Innovation on the road: Xiaomi enters the EV market
Published 13 May 2024
Baoqi Zhu
Senior Associate, Quantitative Research and Multi Asset Solutions
Key Takeaways
- Chinese manufacturers continue to lead the global EV market, shaping its growth advancements.
- Connected car technologies are pivotal in transforming vehicles into integrated components of a broader digital ecosystem.
Xiaomi, primarily known for its consumer electronics, recently made headlines with its foray into the electric vehicle (EV) market by launching its first EV, Xiaomi Su7. Remarkably, the Xiaomi SU7 received nearly 90,000 preorders within 24 hours of its launch, and production for its first year on the market has sold out. This move not only marks Xiaomi’s ambitious entry into the automotive industry but also signals the burgeoning growth and potential of the EV market.
Expanding horizons in EV markets
The global EV market has witnessed steady growth with seasonal patterns over the past few years. Figure 1 shows the substantial rise in sales across the years. Compared to 2022, global EV sales rose by 32% last year, reflecting a growing consumer preference for cleaner and more sustainable modes of transportation – a significant shift in the automotive industry. Among these sales, battery electric vehicles (BEV) accounted for around 70% of the market from 2017 to 2023 (see Figure 2), indicating a strong preference for fully electric models, while plug-in hybrid electric vehicles (PHEVs) made up the remaining ~30%. This robust growth underscores the significant shift towards electrification in the automotive industry, setting the stage for innovative companies like Xiaomi to enter and potentially thrive in this evolving market.
Figure 1: EV monthly sales in unit (2018-2023), worldwide
Source: Bloomberg. Historical performance is not an indication of future performance and any investments may go down in value.
Figure 2: Battery EVs vs. plug-in hybrid EVs sales in unit (2018-2023), worldwide
Source: Bloomberg. Historical performance is not an indication of future performance and any investments may go down in value.
China’s unmistakable role in the EV market
Among the leading players in the global EV market, China has carved a prominent role as a large consumer market and a pivotal manufacturer. In 2023, China accounted for a staggering 59% of global EV sales, demonstrating its dominant position in the industry. Moreover, over 55%1 of the EVs sold were produced by Chinese automotive companies, underlining China's significant influence and manufacturing capability in the EV sector, in the same year. Notably, BYD alone produced over 20%2 of the EVs sold worldwide in 2023, showcasing its considerable impact and leadership within the market. The entry of Chinese companies like Xiaomi into the EV sector is reflective of this trend. The prominent role of China in the EV market highlights not only the scale of its impact but also the strategic importance of monitoring and potentially engaging with this rapidly expanding market segment.
Figure 3: Electric Vehicle Sales in Unit by Region in 2023
Source: Bloomberg
Connected cars and the future of the automotive industry
The concept of connected cars, which integrate communication technologies into vehicles, represents significant innovation and transformation in the automotive industry. Connected carts like the Xiaomi SU7 are equipped with technology that enables them to communicate and interact with other devices both inside and outside the vehicle. Xiaomi’s emphasis on connected car features even extends to potential synergies with its range of smart home appliances. For example, As the driver nears home, the vehicle might send a signal to adjust the thermostat, turn on the lights, and even preheat the oven, all seamlessly integrated through the car’s onboard system. Such synergistic capabilities are not just futuristic – they are imminent. About 95% of new vehicles sold globally will be connected by 20303.
Conclusion
Xiaomi’s recent entry into the EV market represents a significant step for a company traditionally focused on consumer electronics. As a new entrant, Xiaomi is positioning itself as a challenger in a rapidly evolving industry increasingly leaning towards integrating advanced technologies in vehicles. This shift towards EVs equipped with smart technologies highlights the ongoing transformation within the automotive sector.
Sources
1 Source: Bloomberg NEF
2 Source: Bloomberg NEF
3 McKinsey & Company, “Unlocking the full life-cycle value from connected-car data”.
About the contributor
Baoqi Zhu
Senior Associate, Quantitative Research and Multi Asset Solutions
Baoqi Zhu joined WisdomTree in 2023 as a Senior Associate on the Research team. Baoqi focuses on quantitative research on thematic equity indices and portfolio solutions. Prior to WisdomTree, Baoqi spent over two years at Ernst & Young (EY) in their Quantitative Advisory Services, where he was involved in the research and development of quantitative risk models. Earlier in his career, Baoqi served as a quantitative analyst within a multi-asset structuring team at Maven Global for more than three years. His responsibilities included designing and optimising bespoke hedging strategies based on derivatives. Baoqi holds a MSc in Financial Engineering & Risk Management from Imperial College London and a BSc in Actuarial Science from Nankai University, China. He is also a certified Financial Risk Manager (FRM).