Chinese Smartphone Maker to Enter EV Space with $1.5B Investment

Xiaomi, one of the largest smartphone makers in China, has announced that it intends to join the electric vehicle (“EV”) industry by investing 10 billion yuan ($1.52 billion) over the coming 10 years.

The firm revealed on Tuesday that it plans to establish a fully owned subsidiary to make electric vehicles, and the first phase of funding for this project will amount to 10 billion yuan. This subsidiary will be headed by Xiaomi CEO Lei Jun.

In a statement the company released, Xiaomi hoped that it would make high-quality smart EVs, which would give people around the world the opportunity to enjoy a smart way of living wherever they are, and at any time.

Xiaomi, which is ranked as the third-biggest maker of smartphones in China, has its work cut out since the EV space in China is extremely competitive. Some of the companies Xiaomi will be up against include Geely and BYD. These are traditional vehicle makers that made the decision to electrify the models they make. There are also purely electric vehicle startups such as NIO Inc. (NYSE: NIO) and Xpeng Motors, which are enjoying a sizeable share of the electric vehicle market in China.

That isn’t the only competition Xiaomi will be facing. Internet companies have also thrown their hats in the ring, and one particular internet firm has a head start on Xiaomi. Baidu, one of the search giants in China, launched an EV company back in January. Last month, this company hired a chief executive officer for this standalone company.

It should be noted that the electric vehicle wave has gathered steam in China. This is largely attributed to the government policies instituted to encourage EV uptake. The measures include subsidies, even if these have since been reduced.

Nonetheless, Canalys, a research company, estimates that Chinese buyers will acquire approximately 1.9 million fully electric vehicles this year. This would equate to a 51% growth, year on year.

The Chinese EV market is so attractive that overseas manufacturers, such as Tesla Inc. (NASDAQ: TSLA), have fully fledged manufacturing plants in China. The lower cost of production there also means that these automakers can produce vehicles that are competitively priced for the international market.

It now remains to be seen what line-up of electric vehicles Xiaomi plans to make and how those vehicles compare to the existing models in terms of quality, price and consumer segments targeted. For example, Tesla has for long been seen as targeting the luxury market for EVs while Chinese automakers such as NIO have made models targeting the lower end of the consumer market.

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