Daybreak - Can Xiaomi, a smartphone maker, be the next Tesla?

Episode Date: May 28, 2024

A couple months ago, Xiaomi released a new product – the SU7. This wasn’t a smartphone, or any other gadget that you would have otherwise associated with the Chinese company. The SU7 is actually Xiaomi’s first-ever Electric Vehicle. Now, this is a major milestone for Xiaomi. It has become the first smartphone maker to successfully launch an EV. Funnily enough, this is something that many smartphone makers  and technology companies – from Apple to Samsung – have tried to do but failed at. Until now. But what do smartphone makers have to do with EVs?Tune in to find out.Daybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.By the way, have you listened to The Ken's early careers podcast, The First Two Years? In the latest episode, the show's host Akshaya Chandrasekaran talks about how to navigate work friendships. You can check it out here. 

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too. It's for a special announcement. For the last few months, I and Sita Ramon Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission. We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture,

how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production. Sita and I are still reeling from the intensity of our first studio recording. Intermission launches on March 23rd. To get an alert as soon as we release our first episode,

please follow intermission on Spotify and Apple Podcasts or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. A couple months ago, Xiaomi released a new product. It was called the SU7. Now, this wasn't a smartphone or any other gadget that you would have otherwise associated with the Chinese company. the SU7 is actually Xiaomi's first ever electric vehicle.

Now this is a major milestone for Xiaomi. For starters, people have been pretty excited about the Chinese phone maker's first ever EV. More and more customers are joining long waitlist to get their hands on the car. But more importantly, this makes Xiaomi the first smartphone maker to successfully launch an EV.

Funnily enough, this is something that many smartphone makers and technology companies from Apple to Samsung have tried to do but failed at until now. But what do smartphone makers have to do with EVs? Well, what's interesting is that for Xiaomi, the EVE is very much part of its core electronics business. Experts told the Kent Southeast Asia reporter Lou Zhao, it sees it as a natural extension of its existing line of products.

I'll tell you a little bit more about this later in the episode, but for now what you need to know is that, Xiaomi isn't competing with other smartphone makers. Instead, it wants to take on EV Titans like Tesla with the SU7, which it is positioned as an affordable premium vehicle. Now, obviously, that's a pretty ambitious goal to have, especially in a country like China, which happens to be the world's biggest EV market. There, everyone is trying to be the next Ford of the EV ecosystem at the moment.

But not everyone makes it big. In the last five years or so, in fact, hundreds of these new Chinese automakers have either gone bust or were acquired. So what's in it for Xiaomi? Why manufacture EVs at all? Welcome to Daybreak, a business podcast from the Ken. I'm your host Rahel Philippos, and every day of the week, my colleague, Snigda Sharma and I

will come to you with one business story that is worth understanding and worth your time. Today is Tuesday. The 28th of May. One of Apple's worst-kept secrets was its driverless EV project. It was nicknamed Project Titan, and it went on for about a decade. The company is rumored to have invested billions of dollars and human resources to build this car. And the EV they were working on was just as cool as you would imagine.

For starters, rumor has it that the company didn't even plan to put a steering wheel or brake pedal in the car. Unfortunately, the Apple car just... wasn't meant to be. The company reportedly shut down Project Titan just this year. Now, the reason I'm talking about Apple's failed car project is because Xiaomi had announced its plans to enter the EV market around the same time as Apple. And other tech companies also followed suit, including one of Xiaomi's biggest Chinese competitors, Huawei. In fact, around the same time as Xiaomi, Baidu, a Chinese search engine operator, also launched a new AI power.

EV. But what's with these tech companies and their interest in launching EVs? Well, let's take a look at the Xiaomi example. It launched as a budget phone maker in 2010, but over the years, the company has launched a huge variety of products other than smartphones. We're talking TVs, tablets, security cameras, kitchen appliances, even vacuum cleaners. When you think about it, what ties all these products together is Xiaomi's OG offering, the smartphone. It's what the company calls Smart Life ecosystem. It's a lot like the Apple ecosystem, where Apple ensures that your iPhone, Apple Watch,

AirPods, home pod and MacBook connect seamlessly every single time. Samsung has its own version of this, as does Google, or pretty much any other tech company. It would look a little something like this. So when you wake up in the morning, your Xiaomi speakers play your favorite song, Right after you leave for work, your Xiaomi Robo Vacuum cleaner is programmed

to thoroughly clean your floors and when you come home after a long day, your Xiaomi smart LED lights automatically switch on. So basically what Xiaomi is trying to do is connect all the devices that encompass all aspects of the average customers daily life.

And that's where EVs come in. The SU7 is also meant to be an extension of Xiaomi's smartphone. The EV and smartphone are tied together by HyperOS. Xiaomi's operating system that connects over 5,000 apps on its smartphones and turns them into in-car applications.

