Lei Jun and Xiaomi Auto are about to usher in a real test

Interface News Reporter | Yang Shihan

Interface News Editor | Zhao Baiyuan

Lei Jun, who loves jeans and small white shoes, changed into a formal suit for Xiaomi cars, which was his first public appearance in the automotive industry.

In the few years of the rapid rise of China's new EV manufacturers, few companies have been able to become an instant hit. Moving from digital consumer goods to the automotive industry represents a huge shift, often with unexpected challenges in terms of vehicle design, fundraising, supply chain, and sales channels.

After the official debut of the first car, Lei Jun and Xiaomi Auto are about to usher in a real test.

In the past, the key word that could not be avoided in the release of Xiaomi mobile phones was the ultimate cost performance, but Lei Jun was abnormal in the automobile business and emphasized that the pricing was more expensive many times.

The reason why Lei Jun frequently guides consumers' pricing expectations may be that there is a large gap between internal pricing and external expectations. Since the two years since the car was manufactured, the outside world has formed different psychological price points for Xiaomi cars, and reference factors may include past perceptions of the brand, disclosed hardware costs, and the pricing of new cars with extremely involution in horizontal comparison.

Two years ago, Lei Jun surveyed fans on Weibo about the expected pricing of Xiaomi cars, and the results showed that forty percent of users wanted less than 100,000. In other words, Xiaomi has long been aware of the gap between the expected price point given by the young audience and the actual selling price, but it still launched a "bit expensive" model this year.

With the starting price of 1999 yuan from Xiaomi 1 to Xiaomi 5 series, Xiaomi has fought its way out of the red sea competition in the mobile phone circle, and has accumulated a group of fans. Many people who pay attention to Xiaomi's car manufacturing hope that the ratio of extreme performance and price can be continued. "Xiaomi's consistent approach is to give a 'screaming price', maybe the entry price of the first car can really be reduced to more than 100,000 in the end. ”

Mei Songlin, a senior auto analyst, told Jiemian News that domestic high-quality independent brands have occupied the entire market, and the price war since the beginning of the year has also raised the psychological expectations of consumers, and it is difficult for Xiaomi to give the lowest price in the current automotive industry.

The price reduction space often points to the cost, which is also one of the important challenges that Xiaomi will face next. Xiaomi's past brand positioning has left a strong impression on potential users, which may cause them to ignore the calculation of the actual hardware cost.

Lei Jun said that Xiaomi SU7 will be equipped with up to 101Kwh CATL Kirin cells, "the cost of this battery alone will be more than 100,000". The hardware is equipped with two NVIDIA Orin high-computing power chips, and the perception hardware includes 1 lidar and 3 millimeter-wave radars.

According to the formula that the cost of the battery accounts for half of the cost of the whole vehicle, it is estimated that the manufacturing cost of Xiaomi cars may exceed 200,000 yuan.

Zhang Junyi, a managing partner of Oliver Wyman, told Jiemian News that according to the current configuration of Xiaomi Auto, it is almost impossible to set a price of more than 100,000 yuan or less on the premise of ensuring profitability, otherwise it is difficult to guarantee the long-term profits of suppliers and vehicle companies.

According to the current year-on-year growth rate estimates, Xiaomi's investment in automobile research and development may have exceeded 7.2 billion yuan. Labor costs have also attracted attention, and there are currently about 3,000 R&D personnel in Xiaomi Automobile.

Xiaomi's choice of core technology for self-development may bring cost reduction. For example, BYD has also mastered the pricing power to a certain extent through the self-research of the whole industry from parts to vehicles, coupled with a high market share.

Xiaomi has launched three self-developed motors for 400V and 800V voltage platforms, but flagship motors that can achieve higher performance are not expected to be installed until 2025. At the same time, Xiaomi uses a large model in the field of intelligent driving to imitate the driver's decision-making method for underlying self-development.

The capital reserve is a test that Xiaomi's car manufacturing is easy to be ignored by the outside world. At present, Xiaomi's cash reserves are still 127.5 billion, which is equivalent to the sum of NIO and Ideal. However, the current strong cash strength does not mean that the long-term impact of R&D costs on pricing can be ignored, in addition to BYD and Ideal to achieve profitability, many new power brands with strong financing ability are still exploring a benign development path in "selling cars at a loss".

Xiaomi stated in the early stage of car manufacturing that it would use its own funds to build cars, but at present, new energy vehicles are still a major investment destination. Zhang Junyi told Jiemian News that when the time is ripe, Xiaomi Auto may also have relevant considerations for open financing, at least to help bind ecological partners. He further said, "It's not difficult to build a car, but it's challenging for any company to be a sustainable car company."

The test also comes from whether Xiaomi's technology can achieve obvious breakthroughs and innovations. Lei Jun reiterated that "the truth of expensive is expensive", which can also be interpreted as hoping to convert users through higher product power. At the press conference, he introduced a number of technologies.

In fact, with the same positioning of technology companies, Xiaomi Auto embarked on the road of car manufacturing more than ten years later than Tesla, and five or six years later than the new domestic car-making forces. While many competitors have completed multiple model iterations, Xiaomi, which is long overdue, needs to redouble its efforts to make a late move.

Lei Jun claims that every aspect of performance is a little ahead of his competitors, on the one hand, this gap in R&D needs to be translated into consumer perception, and in addition, the most successful products in the automotive industry increasingly need to have outstanding advantages in one or two core functions, and for Xiaomi, it is more likely to come from software or ecology.

