*This article is from the autocarweekly WeChat public account.
Author: Financial Street Lao Li
Xiaomi announced its entry into the automotive industry just over 100 days ago, and it is still only making empty promises.
In the past 100 days, Lei Jun and Xiaomi have taken quite a few actions: Lei Jun has been a frequent presence at major OEM and auto parts companies, from Great Wall to Changan, from Shangtongwu to Shangcheng, allowing everyone to witness the diligence of this entrepreneurial leader. At the same time, there were reports that Xiaomi was poaching Hu Zhenan, the head of research at Geely, and acquiring Baowo and DeepMotion.
Lao Li’s team has been keeping tabs on Xiaomi’s moves for a simple reason: regardless of which company enters the Xiaomi automotive system, it will immediately become a hot topic in the secondary market, and the earlier the news lands, the more market opportunities can be discovered.
“You may have seen many startup CEOs cut through the chaos with a quick knife, but you may be like me, never able to understand why a CEO who has succeeded in two startups and understands both software and hardware fields is so slow,” a friend within Xiaomi’s automotive team told Lao Li before he wrote this article. Following a two-hour conversation, Lao Li concluded that Lei Jun has too many cards to play, but is cautious. When things are not clear, being slow is being fast.
Taking this conversation as a starting point, Lao Li will discuss with everyone what Xiaomi Automotive has been doing in the past three months and what Lei Jun will do in the future.
The More Optimistic The Outlook, The More Rational One Should Be
To be frank, researching Xiaomi is very difficult, more difficult than researching Baidu and Tesla. The method of capital research enterprises is very simple: interview experts and then establish a research system, and then interview experts again, and so on.
Currently, there are two difficulties in researching Xiaomi. One is that there are not many people who truly can access Xiaomi Automotive’s top-level planning, and it is difficult to cross-validate information. Second, Xiaomi’s automotive has not had a clear path so far, and no one knows Lei Jun’s strategic framework.
A friend told Lao Li that Lei Jun often says, “the more optimistic the outlook, the more rational one should be.”
Lao Li often looks at startup companies, and the biggest feeling is “martial arts under heaven, only the fast and agile shall prosper.” The new force of car-making companies is also a similar style. NIO, XPeng, and Ideal are all about winning by being fast, including Jidu Automotive, which has only been making cars for 100 days but already has a team, supply chain, and new car positioning.
Lao Li has done some research on Xiaomi Automotive through colleagues and the upstream and downstream industries. The reactions of many people are that Lei Jun knows too much, understands software and hardware, and wants a good price. It is said that the failure to connect with Baowo was due in part to dissatisfaction with the target and in part to a failure to agree on the price, or in simpler terms, the cost-effectiveness was not good enough.
Another friend who had participated in the reception of Xiaomi Auto told Lao Li that the main reason why Xiaomi Auto is slower than Jidu is that they haven’t figured out how to do it yet. Lao Li has some experience in this regard. The reason why Jidu is progressing so fast is that Baidu and Geely determined the positioning of the first car model earlier this year, which is an SUV based on the PMA1 platform, similar in positioning to Tesla Model Y and Volkswagen ID.4. Baidu and Geely are respectively pushing forward software and hardware work. Therefore, Jidu’s development roadmap is very clear, it will be unveiled in 2022 and delivered in 2023, which fully complies with the product development cycle.
“We propose a cooperation scheme similar to Baidu-Geely cooperation, providing manufacturing system and supply chain. But Mr. Lei has experienced Xiaomi’s supply chain crisis and will largely control the supply chain himself. I am not optimistic about cooperating with them (Xiaomi Auto)”, said Lao Li’s university classmate who is in charge of foreign joint venture and cooperation affairs in an OEM and has also participated in the docking with Xiaomi Auto, maintaining a cautious attitude towards the company’s cooperation with Xiaomi. “We are also very cautious about cooperating with Huawei. For a company with both software and hardware capabilities, paying too much in the early stage is tantamount to cultivating future competitors, especially since we are the selected party.”
Lei Jun has been visiting OEMs for the past three months not for cooperation but for investigation. Why investigation? There is no accurate positioning of the new car within Xiaomi yet. Some say it’s a passenger car, while there are also rumors of a trailer. Two weeks ago, Lao Li interviewed an expert who said, “When Didi came to discuss car manufacturing cooperation, they came with a clear product plan. Mr. Lei’s visit is more like a boss’s investigation. Perhaps there is already a plan in his mind, but at least we haven’t seen it, so we can’t match resources.”
Summarizing, Lao Li speculates that Xiaomi Auto’s car-making may have several principles:
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First, the company needs to take care of both hardware and software, with software ecology as the high ground, but it must have large-scale hardware production capacity to ensure supply chain security.
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Second, cooperation and acquisition must have good bargaining chips, good quality of partners and targets, and appropriate prices.
