Xiaomi makes the car B-side: the car is not yet out, investment first

Text/Chen Qiuxiao Editor/Zhou Xiongfei

When Huawei has made frequent moves in the field of car manufacturing, Xiaomi is still burying its head in a low-key layout.

Since the announcement of the next car, Xiaomi's official information about the first car has not been revealed much, but the investment layout in the automotive industry chain continues.

In the middle of this month, Shanghai Chaifeng Automotive System Co., Ltd., a provider of automotive acoustic systems, completed a series of A+ equity financing of tens of millions of yuan, and the investment convenience is Beijing Xiaomi Intelligent Manufacturing Equity Investment Fund Partnership (Limited Partnership) (hereinafter referred to as "Xiaomi Intelligent Manufacturing Fund").

After two rounds of fundraising, Xiaomi Intelligent Manufacturing Fund, which holds tens of billions of yuan, has opened a layout in the fields of automotive chips, power batteries, and smart cars, and its investment has shown the characteristics of wide casting and deep layout.

The reason why the car has not yet come out and invested a lot is that Xiaomi is anxious about the fact that car manufacturing has lagged behind and its own shortcomings.

Since Xiaomi Chairman Lei Jun announced his entry into the car industry in 2021, there were voices in the industry at that time that Xiaomi was late compared to "Wei Xiaoli". In addition, Xiaomi's car manufacturing is a cross-border and does not have much experience in car manufacturing, so if it wants to successfully go public in 2024, it needs to exchange acquisition for technology and time.

Xiaomi announced the construction of a car in a document on the Hong Kong Stock Exchange, source Xiaomi's official Weibo

While spending a lot of money to invest, Xiaomi Auto has gone through four key nodes, including the announcement of self-built factories, the announcement of full-stack self-developed autonomous driving, organizational structure adjustment, the arrangement of winter road tests, etc., and the appearance design of the first Xiaomi car was also leaked by secondary suppliers.

From the layout of the whole industry chain of new energy vehicles to the exposure of the appearance of Xiaomi cars, it seems that Xiaomi cars may be able to achieve the goal of going public in 2024, but Xiaomi cars want to seize advantages in the new energy vehicle market, and there are still some challenges.

When it is delivered in 2024, Xiaomi will first start a fierce competition with new forces in the price band of more than 150,000 yuan. Secondly, as the new energy automobile industry enters the second half of intelligence, the first car companies have the cumulative advantages of technology, data and supply chain completeness, while Xiaomi must not only strive for car manufacturing qualifications, catch up with technical progress, but also build future competitiveness for its own products in a forward-looking manner, there are many uncertainties.

With the increase of the concentration of the entire industry, Xiaomi Auto, which directly hits the high-end positioning, will face the impact of many players such as "Wei Xiaoli". Therefore, if you want to break the game in the future, Xiaomi still has a long way to go, and now the investment layout is perfected, and it is also paving the way for future car building.

1. Cast a wide net, not bad money?

In March 2021, when he announced his entry into the car manufacturing market, Lei Jun announced that he would use the capital advantage of "investing 10 billion US dollars in the next 10 years and 10 billion yuan in the first phase" as a stepping stone to enter the century-old automobile industry.

At present, Xiaomi is close to preparing to complete the first 10 billion foreign investment target. At the beginning of this month, Xiaomi Intelligent Manufacturing Fund launched and completed the second phase of fundraising, with a total of 2.7 billion yuan. Together with the initial fundraising of 6.33 billion yuan in July last year, Xiaomi Intelligent Manufacturing has raised a total of 9.03 billion yuan, close to its total fundraising plan of 10 billion yuan.

Xiaomi Intelligent Manufacturing Fund was established in September 2021, with Lei Jun as the chairman of the fund's investment decision-making committee. According to Tianyan inspection data, up to now, Xiaomi Intelligent Manufacturing Fund has 24 foreign investment events, mainly in the A round of financing, involving automotive software and hardware and battery materials and other fields.

