Xiaomi’s Electric Vehicle Strategy: Targeting Premium Users with 20 Million Existing Customers

Xiaomi, the Chinese consumer electronics company, has made a bold move into the electric vehicle (EV) market with its long-awaited SU7 model. The company, known for its affordably priced products, has surprised many by targeting the premium segment, a market dominated by established players like Porsche. In this article, we will explore Xiaomi’s strategy, the challenges it faces, and its potential in the fiercely competitive EV market.

Xiaomi’s Electric Vehicle Strategy: Premium Segment and Existing Customer Base

Xiaomi’s Group President, Weibing Lu, revealed the company’s electric vehicle during the Mobile World Congress in Barcelona in December 2023. Although the price and release date were not disclosed, Lu stated that Xiaomi already has about 20 million premium users in China based on its smartphone sales. This strategy is part of Xiaomi’s ecosystem development and “human x car x home” approach.

The company’s decision to enter the premium segment is a shift from its traditional focus on affordably priced products. This move has raised doubts about Xiaomi’s ability to compete in a market where even established EV giants like BYD are slashing prices. However, Lu believes that the overlap between Xiaomi’s smartphone users and the premium electric vehicle market is significant.

Xiaomi’s Ecosystem Development and Smartphone Premiumization

Xiaomi’s strategy is based on ecosystem development and a smartphone “premiumization” strategy launched in 2020. The company benchmarks its latest Xiaomi 14 phone against the iPhone 15 Pro and claims it is overtaking Apple’s device. However, Huawei, another Chinese competitor, is also eating into Apple’s market share with its popular Mate60 Pro, which starts at 6,499 yuan ($900).

Building on its tech capabilities as a telecommunications and smartphone company, Huawei has swiftly become a player in China’s electric car market. The company launched the Aito vehicle brand in late 2021 and sells its HarmonyOS operating system and other software to multiple auto manufacturers. Huawei also promotes some of those cars by showing them in its smartphone stores.

Xiaomi’s HyperOS and Human x Car x Home Approach

Xiaomi launched a new operating system called HyperOS in the fall of 2023. It claims the system includes an artificial intelligence component that can learn from user behavior to automatically adjust connected devices, such as home lighting. The company calls this strategy “human x car x home.” HyperOS is only available on Xiaomi’s 14 phone at the moment but is due for rollout in the coming months to appliances and the forthcoming car.

The Future of Xiaomi’s Electric Vehicle Market Positioning

Xiaomi is investing billions of dollars in the ecosystem and the car to survive in an industry it expects will become even more competitive. In 10 or 20 years, the electric vehicle market will likely be very similar to that of smartphones today, with the top five brands holding about 70% of the market. Without huge funds, Xiaomi doesn’t think it can be the final players. After the first car, the next step for Xiaomi is to build its own factories and make the key components in-house.

Xiaomi’s Overseas Market and Global Expansion

Similar to an increasing number of Chinese companies, Xiaomi is looking overseas for future growth. For the last six years, between 40% to 50% of the company’s revenue came from outside mainland China, primarily Europe and India. Lu, who joined Xiaomi Group in 2019 and is also the president of its international business department, spends “a lot of time” on the overseas market. He acknowledged the political environment makes it more difficult for Xiaomi to go global but said the company can overcome those challenges by building up in-house capabilities and diversifying the business globally and by product.

As for the car, Lu declined to specify a timeframe for its overseas launch but said it typically takes two to three years. Xiaomi’s electric vehicle strategy is an ambitious move that challenges the status quo in the fiercely competitive EV market. By targeting the premium segment with its existing customer base, Xiaomi aims to differentiate itself from competitors and establish a strong market position. Only time will tell if this strategy pays off for the Chinese consumer electronics giant.