Xiaomi Targets Europe with Electric Vehicles...Challenges Tesla

China's Xiaomi is rapidly expanding its electric vehicle business and accelerating its entry into the European market. Leveraging the brand recognition it has built through its smartphone business and its relatively low prices, Xiaomi is expected to challenge Tesla and established European automakers. However, high brand loyalty among European consumers toward existing premium brands, as well as Xiaomi's business structure, which relies on China's domestic supply chain and ecosystem, are cited as obstacles to its market expansion.

Xiaomi is accelerating its entry into the European market as it expands its electric vehicle business. The photo shows visitors examining the electric vehicle "SU7" at the Xiaomi booth during the 2024 Mobile World Congress (MWC). Photo by Joint Press Corps

According to the Financial Times (FT) on April 26 (local time), Xiaomi delivered approximately 650,000 electric vehicles in just two years since producing its first car. This is similar to the number of vehicles Tesla sold in China last year.

FT reported that Xiaomi founder Lei Jun is seeking to challenge Tesla in Europe by introducing premium electric vehicles. Even Ford CEO Jim Farley has praised this electric vehicle model.

CEO Lei Jun announced plans to enter the automobile business in 2021. Just three years later, the company's first model, the SU7, was unveiled. This model sold 50,000 units within just 30 minutes of opening for orders.

For the YU7, which was released last year, 200,000 pre-orders were recorded within just three minutes of its launch. In addition, the new YU7 GT, which is expected to be launched at the end of next month, is the first vehicle that Xiaomi developed together with European engineers. At the recent Beijing Motor Show in China, CEO Lei Jun stated that the YU7 GT model "can match the standards of top-tier German cars."

Even as the Chinese automotive industry faces issues of oversupply, demand for Xiaomi's electric vehicles is outpacing its production capacity. Last year, Xiaomi produced 410,000 vehicles at its new Beijing factory, but it was unable to keep up with the surge in orders.

However, researchers note that Xiaomi is not immune to the fierce price competition in China's electric vehicle market. This competition is putting pressure on the profitability and sales of major Chinese automakers, prompting them to look for growth opportunities in overseas markets. Eunan Choi, a researcher at Gavekal Research, said, "Xiaomi needs to find growth markets in other regions," adding, "This is a reasonable decision."

Xiaomi is the third most popular smartphone brand in Europe. Choi highlighted Xiaomi's experience in selling consumer electronics overseas, stating, "Xiaomi has a stronger global sales network than other Chinese electric vehicle startups," and added, "Its products are more competitive compared to traditional automakers."

Xiaomi has not disclosed which European market it will enter first. However, last year, the company established an electric vehicle research and development (R&D) center in Munich, Germany, and hired more than 75 engineers, as part of its preparation for entering the European market. Xiaomi's Chief Marketing Officer (CMO) Xu Fei said, "The European market is really important to us," adding, "We want to provide products of better quality and higher performance."

However, researchers believe it will not be easy for Xiaomi to replicate its success in China in the European market. This is because European consumers still have high brand loyalty, particularly a strong preference for German premium brands.

According to Schmidt Automotive Research, in the first quarter of this year, Chinese brands held an 8.6% share of the new car market in the UK and Europe. However, the share was much lower in countries such as Germany and France. Matthias Schmidt, founder of Schmidt Automotive Research, stated, "It will take a very long time to enter the premium market," adding, "Xiaomi may succeed in Europe, but it is more likely to take market share from mass-market automakers rather than German premium brands."

Chris Liu, a Shanghai-based researcher at consulting firm Omdia, believes that Xiaomi could lose some of the advantages it enjoyed in China in the European market, such as supplier coordination. These advantages enabled Xiaomi to develop advanced-featured vehicles quickly and at low cost. He explained, "A significant part of Xiaomi's competitiveness is tied to the Chinese ecosystem, and this is not easily transferable to Europe."

This content was produced with the assistance of AI translation services.