The investment situation of some Xiaomi intelligent manufacturing funds, the source of the picture is Tianyan check

Xiaomi also has three equity investment platforms, Xiaomi Yangtze River Industrial Fund, Shunwei Capital and Xiaomi Private Equity Fund Management Co., Ltd., all of which have made a lot of investment and layout in the automotive industry chain, and before announcing the car, Xiaomi Capital has laid out the field of smart cars.

For example, Shunwei Capital participated in NIO's Series A financing in June 2015; Participated in Xpeng Motors' Series A+ financing in 2017; In January of the same year, Xiaomi also invested in companies such as Momenta, a self-driving solutions company.

With Xiaomi's entry into car manufacturing, its investment in the automotive field has continued to increase, experiencing the transformation from financial investment to strategic and equity investment, and the investment direction is more focused on the upstream and downstream of the new energy vehicle industry chain, such as autonomous driving, chips, batteries and other core areas, in order to create a "Xiaomi ecology" in the automotive field.

Taking Xiaomi's investment in Black Sesame Smart in September 2021 as an example, this is Xiaomi's first investment in the core chip link of the upstream of the car, which means that Xiaomi has shifted from investing in algorithm solutions for advanced driver assistance systems to in-depth layout of automotive-grade autonomous driving computing chips and platform research and development.

At the same time, in a single field, Xiaomi's investment also shows the characteristics of "casting a wide net". For example, in the battery supply chain, Xiaomi has invested in many leading enterprises in the industry, including Weilan New Energy, Zhuhai Guanyu, China Innovation Aviation, Ganfeng Lithium Battery, and Hive Energy.

The characteristics of Xiaomi's investment in the automotive field reflect its anxiety in technological catch-up and ensuring production capacity.

Since Xiaomi has previously laid out in the field of mobile phones, when it enters the field of car manufacturing across borders, it is bound to not have much experience and industrial chain reserves. At the same time, the new energy vehicle industry chain also has the characteristics of high value and long chain.

Lei Jun announced the mass production time of Xiaomi cars at the press conference, the picture source is Xiaomi's official Weibo

If Xiaomi wants to ensure supply, stabilize production and reduce costs in the complex automotive industry chain, it needs to establish high-quality and in-depth relationships with suppliers in all links. Investing in the construction of Xiaomi's automotive ecosystem/industry chain is a faster way to achieve this goal, and at the same time, the investment process can also deepen Xiaomi's understanding of the upstream and downstream cooperation and coordination of the smart electric vehicle industry.

Taking Xiaomi's investment in automotive acoustic system supplier Chafengfeng Automobile as an example, CICC research believes that new energy vehicle companies directly purchase their products and services from acoustic suppliers, and then carry out overall sound effect debugging by the car companies themselves in the later stage, in order to achieve the purpose of standardization, modular production, cost control and rapid iteration.

Judging from Xiaomi's extensive investment in enterprises in the same field, in addition to maintaining production capacity, Xiaomi has also laid a good foundation for its own cooperation with other industries in the industrial chain. Xiaomi's previous investment behavior has always revolved around creating "smart electric vehicles" rather than "monopolizing" related technology companies, so most of its investment behaviors are also the injection of lightweight assets.

However, car building itself is an asset-heavy behavior, which also means that Xiaomi needs to spend more time screening and integrating its investment objects in the later stage.

In addition to car hardware, Xiaomi also has shortcomings in software such as intelligent driving. For this, Xiaomi may also have expected and is trying to make up for the shortcomings by investing/acquiring autonomous driving companies and endogenous incubation.

With this layout, Xiaomi, which does not have much accumulation in the field of autonomous driving, can also give priority to adopting the supplier's scheme on the first model if the progress of self-research is not as expected, so as to realize the landing of automatic driving assistance functions and be ready for delivery.

While Xiaomi spends a lot of money to invest, the appearance of Xiaomi cars is slowly revealed.

2. How far is Xiaomi car from mass production?

Xiaomi has been building cars for two years, and it is only one year away from mass production. Overall, Xiaomi has passed four key nodes.