For example, in terms of vehicle manufacturing technology, Xiaomi uses a die-casting machine with a pressure of 9,100 tons, temporarily ahead of Tesla and Wenjie. Lei Jun claims that the technology has reduced the number of solder joints in Xiaomi cars by more than 840, and the rest of the highlights include the reserved collapse design to avoid high losses from small collisions.

The mainstream battery and body integration technology is also present in the Xiaomi SU7, which is said to be expected to achieve a battery capacity of up to 150kWh in the future.

However, a senior automotive software engineer told Jiemian News that judging from the previous patents of Xiaomi Auto, there is no essential difference between the technology and the current mainstream design.

Xiaomi also needs to find a balance between retaining its existing fans and reaching new users. Reasons why loyal users consider Xiaomi an industry pioneer include unique technological innovations, value chain-based cost management, and affordable smart technology inclusion.

These mobile phone users, who already have a clear understanding of the brand label, are likely to be the intended audience of Xiaomi Auto. According to the Xiaomi SU7 intended user portrait preview released by the research agency Jielan Road, 91% of users have used Xiaomi mobile phones, and nearly half of the users have become its users in the early days of Xiaomi mobile phone entrepreneurship.

Appearance, technology, and ecological advantages are all likely to win the favor of consumers in the Z generation. Although it has caused controversy since its debut, the streamlined body lines and dynamic low-lying posture of the Xiaomi SU7 have left a deep impression. The preference of young car buyers has been amplified in the era of electric intelligence, and even the old gasoline models Hyundai Sonata and Toyota Camry have once again emphasized the sporty element.

The "bay blue", which mainly promotes high saturation of the color, also seems to be deliberately catering to the needs of young people to show their individuality. This strategy may work, and many rice fans contacted by Jiemian News favor the more low-key color scheme of the SU7, especially the contrasting color combination of blue exterior and yellow calipers.

In terms of sales channels, Xiaomi needs to provide stable dealer returns and build a mature sales team, which requires a lot of training and recruitment. Xiaomi's anchor competitor in the automotive industry is Tesla, whose direct sales model is considered to be an important reason for market acceptance. In this regard, Xiaomi also has its own unique advantage, that is, the use of mobile phone stores that have already been built.

The current sales channels of Xiaomi Auto may be divided into two types, one is the existing mobile phone sales channel, and the other is the new delivery and after-sales center. Not all mobile phone stores are available for car sales. The staff of Xiaomi Home told Jiemian News that the relevant transformation had been gradually started two years ago. "Mobile phone stores with 6 to 7 display pedestals are likely to have sufficient area to enter the car."

In addition, Xiaomi is rumored to be in contact with some dealers with poor sales to discuss the renovation of new delivery after-sales centers. A number of joint venture brand dealer store directors told Jiemian News that if the situation is true, Xiaomi Auto is likely to need to give more favorable rebates, subsidies and personnel training support. "The most basic rebate is to ensure that the naked car does not lose money, plus the license, insurance, mortgage and other businesses, as well as additional rebates and dividends, to jointly support the healthy survival of dealers. ”

Xiaomi's mobile phone business franchisees used to be unsustainable because the profit of a single machine was too low, and taking into account the interests of multiple parties is even more important in the automotive business with higher input costs.

The sales side is still recruiting a lot of talent. Candidates generally believe that Xiaomi's salary in sales positions is not much different from that of mainstream car companies. One of them was worried about the prospects of Xiaomi cars, "it is still unknown whether the SU7 will sell well or not", and he ended up going to Tesla.

Among those who stayed in Xiaomi cars, many were influenced by Lei Jun. Lei Jun, who has been in business for more than 30 years, has undiminished passion for car building, claiming to have personally driven more than 150 cars to learn and Xi.

The label of "Xueba" has accompanied Lei Jun since his college days. Mei Songlin said that the strong ability to learn Xi is the common characteristic of successful entrepreneurs, who can continue to learn lessons from past experiences. This has been reflected in Li Xiang, CEO of Li Auto, and Yu Chengdong, Chairman of Huawei's Intelligent Vehicle Solution BU, who have led the company's business model to evolve. ”

Few new EV makers have been able to rely on their first model to gain a foothold in the market. They usually need to go through iterations and run in with the market, and the first production models of Li and Xpeng once fell into a crisis of confidence, and the pricing errors of the iteration models have also angered new and old car owners. Xiaomi may also have to gradually improve in the review like other new car-making forces.

This also means that Xiaomi's entry into the automotive industry at the most competitive moment is itself a disadvantage.

The Xiaomi SU7 market segment is still in rapid growth, the main competitors Tesla, Xpeng, Zeekr, Zhijie have corresponding products, the latest listed Zeekrypton 007 has a similar configuration, but the starting price is lower than the previous market expectations, which will also have an impact on the pricing strategy of SU7.

The high value of Xiaomi cars is from top to bottom, and engineers and sales staff have rushed to Beijing from all over the country to support. Manpower support was necessary at the scene, and more than 3,000 attendees were once congested outside the venue, including nearly 1,000 Xiaomi fans, some of whom traveled more than a dozen hours by train.

At the press conference, many fans chanted "far ahead", and Lei Jun did not shy away from announcing that Xiaomi's goal of building cars is "comparable to Porsche and Tesla", and hopes to become one of the world's top five car companies in 15 to 20 years.

To realize such a vision, the acceptance of Xiaomi's first car by the market as soon as possible is only the first step, and more importantly, how to deal with the many tests from production to delivery, which is still new to Lei Jun and Xiaomi.