Why a Chinese gadget maker beat Apple on electric vehicles

Xiaomi makes all kinds of electronics, from robot vacuum cleaners to air conditioners, which are connected through its operating system and controlled in its app. The SU7 is, in some ways, just another gadget. It can use data collected from other devices about a driver’s daily routine to determine the best time to charge the car’s batteries.

“Xiaomi has really started infiltrating your home,” said Gary Ng, an economist with Natixis Corporate & Investment Banking. “Everything is linked together, and this is something other companies couldn’t do.”

While the SU7 earned Xiaomi just a small fraction of the sales of China’s top electric vehicle makers, it puts Xiaomi among the Chinese companies that are dealing a major blow to foreign automakers’ long command over China’s market for premium cars. In the year since the SU7 went on sale, Porsche deliveries in China have fallen nearly 30 per cent.

On Thursday night in Beijing, Xiaomi released a high-end version, the SU7 Ultra, alongside a premium version of its latest smartphone. The company staged a flashy teaser for the car by racing a prototype around Germany’s Nürburgring racetrack, where, Xiaomi said, it set a record for “fastest four-door sedan”.

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Xiaomi also plans to release a sport utility vehicle, the YU7, this year, according to regulatory filings in China.

Chinese electric vehicle companies have benefited from billions of dollars in government support, which has helped them gain control of the supply chain down to the very minerals inside the car batteries. This early edge helped two Chinese companies, BYD and Contemporary Amperex Technology – known as CATL and added to the Pentagon’s list of Chinese military companies in January – become the biggest electric battery makers in the world.

Xiaomi used this supply chain to its advantage. Its cars contain batteries from BYD and CATL. It was able to start production quickly by taking over a factory from Beijing Auto Group. Construction workers in Beijing are working around the clock on a second factory.

All this manufacturing capacity helps Chinese electric vehicle firms move from development to production in far less time than traditional automakers in China, enabling them to bring new models to market quickly and focus on making software that they can continually update, said Stephen Dyer, head of Asia Automotive at AlixPartners, a consultancy.

Intense competition at home has pushed many Chinese carmakers to flood the global auto market with affordable electric cars. Last year, BYD sold more than 4 million new cars worldwide.

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It is just a matter of time before Xiaomi cars are on the road outside China, said Cui Dongshu, secretary-general of the China Passenger Car Association.

Xiaomi’s popularity as a maker of all kinds of consumer electronics gave it a deep well of knowledge about Chinese consumer preferences. On the first day SU7s were delivered, buyers could go to Xiaomi’s app store and get accessories to trick out the cars, like analog dashboard clocks and a row of physical switches that attach to a touch-screen panel.

“The strength of the brand puts Xiaomi ahead of a lot of their competitors,” said Tu Le, a managing director of consultancy Sino Auto Insights. “That’s what it takes to sell cars globally because it’s not just a consumer product; it’s an emotional product.”

Meaghan Tobin reported from Taipei, Taiwan; and Claire Fu from Seoul, South Korea.

This article originally appeared in The New York Times.