianyuan, has defended the SU7’s aesthetics, emphasising that the choices were driven by aerodynamic efficiency and performance benchmarks.
In late March, there was another setback after a fatal accident involving the SU7. The car had its advanced driver assistance technology turned on before the crash, which afterwards led to authorities reining in the promotion and deployment of the technology.
The usually vocal Lei kept a low profile on social media for more than a month after the March accident. He returned to more active engagement in May with a missive that said this period of time was the most difficult in his career.
A rendering by UK car lease company Vanarama of what the Apple Car could have looked like, based on patent filings. Apple abandoned the project last year.Credit: Vanarama
Fortunately for Xiaomi, its consumer base is sticky. Known as “Mi fans,” the loyal customers have played a pivotal role in the company’s rise. Xiaomi cultivated this fandom early on by prioritising user feedback, and the grassroots allegiance has helped it build strong brand equity, especially in China. The SU7 has remained a top-selling model even after the accident in March.
Dealers have reported that nearly 50 per cent of customers plump for the SU7 without comparing it to other brands. “A significant number of older consumers are buying the SU7 for their children, indicating that the model has built trust among more conservative buyers thanks to its safety and quality,” said Rosalie Chen, a senior analyst from investment research firm Third Bridge.
Small scale
Xiaomi has set a delivery target of 350,000 units in 2025, up from its previous goal of 300,000, buoyed by demand for the newly launched YU7 and a ramp-up in production. The starting prices for the SU7 sedan, at 215,900 yuan ($46,427), and its SUV, at 253,500 yuan, make them competitive alternatives to models such as Tesla’s Model 3 and Model Y.
The EVs are also showing financial promise. Xiaomi posted record revenue for the first quarter this year, driven by car and smartphone sales. Its EV division is expected to turn profitable in the second half of 2025, Lei said in an investor meeting in June.
But even if the popularity of Xiaomi’s EVs can spring beyond the company’s devoted base, production is still on a much more boutique scale. China’s top car brand, BYD, sold around 4.3 million EVs and hybrids last year, many overseas, while Tesla moved about 1.78 million vehicles globally. Toyota, the world’s No. 1 automaker, sold some 10.8 million vehicles and boasts a line-up of approximately 70 different models.
Lei doesn’t seem to be prioritising the mass market of below $US20,000 yet, which drives significant volume and is where BYD dominates, Automotive Foresight’s Zhang said.
Without a line-up in that segment, Xiaomi cars will remain niche purchases for middle to higher-income consumers and Xiaomi may face the same risks as Tesla, which is seeing its sales slump, exacerbated by a narrow consumer base and limited models.
Nonetheless, Lei seems buoyed by Xiaomi’s early wins and is now looking at global expansion. Xiaomi will consider selling cars outside China from 2027, he said earlier this month.
Success or otherwise, the European Union, the US and Turkey have all slapped tariffs on Chinese EVs, but Xiaomi wants to set up a R&D centre in Munich and may test sales starting in European markets such as Germany, Spain and France when the time is right, Chinese media 36Kr reported in April.
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“Xiaomi is a latecomer to the auto industry,” Lei admitted on Weibo in June. But, he said, in a market driven by technology and innovation and the rising global influence of China’s EV culture, “there are always opportunities for latecomers.”
Bloomberg
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