Credits By: Sindikasi | Republika
According to two people familiar with the matter, Xiaomi has received approval from China’s state planning authority to start producing electric cars (EVs). This breakthrough represents a sizable step toward the smartphone manufacturer’s goal of entering the automotive industry by the first few months of 2019.
Beijing-based Xiaomi was permitted to produce EVs by the National Development and Reform Commission (NDRC), which regulates new investments and manufacturing capabilities in China’s automobile industry. This NDRC decision marks just the fourth instance of such permission since the year’s end.
Xiaomi is one step closer to achieving its over two-year-old proclaimed goal of mass-producing electric vehicles, according to the NDRC. However, the company still needs approval from the Ministry of Industry and Information Technology (MIIT). To make sure that new automakers and their models adhere to technical and safety requirements, the MIIT examines them.
Xiaomi is entering the world of automobile manufacturing in China when the country faces several challenges as the leader in the automotive industry. These issues include an overabundance of manufacturing capacity and dwindling demand, resulting in ferocious price competition and negatively impacting supplier profit margins.
Xiaomi had promised to invest $10 billion over ten years in its entry into the automotive sector and hoped to start mass-producing its debut cars in the first half of 2024. However, worries about overcapacity and declining demand within the sector, as well as the NDRC’s cautious attitude in approving new EV production plans, raised questions about the viability of this schedule.
According to news reports from June, Tesla was still awaiting approval to expand its Shanghai plant. Additionally, sources from the sector earlier told Reuters that Lucid Group, a U.S. luxury EV maker, was interested in setting up shop in China but had heard that the likelihood of success was slim.
Uncertainty surrounds the NDRC’s reasoning for approving Xiaomi. The Beijing city administration has acknowledged the EV facility as a critical industrial advancement project.
The third-largest smartphone brand in the world by shipments, Xiaomi, did not immediately respond to demands for comments. The NDRC and MIIT held off promptly responding to questions sent to them through fax. The sources opted not to reveal their identities because the subject matter is private.
While waiting for clearances, Xiaomi continued with its project, eventually building a factory infrastructure in Beijing that could produce 200,000 EVs annually. According to plans, Xiaomi expects to produce over 100,000 EVs in the upcoming year. According to two Xiaomi employees who spoke anonymously owing to the subject’s sensitive nature, this acceleration has led to an increase in hiring for the EV facility in anticipation of a rise in output by December.
Despite these challenging conditions, Xiaomi’s commitment to entering the EV industry is evident. Utilization rates for Chinese auto factories, including those producing traditional combustion engine vehicles, have decreased. According to data from the China Passenger Car Association, while having the ability to build 43 million units annually until the end of 2022, these facilities’ utilization rate was only 54.5%, down from the 66.6% saw in 2017.
With its most recent quarterly revenue down 18.9% as of May, Xiaomi has its reasons for diversifying away from its core smartphone sector, particularly in light of declining consumer demand for gadgets. According to Counterpoint, a consultant, China’s smartphone sales decreased by 4% year over year in the second quarter of 2023, the lowest Q2 sales figure since 2014.
According to Reuters, Xiaomi plans to make the most of its massive network of stores by using them as showrooms for its electric vehicles. Lei Jun, the CEO of Xiaomi, recently tweeted photos on his personal Weibo social media account of people holding signs that read “Fighting for Xiaomi Auto.” Lei Jun views Xiaomi’s foray into the EV market as his final significant entrepreneurial endeavor.