Node 1: On November 27, 2021, the Administrative Committee of Beijing Economic and Technological Development Zone and Xiaomi officially signed a cooperation agreement, announcing that Xiaomi Auto settled in the Beijing Economic and Technological Development Zone. Different from the OEM or acquisition model that new forces will choose before, Xiaomi chooses the form of a more asset-heavy self-built factory.

Beijing Economic and Technological Development Zone and Xiaomi Technology signing ceremony, source Beijing Daily

Self-built factories require sufficient capital investment in the early stage, and Xiaomi needs to squeeze out more surplus for mass production time. Since the production technology and upstream and downstream supply chain of automobiles are more complex than mobile phones, Xiaomi chose to build its own factory at the beginning, which is conducive to unified control of all links and the stability of final quality.

The second node, which appeared in July 2022, began to test autonomous driving on the road. This is another progress for Xiaomi's autonomous driving after Xiaomi announced in July 2021 that it announced its public research and development of L4 intelligent driving capabilities and acquired autonomous driving company DeepMotion Technology.

At the beginning of the announcement of the car, Xiaomi had focused on promoting the imagination of Xiaomi's intelligent ecology in the cockpit of the car, but by the autumn conference in August last year, the key word Lei Jun mentioned many times had become "automatic driving". Lei Jun proposed that autonomous driving is the key point of smart car victory, Xiaomi autonomous driving will use full-stack self-developed algorithms, the first phase of R&D investment has spent 3.3 billion yuan, and will enter the "first camp of automatic driving" in 2024.

Xiaomi also released a demo video of the progress of its autonomous driving technology at the conference. In the video, the test vehicle equipped with Xiaomi's autonomous driving technology is equipped with a lidar from Hesai and multiple visual ADAS cameras, realizing functions such as one-key remote start of the vehicle, automatic navigation, intelligent avoidance, and automatic parking.

Screenshot of Xiaomi's autonomous driving technology display video, source Xiaomi's official Weibo

Just before and after announcing the relevant progress in the field of autonomous driving, Xiaomi also revealed new progress related to car manufacturing.

According to Xiaomi's latest financial report for the third quarter of 2022, Xiaomi's R&D team has exceeded 1,800 people. It should be noted that in addition to the internal backbone, the core leadership team of Xiaomi Car also has many executives with backgrounds in the automotive field.

At present, Hu Zhengnan, former president of Geely Research Institute, Li Tianyuan, former BMW exterior designer, Yu Liguo, former president of Beiqi Extreme Fox, and Zhou Yu, former deputy general manager of SAIC-GM-Wuling Sales Company (resigned), have participated in Xiaomi's car manufacturing.

In January 2023, Xiaomi also carried out what Lei Jun called "a far-reaching change in the history of Xiaomi's corporate governance", preparing for improving the quality and efficiency of decision-making in the later stage, taking into account rapid business response and long-term system construction: the group management committee and human resources committee were newly established, and Lei Jun served as the director of both committees.

If the above progress is not considered the substantive information of Xiaomi's car manufacturing. Then with the leakage of the appearance of Xiaomi's first model, as well as the winter test inspection, finally let the industry and outside see some of the appearance of Xiaomi cars.

Previously, some netizens took spy photos suspected of being Xiaomi cars near the Xiaomi Science and Technology Park, and the appearance of the mid-sized coupe model, long nose and short tail was designed with the taste of Porsche Paramela, and the front face of the car adopted a trapezoidal front grille, and the sides were equipped with rounded triangular headlights, and the visual effect was more sporty.

The side of the body presents a slip-back coupe style, the roof is equipped with lidar and an integrated giant canopy, and the popular hidden handle, sedan tailgate and other elements also appear. However, Xiaomi Group responded that the leaked document was a design draft of the very early bidding process, not a final document.

During this year's "Two Sessions", Lei Jun publicly introduced that Xiaomi Automobile has successfully completed winter tests and is expected to be mass-produced in the first half of 2024. Alpine testing items include reliability, powertrain, ice and snow anti-slip, and more. Under normal circumstances, new cars can be launched 1-2 years after the winter test.