This is why Xiaomi's EV stands out in the hyper-competitive Chinese market. Convergence. The internet of things. Your vehicle is a big part of your daily life. So doesn't it make sense for it to connect to all your other devices? Xiaomi is the first tech company to successfully pull that off. Simple enough logic, but it's obviously really complicated to execute. Xiaomi has its work cut out for it, but it does things a little differently.

More on that in the next segment. Hi, I'm Akshachandrushikrin, and I host the Kent's early careers podcast the first two years. It is meant for people in the 18 to 25 age group who are starting off in their careers. It's a new podcast and a whole bunch of us have come together to make it happen. Podcasting is truly an ensemble act. By virtue of working together so much, we have all found a camaraderie. And I got to learn so much in my time as a podcast host. In fact, there are studies after studies saying that this is not a unique experience.

The top reason behind job satisfaction is having a work best friend. You stay at the company for longer than you normally would. You go to extra mile at work if it's your friend headlining the project, you're less likely to call in sick at work if you have a work best friend. It's almost like a best friend at work is a gift that keeps on giving. Still, one of the most common pieces of career advice we've all received is to resist the temptation of turning your colleagues into friends. Keep it polite, keep it impersonal and definitely keep them at an arm's length.

Why? I was just as curious. So in the latest episode of the first two years, we find out all. all about the messiness of work friendships. The link is in the description. I hope you like it. Now over to Rahel. The Chinese EV market is in the middle of a massive bloodbath at the moment. I hinted at it a little earlier in this episode.

I told you how everyone is trying to be the next Ford of the EV space. But most companies see their dreams crash and burn very quickly. Basically, automakers launching EVs are a dime a dozen. There's a continuous influx of new models with more advanced features and lower prices. So in a market this competitive, how does Xiaomi expect to make a mark? Well, for starters, it wants to sell its EVs just like it sells its smartphones. What I mean by that is that, like with its phones, it has positioned the SU7 as the cool new car for younger people. And it has a price tag to match.

It's positioned as an affordable premium SUV. It costs about $3,000 less than the average EV in China. It's all part of Xiaomi's aggressive strategy where its vehicles have a lower price tag than cars with comparable features. This is likely to only intensify the price war in China's hotly contested EV market. This, according to one expert, is Xiaomi's consistent strategy, selling their first product in bulk at cheap prices to reduce overall costs. then there is the convergence with other devices that Xiaomi has managed to pull off. Every player in China's EV market has the same objective as

Xiaomi, but no one has been able to pull it off like Xiaomi has. Xiaomi's goal is simple. It wants to disrupt the EV market, and it's not taking the easy route to accomplish that goal. Other tech companies like Baidu and Huawei partnered with auto companies like Gileys, Surs and Shari to produce their cars. Xiaomi, meanwhile, has established a full-blown factory, capable of producing 2-lac cars annually.

The company has invested over $1 billion towards its auto business so far, and plans to devote about $14 billion over the next decade. So it's all in. But despite the intrigue around the SU7, it did get some bad press right after its release. There have been multiple crashes, photos of which very quickly went viral online. Now, when it comes to EVs or any car for that matter, safety is extremely important. With EVs, there's also an extra layer of complexity because EVV manufacturers also have to protect its customers from cyber attacks.

This is because modern EVs function through technologies that create massive amounts of data. EVs have been hacked in the past. Like in 2019, when a 19-year-old security research student managed to access the digital car keys of more than 25 Teslas all around the world. He opened the car windows, unlock the doors, even disable the car security mode. Kind of scary, right? So security is not something Xiaomi or any other tech company can overlook with its EVs. But coming back to the SU7 and customer complaints, soon after it was launched,

there were also some people who accused Xiaomi of copying the design of the Porsche Tycoon. Of course, this isn't the first time Xiaomi has been accused of copying other brands, don't forget it's been very unabashedly cloning Apple's designs over the years. So much so that it's a running joke on social media and the subject of many memes. But that aside, Xiaomi's latest launch is a massive milestone, not just for the company, but for the tech industry at large. Experts who spoke with the Ken suggested that if the Beijing-based firm can sell around 70,000 cars, roughly half its peak capacity, this year, then SU7's launch would be deemed a

success. And if Xiaomi manages to do that, we could potentially see a massive shake-up in the automotive industry. Because if Xiaomi can do it, then what's stopping any other tech company from launching its own EV? Daybreak is produced from the newsroom of the Ken, India's first subscriber-focused business news platform. What you're listening to is just a small sample of our subscriber-only offerings. A full subscription unlocks daily long-form feature stories, newsletters and podcast extras. Head to the Ken.com and click on the red subscribe button on the top of the website. Today's episode was hosted by Rahil Filippos, produced by me Snigda Sharma and edited by Rajiv Sien.