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Third, slow is fast. Xiaomi Auto needs to conduct business in sections and ladders and integrate into the Xiaomi system.
The most difficult part is talent, manufacturing, and supply chain. In the past, car-making was a very mysterious thing, but now it is very transparent.After 2015, new forces provided a very intuitive understanding of car making, where money is the most important factor, followed by talent, manufacturing, and the supply chain, with the former being the foundation and the latter being the ability to build. Lao Li introduced Wei Xiaoli’s ability to build, with a talent strategy of hiring high-paying traditional OEM talents to build a team, such as Shen Feng and Liu Minghui, followed by manufacturing, where production capacity is improved through OEM or self-built factories, and finally the supply chain, where NIO’s strategy is to use expensive materials, but the ideal strategy is to use cost-effective materials.
In the past 100 days, Lei Jun has also been trying to build Xiaomi’s “talent, manufacturing, and supply chain” for its cars in the same way. Although money is not a problem, the development phase of the industry has changed, and Xiaomi’s car venture has not been smooth.
As the ancients said, one can get a thousand soldiers easily but it is difficult to find a capable general. Although Lei Jun personally leads Xiaomi’s car venture, there is a lack of a capable general who can coordinate the development of the entire car. At the beginning of June, there were rumors that Hu Zhengnan, the head of Geely’s Research Institute, had joined Xiaomi’s car division. Although the matter has not been confirmed, Lao Li has learned some inside information and would like to share it with everyone.
Lei Jun once visited Geely to investigate related models of Lynk & Co. At that time, the Geely leader accompanying Lei Jun was Hu Zhengnan. Hu Zhengnan is well-suited to Xiaomi in terms of both his personal resume and team capabilities. Xiaomi needs Hu to manage R&D, and Hu also needs a new platform to open up new development. In 2012, Hu Zhengnan joined Geely and was promoted from a car model project leader to the head of the research institute. In Geely’s electric vehicle research institute, there are many of Hu’s old team members.
The automobile industry emphasizes team-based fighting. During the job-hopping process, R&D leaders often take their team with them when they leave. According to Lao Li’s understanding, at that time, a deputy dean and three car model project leaders were likely to follow Hu Zhengnan to join Xiaomi. Some researchers estimated that at least 300-500 people might leave Geely’s R&D department after Hu’s departure, which would be a fatal blow to Geely’s already unstable R&D system. Due to the intervention of high-level executives, things eventually took a turn for the better, and Xiaomi’s car division still has a long way to go in team building.
Compared with team building, Xiaomi’s manufacturing system has been much smoother. First, various local governments extended olive branches and actively sought to attract Xiaomi’s car division to settle in. Later, many other car companies also made contact. Among local governments, Wuhan responded the quickest. Even before Xiaomi announced its car plans at the end of March, the Wuhan government had already started negotiations with Xiaomi. Logically speaking, Wuhan is an ideal place for Xiaomi’s car manufacturing system to settle.根据老李的了解，小米的制造体系已经在武汉落户，尚未官宣。除了制造体系，武汉还希望本地化小米汽车的研发体系，与合肥提出给蔚来的条件相同。然而，小米的研发极有可能在北京、上海和武汉三地布局。老李个人认为，从行业角度来看，上海临港也许是小米汽车制造体系更好的选择。据说雷军在考察完上乘后，也去了临港。我们拭目以待是否可以有合作落地。
在调研过程中，有位朋友提到雷军真正担心的可能是供应链，这也是二级市场最关心的。很多研究人员认为，行业里很有可能在「特斯拉概念股」之后，出现「小米汽车概念股」，二级市场甚至一度流传出拍脑袋版的「小米汽车供应链」。
过去的三个月，雷军考察了宁德时代、博世等一大批供应链企业，老李认为小米汽车将来的供应链分两大类：
第一类：传统的中小型零部件供应商，目前没有他们与小米接洽的信息，将来无论是哪家企业进入小米汽车供应链，其股价都将被快速拉升。
第二类：巨头供应商，典型的是宁德时代和博世，过去巨头供应商对造车新势力并不友好，一些企业曾要求新势力「先付款、再取货」，宁德时代也是大家都熟悉的包产到户。
小米汽车与「蔚小理」不同，小米汽车极有可能是快速走量的，供应链尤其是电池、芯片等核心零部件供应非常重要，小米担心这些地方会卡脖子。
据了解，小米接下来可能会有新动作，在电动化方面，要关注亿纬锂能和比亚迪，前者是动力电池后起之秀，后者是亟待开放的传统豪强，而小米消费电子电池供应商欣旺达也在考虑中，但技术水平尚不成熟；在智能化方面，小米将入股自动驾驶公司。
好牌抓手中，闷声做大事
相比当年的「蔚小理」，雷军目前手上有一把好牌。雷总的打牌非常慎重，老李认为有两个原因：
第一，小米汽车的目标和「蔚小理」不同。在发展初期，「蔚小理」没有资源和影响力，其企业发展和销量目标都是渐进式的。而小米汽车在企业发展和销量目标方面，要打指数型发展的规模战。Secondly, Xiaomi’s automotive ecosystem is different from “We Xiaoli”. Xiaomi’s ecosystem is well-built, and so is its enterprise risk investment (CVC) strategy. Xiaomi’s primary goal in making cars is to make them a crucial component of its ecosystem and investment system. Xiaomi is more closed in its openness than anyone else in the industry.