Based on the above process, Xiaomi's car manufacturing seems to have driven on the "right path" and is moving towards the goal of mass production in 2024. But Xiaomi wants to achieve this, and it is not easy.

To build a car, you first have to look at the manufacturing level. According to a number of media reports, Xiaomi Automobile has not yet obtained the qualification to build a car. Since the relevant national departments submitted a proposal to narrow the qualification of car manufacturing this year, in the industry's view, there are many challenges in obtaining this qualification in the past two years, which naturally includes Xiaomi.

Even if it obtains the car manufacturing qualification, Xiaomi Automobile wants to achieve mass production, and there are limiting factors in terms of production capacity. Although from the current point of view, it is possible for Xiaomi to achieve the first batch production after the completion of the first phase of the factory. However, its annual production plan of 300,000 vehicles is still far from its vision of 10 million vehicles per year.

Looking at the vehicle itself, there are still some immature factors to achieve mass production, and the main challenge will come from the supply chain.

Judging from the core hardware system scheme disclosed by 36Kr and many other media, Xiaomi decided to use a 400V platform for low-end batteries + BYD lithium iron phosphate batteries, and a high-end 800V platform + Ningde Kirin battery; The electronic control uses UMC and Huichuan. This means that Xiaomi does not yet have the ability to independently develop the key hardware of Sanden, but purchases through Tier1 suppliers, and Xiaomi may face the test of cost control and supply chain supply in the future.

According to Leopard Change report, some internal employees said that the automatic driving shown in the demo video is only a verification of the software at the basic level, and in fact it is far from entering the formal test process.

In this way, whether from the perspective of factory capacity, car manufacturing qualifications, or the vehicle itself, Xiaomi's car manufacturing is still far from the real mass production and listing. For Xiaomi, achieving mass production and listing may only be the first step on its road to building a car.

3. Does the distant water quench the near thirst?

In addition to the car itself, Xiaomi has many challenges to face in the future.

As early as the Xiaomi Investor Day in 2021, Lei Jun said that Xiaomi cars will be officially mass-produced in the first half of 2024. At that time, the competition in the domestic new energy vehicle track will be far more fierce than expected.

First of all, with the continuous growth of the penetration rate of new energy vehicles, the market has turned to the key node of accelerated development in advance.

According to data from the Passenger Association of China, the penetration rate of new energy passenger vehicles in China exceeded 20% to 27.6% for the first time in 2022, an increase of 12.6 percentage points over 2021, which marks the target of 20% penetration rate in 2025 specified in the "New Energy Vehicle Industry Development Plan (2021-2035)", which has been completed three years ahead of schedule.

The development vision of the "New Energy Vehicle Industry Development Plan (2021-2035)", screenshot from the Chinese government website

The Passenger Association predicts that the market penetration rate of new energy passenger vehicles will reach 36% in 2023, and market research institutions such as CITIC Securities and Gasch Automotive Research Institute have made bold predictions of 50%. At the same time, the Credit Suisse research team expects that about 100 new energy vehicles will be launched in China in 2023, up from 70 in 2022.

That is to say, as the penetration rate of new energy vehicles grows faster and faster, Xiaomi cars will compete with more mature smart car products for a limited time window for a small number of market shares, which requires Xiaomi to come up with more competitive products in terms of pricing and intelligence.

From the perspective of product pricing, Lei Jun once disclosed in Douyin live broadcast in April 2021, and the pricing of the first Xiaomi car may be between 100,000-300,000 yuan, but at that time, Xiaomi had not yet made a choice between sedan and SUV models. According to a late LatePost report at the beginning of this year, Xiaomi's first model has been divided into two versions, high and low, with a low version or a price of 260,000 yuan to 300,000 yuan, and a high version of more than 350,000 yuan.

This means that the first Xiaomi car will be squeezed into the mid-to-high-end model track in the future, which will bring at least two levels of testing.

First of all, Xiaomi Auto chooses the most "volume" 15-350,000 yuan high-end model track, specifically, the 15-300,000 yuan track has both Tesla, BYD and "Wei Xiaoli" and other old players continue to make efforts, and there will also be traditional luxury car brand BBA and other challenges of transforming new energy.

