A new player is set to enter China's booming EV market as smartphone maker Xiaomi Corp. unveiled its plans to join the electric car market.
Xiaomi co-founder Lei Jun announced the company's intention to lead a fresh division dedicated to a new field. He called it his "final major startup endeavor."
With Xiaomi’s stock rising by as much as 6.1 percent, it seems the company is looking to maximize that to make a huge stock value boost within the next decade.
Let's take a closer look at Xiaomi's electrifying plans.
Not The First Phone Brand To Enter The Auto World
Xiaomi will be following in the footsteps of other smartphone makers like Huawei Technologies, a company that has already entered into the automotive industry.
Apple Inc. has also set foot in the scene and heads its own division focused on creating Apple-branded EVs. Many believe that the cars of the future will be more autonomous and connected once this happens.
Xiaomi Plans On Going Solo
Lei Jun said that this will be the "last startup project" in his career. Despite the huge risk, Xiaomi has made it clear that they are going solo on this one.
The company has already indicated that it will not invite outside investors so as to maintain full control over the product been made.
Xiaomi becomes the latest company to go into the market as it hopes to create the next automotive giant like Tesla Inc. is in North America.
Xiaomi Will Outsource Its Manufacturing
While Xiaomi may go solo on the entire project, they will be getting help for its operations. Xiaomi plans to outsource assembly operations to one of its contract manufacturers.
The Beijing-based company already tapped the services of Taiwan’s Foxconn Technology Group to handle assembly for Xiaomi mobile devices. Another contract manufacturer is handling its home gadgets and electronic products.
As for its own electric vehicle, the company indicated that it has no plans on choosing “established” automakers for manufacturing. Xiaomi has already hired its own engineers to design the embedding software for its future EVs.
Xiaomi To Invest $1.5 Billion
Xiaomi will make a safe splash into unfamiliar territory as it invests an initial capital of 100 Billion Yuan or $1.5 billion USD into its EV startup. It isn't the first time the company will invest in the EV business as it has already done so with Xpeng in 2019.
The company plans to ramp up its budget in subsequent years. Projections suggest that the budget is going to last for as long as three to five years. Sources stated that Xiaomi will contribute about 60% of the envisioned sum and raise the remaining 40%. Lei Jun stated that Xiaomi has a "deep pocket" for the electric car startup.
RELATED: Audi Expects 30 Electrified Models By 2025 With $12 Billion Investment
Other Huge Competitors
Xiaomi will have a tough task ahead as established Chinese automakers are opening up to cleaner vehicles as well.
The Warren Buffet-backed BYD and Geely Automobile Holdings Ltd. are already leading the charge in China. Fellow automotive startups Nio and Xpeng Motors are also making their moves already.
Internet company Baidu Inc. has already partnered up with Geely to build electric cars as well. In fact, Baidu has already hired its CEO in an effort to make their own splash in the market.
With these pure automotive companies from China battling to make a mark in the world’s biggest EV market, sales are projected to increase by 50% more this year as buyers embrace environment-friendly alternatives.
The bottom line for this is that Xiaomi's competition is not only limited to smartphone makers now. Even internet companies are opening up to investing in the EV market.
EV Sales Projection For China
With electric cars already taking off in a huge way in China, sales will surely skyrocket with strong policy support from Beijing.
With the increase in demand and reduction in measures, it is projected that a total of 1.9 million electric vehicles will be sold in China this year alone.
RELATED: Electric Cars Are Hot In China, But Market Might Be Ready To Collapse
Final Thoughts On Xiaomi's Plans
Xiaomi has diversified a lot since its founding a decade ago. It has not only been the fastest-growing smartphone maker in China but also in other home gadgets and their own internet service as well.
With a good reputation for their products, the company is looking to make a huge investment in producing quality EVs since the demand in China alone has grown as fast as the demand for Xiaomi products.
Xiaomi might struggle to hit the American market though. Not only does Tesla dominate EV sales but the US also placed sanctions on fellow Chinese smartphone company Huawei.
CEO Lei Jun already mentioned that this EV project will be his "last startup." So you can imagine Jun will ensure it all works out so that he can go out strong.