Xiaomi has won approval from China’s state planning authority to produce electric vehicles (EVs), two people familiar with the matter said, marking a major step toward the smartphone maker’s goal of producing cars early next year.
The National Development and Reform Commission (NDRC), which oversees new investment and production capacity in China’s auto industry, earlier this month gave Beijing-based Xiaomi Corp the green light to make electric vehicles, people familiar with the matter said. The Xiaomi venture is the fourth to be approved by the National Development and Reform Commission since late 2017.
While the NDRC approval brings Xiaomi closer to mass production of electric vehicles more than two years after first announcing the plan, the venture still needs approval from the Ministry of Industry and Information Technology, which evaluates technology for new automakers and models and security requirements.
Its entry into Chinese car manufacturing comes as the world’s largest auto market is facing a series of problems, including overcapacity and slowing demand, which have sparked a bitter price war and hit suppliers’ profit margins.
Xiaomi has pledged to invest $10 billion (roughly Rs 8,270 crore) in its auto business over a decade and has set a target of mass producing its first car in the first half of 2024. But doubts have been cast over whether that timetable will be met. The National Development and Reform Commission has been cautious in approving companies’ new production plans for electric vehicles amid concerns about overcapacity in the industry and slowing demand.
Reuters reported in June that Tesla’s planned expansion of the Shanghai factory has yet to be approved. Industry sources previously told Reuters that U.S. luxury electric carmaker Lucid Group was keen to make cars in China but was told the odds were low.
Reuters could not immediately ascertain why the NDRC had approved Xiaomi. Its electric vehicle factory has been listed as an important industrial upgrading project by the Beijing municipal government.
Xiaomi, which owns the world’s third-largest smartphone brand by shipments, did not immediately respond to a request for comment. The National Development and Reform Commission and the Ministry of Industry and Information Technology also did not immediately respond to faxed requests for comment. The sources declined to be named as the matter is private.
While awaiting approval, Xiaomi has been aggressively advancing the joint venture, completing construction of a factory facility in Beijing capable of producing 200,000 electric vehicles a year, according to a July report in the state-run newspaper Beijing Daily.
Xiaomi plans to produce about 100,000 electric vehicles next year, one of the sources said. The company has also accelerated hiring at its electric car factory since last week in preparation for ramping up production in December, two Xiaomi employees told Reuters. They spoke on condition of anonymity due to the sensitivity of the matter.
challenging times
The magnitude of the challenge facing Xiaomi is evident in the utilization rates of Chinese auto factories.
According to data from the China Passenger Car Association, by the end of 2022, Chinese factories, including internal combustion engine vehicles, will have an annual production capacity of 43 million vehicles, but the utilization rate is only 54.5%, down from 66.6% in 2017.
But Xiaomi, whose revenue fell 18.9 percent in its latest quarter in May, also has the urge to move into electric vehicles.
The company is diversifying away from its main smartphone business as demand for electronics slumps. Smartphone sales in China fell 4% year-on-year in the second quarter of 2023, reaching the lowest second-quarter sales since 2014, according to consulting firm Counterpoint.
Xiaomi plans to use the thousands of stores it owns as showrooms for its electric vehicles, Reuters previously reported.
Chief Executive Lei Jun said Xiaomi’s foray into electric cars would be his last major entrepreneurial venture, posting photos of people holding “Fight for Xiaomi Cars” banners on his personal Weibo social media account on Saturday.
© Thomson Reuters 2023
(This story was not edited by NDTV staff and was automatically generated from syndicated feeds.)
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