The National Development and Reform Commission (NDRC), which
regulates new investments and production capacity in China's auto industry,
gave the nod for EV manufacturing to Beijing-based Xiaomi earlier this month,
said the people. Xiaomi's venture is only the fourth since the end of 2017 to
win NDRC approval.
While NDRC's nod brings Xiaomi closer to mass production of
EVs more than two years after it first announced the plans, the venture still
needs clearance from the Ministry of Industry and Information (MIIT), which
assesses new automakers and models for technical and safety requirements.
And it would be entering China's car manufacturing sector at
a time when the world's largest auto market is wrestling with a series of
issues, including a capacity glut and slowing demand that have stoked a
bruising price war and hit supplier margins.
Xiaomi had pledged a $10 billion investment over a decade in
the automobile business and set a goal of mass-producing its first cars in the
first half of 2024. But there were doubts if the timeline could be met as the
NDRC has been cautious in approving new EV production plans of companies
because of concerns about overcapacity and slowing demand in the sector.
Tesla's plan to expand its Shanghai plant had yet to win the
nod to go ahead, Reuters reported in June. And industry sources have previously
told Reuters that US luxury EV maker Lucid Group is keen to make cars in China
but has been advised that the possibility was low.
Reuters was not immediately able to determine why NDRC
granted approval to Xiaomi. Its EV plant has been marked by the Beijing
municipal government as an important industrial upgrade project.
Xiaomi, which owns the world's third largest smartphone
brand by shipments, did not immediately respond to a request for comment. The
NDRC and MIIT also did not immediately respond to faxed requests for comment.
The sources declined to be named as the matter is private.
While it awaited the approvals, Xiaomi has forged ahead on
the venture, completing the construction of factory facilities capable of
producing 200,000 EVs annually in Beijing, according to a report in the
state-run newspaper Beijing Daily in July.
Xiaomi plans to produce about 100,000 EVs next year, said
one of the sources. It has also accelerated hiring workers for its EV plant
since last week as it prepares a production ramp-up in December, two Xiaomi
workers, who did not wish to be named because of the sensitivity of the matter,
told Reuters.
Challenging Times
The severity of the challenges facing Xiaomi is evident in
the automobile factory utilisation rates in China.
Chinese factories, including those making combustion engine
cars, were capable of producing 43 million units annually at the end of 2022,
but their utilisation rate was just 54.5 percent, down from 66.6 percent in
2017, China Passenger Car Association data showed.
But Xiaomi, which reported an 18.9 percent drop in its
latest quarterly revenue in May, has its own compulsions for foraying into EVs.
It is making the shift to diversify away from its main
smartphones business amid slumping demand for gadgets. China's smartphone sales
fell 4 percent year-on-year in the second quarter of 2023, reaching the lowest
Q2 sales figure since 2014, according to consultancy Counterpoint.
Xiaomi plans to use the thousands of stores it has as
showrooms for its electric cars, Reuters previously reported.
CEO Lei Jun, who has said Xiaomi's foray into EVs will be
his last major entrepreneurial project, posted on Saturday pictures of people
holding a banner saying 'Fighting for Xiaomi Auto" on his personal Weibo
social media account. © Reuters