Xiaomi Joins EV Race With $10 Billion Investment Plan

Chinese smartphone maker Xiaomi Corp. announced Tuesday that it’s jumping on the electric car manufacturing bandwagon with a plan to invest $10 billion over the next decade in a subsidiary focused on the “smart electric vehicle business.”

Xiaomi will set up a new smart car division with initial investment of $10 billion yuan ($1.5 billion), the company said Tuesday. Xiaomi’s billionaire founder and Chief Executive Officer Lei Jun will head the new unit, according to a filing with the Hong Kong stock exchange.

Lei said Xiaomi will rely on its own money to fund the new business, although many investors showed interest. With 108 billion yuan of cash and cash equivalents as of the end of 2020, Xiaomi is capable of underwriting the costs of developing the car business, Lei said.

Xiaomi is one of the world’s biggest smartphone makers but it also produces a range of gadgets including home security cameras, electric shavers and toothbrushes, light bulbs, watches, and scooters. The company did not provide further details on its strategy for entering the automotive industry, and whether it will focus on manufacturing, software, or both.

No matter its plans, Xiaomi will face a crowded field of competitors who are trying to produce electric vehicles at scale including Tesla and traditional carmakers such as Volkswagen and General Motors, all of which have been working for years to develop and sell electric cars that consumers want to buy.

And earlier this year there was a flurry of speculation that Apple was on the verge of going public with long-rumored plans to make an electric car, possibly in partnership with an established brand. Numerous other tech companies have established partnerships with carmakers, hoping to capitalize on the huge potential market for software applications such as autonomous driving.

Dan Ives, an analyst at Wedbush Securities, wrote earlier this week that the electric vehicle “transformation is just beginning.” “This industry is on the cusp of a $5 trillion market opportunity over the next decade. With GM, Ford, and Volkswagen all jumping into the deep end of the pool on electric vehicles, it speaks to the massive pent-up demand globally around electric vehicle technology on the horizon,” said Ives.