As Mr. Li often says, entrepreneurship requires mastering the rhythm. Xiaomi’s automotive business is not yet at the stage where everything is ready except for the east wind. At this stage, entrepreneurs need to be “steady, accurate, and ruthless.”
At the press conference, Lei Jun announced that Xiaomi’s automotive business will invest $10 billion over the next ten years, with an initial funding of RMB 10 billion. While 100 billion may sound like a lot, it is only a drop in the bucket for a new automotive startup. The cumulative investment of each of the three companies of We Xiaoli exceeds RMB 20 billion, and Geely’s Haohuanjia Investment exceeds RMB 18 billion. For Xiaomi’s automotive business, 100 billion is just the beginning.
According to reports, Xiaomi’s automotive business recently acquired DeepMotion for about RMB 1-2 billion. DeepMotion is a research and development enterprise that uses high-precision maps as its core to achieve autonomous driving through positioning, perception, analysis, and computation. Its scale is about 30 people, and it has made many achievements in the field of autonomous driving. The well-known Yangshan Port Slam comes from this team, and some of SAIC’s assisted driving technologies also come from this company. In cooperation with Zongmu Technology, invested by Xiaomi Changjiang Industry Fund, whether the news is true or not, Xiaomi values DeepMotion the most for its price.
Recently, many friends who study Xiaomi’s automotive business have been discussing how to explore the trends of the secondary market. Instead of studying what Lei Jun has done, it is better to change one’s perspective and judge what Lei Jun wants to do next.
At least from the current official information, it is difficult for everyone to accurately judge what Lei Jun wants to do. Lei Jun once said in a live broadcast that according to the voting intention of netizens, Xiaomi’s first car will either be a sedan or an SUV, with a price range of 100,000 to 300,000 yuan. It will take at least 3 years for Xiaomi’s first car to go offline.
At first, Lei’s words may seem unremarkable, but upon closer examination, they contain a lot of critical information: the 3-year development time means it will be from scratch rather than, like Baidu, borrowing from a car company’s platform; the price range of 100,000-300,000 yuan means it will be an economically positioned, high-volume car model, which is in line with the predictions of many analysts. After all, “originality + scale” is necessary to produce monster stocks.
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“Now the only thing that can be confirmed is that Xiaomi Automobile is definitely the most important part of the Xiaomi ecosystem, and in the future, the positioning of Xiaomi Automobile will surpass that of Xiaomi mobile phones. From a financial perspective, it is easy to understand that Xiaomi mobile phones have been in business for ten years, with an annual revenue of only 250 billion yuan, including the revenue of ecosystem products. On the other hand, Xiaomi Automobile is priced at 200,000 yuan per unit, with an annual sales volume of 1 million units, with revenue easily exceeding 200 billion yuan. There are too many things that can be done in the automotive ecosystem,” explained a friend of Lao Li on the strategic positioning of Xiaomi Automobile. Based on this strategic positioning, Lao Li believes that we can pay attention to the following aspects of Xiaomi’s movements:
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First, vehicle ecosystem integration. “In the smart ecosystem, cars and mobile phones are one thing.” Lei Jun’s words have made it clear that starting from chips to displays, from operating systems to software applications, both Xiaomi mobile phones and existing automobile industry chains are worth paying attention to.
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Second, IoT capabilities. After the debut of Xiaomi Automobile, it is very likely to be the only company that can connect people’s 24-hour life circle. Although it is impossible to achieve full interconnection of all things, it is only a matter of time for the Xiaomi family to achieve interconnection.
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Third, new profit logic. Like Xiaomi mobile phones, the profit logic of Xiaomi Automobile is not traditional manufacturing, sales, after-sales, and spare parts, but the software and hardware ecosystem services of its car core. After Xiaomi Automobile goes public, it will create new hardware and software applications.
Lao Li often uses the term “open and closed ecosystem” to describe Xiaomi, in which any hardware can be integrated into its IoT system, which is open. Once people enter this system and use it for a long time, they may fall into the “sweet and wonderful” scenario, which is closed, just like the “Apple suite” or the “Huawei suite” that people often mention in the past. It is imaginable that if a brand can cover the entire scene from home to travel to work, what a scene it will be… Xiaomi’s car manufacturing is indeed different from others.”
This article is a translation by ChatGPT of a Chinese report from 42HOW. If you have any questions about it, please email bd@42how.com.