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The backstory: China's auto industry, a big player in the global car scene and the world’s largest auto market, has been facing a bit of a squeeze. Overcapacity and not-so-strong demand have led to intense competition in a price war that’s hit automakers’ bottom lines.
Last year, the nation's electric vehicle (EV) sales shot up by 87% compared to 2021, according to Counterpoint Research. But the China Association of Automobile Manufacturers revealed that from January to May this year, the growth rate hit the brakes at 41%, way lower than the 120% speed it was going at the same time last year. So, Tesla started slashing prices to draw in more sales, creating a snowball effect among other automakers that led to a full-on price war.
More recently: In a bold move, Xiaomi, a major player in the smartphone market, is entering the EV sector. CEO Lei Jun announced this endeavor back in 2021, saying it’d be his last big business project. This past weekend he posted photos on Weibo of people holding a banner that said "Fighting for Xiaomi Auto." But, it still needed approval from China's state planner before it could start making EVs in the market.
Meanwhile, the Beijing factory Xiaomi has been working on since 2021 is now good to go, according to Beijing Daily in July. Also, it’s said it would be investing US$10 billion into its car business over the next decade, with plans on rolling out Xiaomi rides by the first half of 2024.
The development: Xiaomi has reportedly gotten a nod from China's National Development and Reform Commission (NDRC) to go ahead with its EV manufacturing plans. This is big news and a major step towards making their own cars by next year. The NDRC is the authority for investments and production capacity in China's auto world. But there's one more checkpoint for Xiaomi to complete. The Ministry of Industry and Information (MIIT) holds the keys when it comes to new carmakers and their models, so Xiaomi still needs it to clear things on the technical and safety fronts.
According to insiders close to the matter, Xiaomi has been on a hiring spree at its EV plant, gearing up for its big production goals. Sources said that the company aims to roll out around 100,000 EVs in the coming year.
“Xiaomi’s car manufacturing has progressed beyond expectation and has recently successfully completed winter testing,” said Xiaomi CEO Lei Jun at a meeting of the National People’s Congress and Chinese People’s Political Consultative Conference.
“Xiaomi wants to find a mature automobile manufacturer to provide model infrastructure, enabling its own advantages in mobile internet technology,” said Alan Kang, senior analyst at LMC Automotive in 2021.
“The forecast is the latest sign that China’s EV builders might see a strong sales recovery,” said Gao Shen, an independent analyst in Shanghai to SCMP, referring to Chinese EV-maker Nio’s forecast for a jump in deliveries this month. “A rebound in sales by indigenous brands will take place in the second half, when their new models hit the market.”