Lessons from Xiaomi - Smart Car, NOT smartphone-on-wheels

Born in 2010 as a smartphone manufacturer, Xiaomi wowed the world in 2024 by introducing a production-ready EV at Mobile World Congress (MWC), showing it off in the same booth along with its new smartphone, Xiaomi-14 Ultra. While the Smartphone included a Snapdragon 8 Gen 3 processor, the car included Snapdragon 8295 for its infotainment. The achievement particularly stood out after Dyson, the British appliance brand, folded its EV project in 2019, within two years after spending over £500Mn and Apple’s well-known car project reportedly spent $10Bn before shutting down the project in 2024

Xiaomi’s feat can perhaps be better understood in the context of the ongoing automotive dynamics in China.

China Factor:

After years of characterizing Chinese products as knock-offs and shiny but not able to meet the real Western requirements for quality or safety, there is now a growing reckoning that China has reached a highly competitive technological sophistication, not just in streaming, karaoke or in-cabin avatars, but in fundamental engineering from ADAS to chassis controls, thermal systems, E/E architecture, not to mention the unparallel lead in electrification and battery technology. While Tesla and Rivian continue to be the flag bearers of the software-defined architecture here at home, China has multiple OEMs releasing software-first architectures.  

It is not surprising that China’s car buyers have been using seamless voice assistants, personalized cockpits, and advanced ADAS functions, many frequently updated over the air, when many US OEMs were still pondering if it was even worth the cost of offering features such as automated parking assists for their China-bound cars. The young Chinese OEMs such as Xpeng, Li Auto, Xiaomi and others are fast implementing the concept of flexible software-defined platform into building a car, while the Western OEMs are only gradually making the transition, evolving their well-entrenched architecture with function-specific electronics.

An eyeopener

During a recent visit to vehicle tear-down expert Caresoft in Livonia, Michigan, I had an eye-opening experience to see first-hand the various sub-systems of multiple current Chinese vehicles, BYD Seagull, Avatr 12, XPeng G6, Zeekr X, Leapmotor C10, and others. Many of the vehicles appeared to have started with the initial playbook from Tesla and other Western OEMs, but gone way further to create new innovative and efficient designs of everything from underbody castings to chassis design to brake systems, cooling hubs, and wiring harnesses. It is not surprising to read the media articles of journalists and analysts returning from the Shanghai or Beijing auto shows, voicing their combined amazement and frustration at the crowded booths with the latest vehicles while the booths of the Western OEMs ran empty with lackluster products.

“Unfair” Advantage

China’s steady governmental support and subsidies are often cited as its unfair competitive advantage. Chinese OEMs are surely making full use of the governmental support, but their edge probably also comes from what they are doing with those subsidies.

China additionally appears to have the leverage of a socio-political system that flouts the idea of work-life balance and pushes and promotes long hours, the so-called 6-9-9 work culture. However, despite this less-than-ideal practice, probably a key factor in reducing the product life-cycle to 12-18 months, it is increasingly harder to overlook that the industrial culture is also far more receptive to new technology, providing an impetus to try and launch new technology faster than the Western OEMs. This is a market where new technology, and not brand loyalty, appears to be the dominant factor in buying decisions. While there is new cautiousness in the market, after the Chinese government recently introduced new approval requirements for OTA updates for autonomous driving software, the market remains innovative and highly proactive relative to new tech and feature introductions.

The Apple Playbook

Xiaomi’s automotive debut at MWC was an interesting use case for a consumer tech company’s successful foray into automotive. The story is even more interesting in the context of Apple’s 10-year sojourn and then closure of its Project Titan – the much-ballyhooed Apple Car project.  

We may never know the thinking and strategic drivers behind the development or closure of the Car project. Arguably, Apple saw the car as another addition to its ecosystem of devices and modeled it after the same tight control and ownership of key design. Numerous news reports of its negotiations with multiple OEMs suggest that it probably envisioned a tightly controlled contract manufacturing delegated to a Foxconn-like entity – a model that might not have reconciled the complexities of the manufacturing logistics with Apple’s demanding terms and carmakers’ strategic interests.

An intelligent car, but NOT a smartphone on wheels

Xiaomi, not unlike Apple, seems to have envisioned the car as another intelligent device in its portfolio of consumer technology, part of the “Human x Car x Home” ecosystem, all using the same HyperOS. While it sought to integrate the new EV seamlessly with its smart device ecosystem and IoT platforms, it differed significantly in how it saw some of the traditional automotive engineering and supply chain as its core competence, not to be handed off to a contract house.  The key to Xiaomi’s success vis-à-vis Apple might just be that the company saw the automobile as a unique complex device deserving a full understanding of the specific engineering, including the safety and reliability requirements.

In other words, Xiaomi demonstrated a deep commitment to car-specific R&D and product development with investment in foundational technologies, including battery technology, autonomous/ADAS functions, and manufacturing. It’s that focus on automotive excellence above and beyond just bringing its IoT or software expertise that perhaps led Xiaomi to be a viable challenger, not just to Tesla but to the likes of Porsche.  

One area where Xiaomi seemingly makes its particular distinction from Apple’s approach is its strategy to learn and own the complexities of vehicle manufacturing and manage the supply chain by itself, with a wholly owned subsidiary. Emulating a Tesla-like approach, Xiaomi has invested in a strong supply chain management, with local sourcing that ostensibly allows them to move from design to production much faster than traditional Western OEMs

Epilogue

Xiaomi is a poster child of the fast-changing world of automobiles, where the new mobility is not only about cleaning the air, and not just about taking people safely from A to B, but also about elegant design, about building agile supply chains and fast software-first product cycle, offering intelligent services that integrates with the consumer’s digital life, while giving you the occasional excitement of Nürburgring records for those car enthusiasts who love it.

Perhaps, the most important lesson from Xiaomi might be that for the tech industry to make a foray into the automotive industry, you still have to focus on all the elements of the car, understand and invest in the uniqueness and complexities of engineering the device, and not just transplant software and hardware.

It is too soon to predict Xiaomi’s long-term success, especially in the face of competition from the likes of BYD, Nio, Huawei, and of course, Tesla. The initial market win for a company officially founded in 2021 is still noteworthy, despite the reports of many quality issues, engineering flaws, and software glitches, not to mention the crash in March 2025, ostensibly due to the failure of its Level 2 autonomous systems. While Xiaomi has to learn fast from the failures, some of the glitches are not unheard of in a new product launch of even the established brands.

Xiaomi’s success in expanding from a consumer tech giant to an exciting automotive brand may just be the roadmap to combine the tech industry’s software skills with the unique engineering competence of the auto industry and its supply chain management. Any OEM that hopes to survive the tsunami of change by wishing to become a software company might not be reading the tea leaves holistically.