On the other hand, as new energy vehicles gradually move towards the mass consumer market, the ultimate cost performance is one of the keys to competition.

In the face of this change, "Wei Xiaoli" has a corresponding layout, ideal as early as the first quarter of 2022 earnings conference disclosed that the future products will cover the market range of 200,000-300,000 yuan, and launch a popular product every 100,000 yuan.

Xpeng Motors revealed that it will launch a new mid-size SUV model priced in the range of 200,000-300,000 in mid-2023; NIO also has two low-end brand tram products that will land in 2024, of which the brand codenamed ALPS will enter the range of 150,000-300,000 yuan, and "Firefly" will drop to the range of 100,000-200,000 yuan.

On the whole, Xiaomi, which has given priority to the "cost-effective" route in the mobile phone industry, but is facing the dilemma of high-end transformation in the future, wants to cut directly into the high-end track and open up the new energy vehicle market, which is not unreasonable. But in addition to the market potential, it is unknown whether Xiaomi fully foresees the complex tests that the high-end track will face.

In 2023 and 2024, while increasing the consideration of cost performance, new energy vehicle companies also need to see the key breakthrough of intelligence.

On the occasion of the launch of Xiaomi cars in 2024, many domestic intelligent driving players will quickly enter the stage of large-scale landing. In the field of autonomous driving, the goals of domestic new energy vehicle companies can be divided into two categories, one is to continuously improve the functions of assisted driving in the city, such as NIO, Xpeng and Lili, etc., and the other is infinitely close to high-level automatic driving, such as Nezha Automobile has clearly proposed a plan to reach L4 autonomous driving capabilities in 2024.

Judging from the assisted driving demonstration video released by Xiaomi, Xiaomi cars are currently only equipped with L2 level assisted driving functions. This means that Xiaomi focuses on the investment layout in the field of intelligent driving, and can play the role of "catching up with the progress" at present, but whether it can "surprise the future" is doubtful.

Screenshot of Xiaomi's autonomous driving technology display video, source Xiaomi's official Weibo

At the same time, although Xiaomi claims that its intelligent driving is full-stack self-research, Xiaomi's continuous acquisition or investment of this behavior just highlights the shortcomings of Xiaomi's lack of independent research and development technology. Xiaomi, which lacks independent research and development capabilities, will not only be limited in terms of technological development space, but also face challenges in cost control.

Finally, look at the funding aspect. Although Lei Jun said that Xiaomi has prepared to invest 10 billion US dollars in the next ten years, compared with peers, Tesla only ushered in the first profit in 2020 after burning money for 17 years, and there are many pessimistic voices in the industry about how long Xiaomi is willing to burn money for the car manufacturing business.

On the other hand, Xiaomi's first large-scale layoffs, which began at the end of 2022, have also increased investors' concerns. In the third quarter earnings call, Xiaomi Group President Wang Xiang said that since the beginning of the year, Xiaomi has begun to try to reduce costs and increase efficiency. According to interface news and other reports, Xiaomi began to lay off employees in many departments such as the mobile phone department, the Internet department, and the China department at the end of 2022, and the car manufacturing business was also affected.

In the industry's view, Xiaomi's round of layoffs may be related to the fact that Xiaomi's car manufacturing process is not as expected. According to the power plant, some of the things to be delivered in the definition are delayed due to various factors, which can lead to the cutting of some features and products that should have been delivered.

Therefore, the layoff of Xiaomi also revealed a signal, although there is a foreign investment layout, internal layoffs and savings, Xiaomi seems to bet on building cars at all costs, but from the above, it can be seen that it is far from mature in supplier management, manufacturing and capacity management.

In general, because Xiaomi's car manufacturing process is too slow, the industry is full of doubts about its plan to achieve the first car off the production line and mass production in 2024. Because of this, perhaps Lei Jun and Xiaomi need to let Xiaomi cars really land faster, after all, only in this way can we give the market greater confidence and expectations.