2nd April 2024 – (Beijing) When Xiaomi Corp. unveiled its first electric vehicle in the Chinese capital last week, it marked more than just another tech conglomerate’s foray into car-making. It signalled the vaulting aspirations of China’s upstart automakers who are drawing inspiration from their nation’s stratospheric rise as a mobile phone powerhouse to tackle the global EV industry.

The sleek, four-door Xiaomi MS7 sedan may bear an uncanny resemblance to far pricier models like Porsche’s Taycan and Tesla’s lineup. But with a sticker price of just 215,900 yuan ($29,880), it undercuts the entry-level Tesla Model 3 by a substantial margin. More importantly, it showcases the unique strengths Chinese brands believe can help them leapfrog Western rivals: rapid innovation cycles, cost-competitiveness rooted in a localized supply chain, and a vast home market primed for electric vehicle adoption.

“Just as we disrupted the mobile internet era with our smartphones, we will re-imagine smart electric mobility with the MS7,” boasted a confident Lei Jun, Xiaomi’s founder and CEO, at the glitzy unveiling. Watched by rival Chinese EV pioneers like Nio, Xpeng and Li Auto, Mr. Lei proclaimed his ambitions are grander than simply catering to China’s bulging demand for battery-powered cars. “We want to spearhead the reshaping of transportation for the entire world.”

Only a few years ago, such braggadocio would have been unthinkable for a Chinese carmaker. Now, buoyed by leadership in EVs and cutting-edge battery technology, there is a groundswell of belief that the future of driving will be dominated not by industry stalwarts but by nimble challengers from the world’s second-largest economy.

“China has already overtaken the West in mobile internet and 5G, and EVs represent the next frontier,” says Zhang Xiang, an auto analyst at China Merchants Bank. “Xiaomi’s pricing, tech integration and smart connectivity features highlight the potential for Chinese brands to achieve global preeminence in this arena over time.”

China’s determination to dominate next-generation vehicles has been years in the making. As far back as the mid-2000s, policymakers identified new energy vehicles (NEVs) as a strategic priority. With the traditional gasoline automobile segments sewn up by behemoths in the U.S., Europe and Japan, EVs presented an opening for China to break into an industry that would be pivotal for the future.

Thus began a torrent of subsidies, tax incentives and policies conducive to EV development and adoption. More significantly, Beijing leveraged its command over the world’s largest car market to pressure overseas automakers into transferring core technologies to their Chinese joint venture partners. Many complied, effectively planting the seeds for future homegrown EV champions.

The results have been spectacular. In 2022, EV sales in China topped 6.8 million units, making it the first major economy where electrics outnumbered gasoline vehicles. While conventional auto behemoths like Volkswagen and Toyota racked up sales, they were outpaced by insurgents like BYD and Tesla’s Shanghai operations. In just two years, the EV market swelled from $30 billion to over $120 billion – a staggering quadrupling.

“No other country was providing the kind of long-term, committed support to new energy vehicles that China was,” says Yale Zhang, managing director of Automotive Foresight. “It not only catalysed consumer demand but nurtured Chinese startups and compelled foreign players to accelerate electrification, which enabled massive tech transfer.”

Detractors may accuse China of distorting market dynamics, but the country has clearly begun to reap dividends. Chinese manufacturers now account for over half of the world’s EV output, while their western counterparts play catch-up. Battery costs have plunged over 90% this past decade, extending China’s prowess beyond vehicles to critical components.

“China has established clear leadership in lithium-iron phosphate battery chemistries that are less energy-dense but safer and cheaper,” says Ilka von Dalwigk from EV-Volumes. “Companies like CATL and BYD have advanced the technology to narrow the performance gap, while China controls most of the world’s raw materials access and refineries to manufacture these cells.”

That upstream mastery provides Chinese marques with a crucial cost advantage. Unfettered access to inexpensive batteries allows them to pack even affordable EVs with larger battery packs. The MS7, for instance, boasts a substantial 73.6 kWh LFP blade battery that delivers a claimed 700 km of range – superior to most premium alternatives in its class.

Hardware prowess, however, is only one facet of China’s EV blueprint. Perhaps the biggest advantage for homegrown carmakers is their ability to integrate automobiles into the nation’s expansive consumer technology ecosystem. Having evolved in parallel with China’s unprecedented digitalisation, brands like Xiaomi, Oppo and Vivo possess deep expertise in developing user-friendly software interfaces and smart services. The MS7 exemplifies this software-defined vehicle ethos, sporting a unified operating system that blends infotainment, navigation and vehicle controls into an AI-enabled, voice-controlled cockpit.

Better yet, it is the spearhead of Xiaomi’s Internet of Things universe – integrating seamlessly with the company’s burgeoning lineup of smart home products, wearables and appliances. Similar convergence is visible across Chinese EV brands, where vehicles serve as the centerpiece of a holistic digital lifestyle.

“In Europe and America, you still have legacy software dinosaurs providing outdated infotainment experiences that don’t speak to the digital native generation,” remarks Bill Russo, founder of automotive consultancy Automobility Ltd. “Chinese brands are embedding vehicles into the type of hyper-connected ecosystem Western consumers can scarcely imagine.”

For millions of China’s urbanites, the smartphone remains the remote control for daily existence. Having that hardware and software fluency translate into a vehicle’s operating system will likely prove compelling. And it is a core competency traditional automakers may struggle to attain.

“Volkswagen hired over 10,000 software engineers yet still can’t keep up with the agile, iterative software update cycles of China’s tech giants,” says Russo. “It’s the physical embodiment of why Western players are on the defensive when it comes to smart electric mobility.”

None of this is to say blockbuster Western marques are ready to cede the mantle of automotive supremacy. Tesla remains formidably entrenched in China’s premium EV segments, having cultivated a tech-forward brand image long before local competition arrived. Legacy icons like Volkswagen and Toyota have the manufacturing scale and slack financial resources to meet upstart challenges head-on.

Over the longer run, however, most analysts concur Chinese carmakers will continue gaining ground. With the home market largely saturated, established brands like BYD are already exploring overseas export avenues. In the Middle East, Southeast Asia and other developing regions relatively insulated from anti-China trade crosswinds, Chinese EVs stand to see brisk demand growth fuelled by their cost-competitive pricing and smart digital packaging.

“It is still too early to declare China’s technology dominance in cars,” cautions Tu Le, managing director of Sino Auto Insights. “But given their structural advantages across batteries, software and scale, there’s little doubt Chinese EVs will emerge as the world’s preeminent mobility solution over the next decade.”

For Beijing’s economic planners, that ascendancy would be vindication of their long-held ambitions to usher automaking into China’s constellation of globalised technology industries. Vehicles may have turned the wheels of the 20th century’s economic superpowers, but 21st century mobility appears poised to be defined by China’s unique consumer technology playbook.

As Xiaomi’s Lei Jun declared matter-of-factly at the MS7’s star-studded launch, “This car represents a pivotal juncture where the Internet, electric vehicles and robots converge into one revolutionary model for future mobility.” Words that could well echo far beyond China’s borders in years to come.