Xiaomi to Obtain Electric Vehicle Manufacturing License

Chinese consumer electronics maker Xiaomi is close to obtaining approval for producing electric vehicles (EVs). Local media outlet Jiemian News reported on February 14 that two car industry insider sources confirmed this, adding that nothing is set in stone before an official announcement.

Since 2017, the application process and criteria for granting electric vehicle manufacturing licenses have tightened. Stricter requirements have caused automakers to seek new solutions, such as partnering with original equipment manufacturing (OEM) companies or acquiring other companies. XPeng Motors’ Guangzhou factory obtained their manufacturing license for electric vehicles in January this year–a rare event over the past five years.

Xiaomi obtained its vehicle manufacturing license through its takeover of Borgward, an automaker that went bankrupt on November 29 last year.

Xiaomi Auto’s factory is located in Beijing and will complete construction over two phases, with each phase having a production capacity of 150,000 vehicles. The first phase started in April 2021 is expected to be completed by June this year.

Lei Jun, chairman of Xiaomi, has high hopes for Xiaomi Auto. On Investor Day on February 9, he expressed that Xiaomi Auto strives to become one of the top five automakers in the world within the next 15 to 20 years. Lei’s conviction is buttressed by the fact that Xiaomi has established a network of 10,000 brick-and-mortar stores in China over the past three years and has widely expanded its business to many countries around the world.

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The 2022 sales volume of electric cars in China is a testament to its rising appeal. According to the China Passenger Car Association, in 2022, the total retail sales of passenger cars in the Chinese market was 20.543 million units, a year-on-year increase of 1.9%. Among them, the retail sales of gas-powered vehicles were 14.868 million units, a year-on-year decrease of 2.302 million, while the retail sales of electric vehicles were 5.674 million units, a net increase of 2.687 million units over the same period of 2021.

While many new EV companies have sprouted over the past several years, the rapid growth of the electric vehicle market has not been boosted solely by new EV companies. The recent sales growth rates of NIO, Li Auto, and XPeng are 34%, 47%, and 23%, respectively. Traditional car companies have begun to launch their own electric vehicle fleets as well. The sales growth rates of electric vehicles by BYD, Geely, and GAC Aion are 208%, 278%, and 116%, respectively.

EV companies have been known to set lofty sales targets. The 2023 sales targets of NIO, XPeng, and Li Auto are 200,000 vehicles, 200,000 vehicles, and 350,000 vehicles, respectively. However, their sales volume over the past year was only 122,500 vehicles, 120,800 vehicles, and 133,200 vehicles, respectively. These three EV startups were founded during the previous wave of new car makers in China, around 2014. Xiaomi, as a follower, will mass produce its first car in 2024. Although lagging behind the previous wave by ten years, Xiaomi‘s ambition is high.

“Over the past three years, 75 EV brands have failed,” Zhu Huarong, chairman of Changan Automobile publicly stated, “The future competition will still be very fierce. It is expected that 60% to 70% of startups will shut down after three to five years.”