Date: August 23, 2023. Xiaomi, is embarking on a new venture in the electric vehicle (EV) industry. Unlike traditional automakers that rely on profit margins from vehicle hardware, Xiaomi’s strategy involves focusing on software services within its EV lineup. The company’s goal is a mere 1% profit margin from vehicle sales, relying on its software ecosystem for revenue generation.
Xiaomi utilizes software and AI to stand out in the EV market, distinguishing from rivals such as Tesla, NIO, and conventional automakers. The company plans to offer a range of connected services and features, including autonomous driving capabilities, over-the-air updates, and advanced infotainment systems.
Xiaomi’s strategy banks on generating more revenue from software-related services and ecosystem partnerships over the long term. However, experts warn that achieving profitability with such a slim margin will be challenging. Electric vehicle manufacturing requires substantial investments in battery technology, production facilities, and supply chain management. It remains to be seen whether Xiaomi’s software-driven approach can offset these costs and generate consistent profits.
Xiaomi’s pivotal decision regarding battery suppliers for RVs has taken shape. Zhongchuang Xinhang and CATL have emerged as the chosen providers, sidelining the initial contemplation of including BYD.
Formerly, whispers circulated about Xiaomi’s intent to incorporate both CATL and BYD batteries. However, the new revelation asserts a definite shift towards Zhongchuang Xinhang and CATL, largely attributed to legal conflicts with BYD.
The substantial battery costs, constituting nearly half the car’s total cost at approximately $10,000 per pack, weigh significantly on Xiaomi. Xiaomi’s nascent stage limits its bargaining power. Consequently, Xiaomi is strategically revamping its supply chain to alleviate the financial burden. Amid these intricacies, achieving even a 1% profit margin might prove inadequate to ensure competitive pricing. The company’s commitment to market alignment remains resolute.
Xiaomi’s software-focused EV strategy holds promise, its success hinges on delivering exceptional software experiences and effectively monetising the ecosystem.