Can Xiaomi Auto Last a Century?

In 2021, when Xiaomi announced its entry into car manufacturing, more than one industry insider commented that "Xiaomi is late to the game" and would find it difficult to establish itself in the fiercely competitive new energy market. However, market performance has proven the value of the latecomer advantage.

In March 2024, the first model SU7 achieved over 100,000 firm orders within 72 hours of its launch, with more than 130,000 units delivered throughout the year. In June this year, the second model YU7 set an industry record with 280,000 firm orders in just one hour.

As Lei Jun, the founder of Xiaomi Group, said, "There are advantages to being late; there are latecomer advantages." From skepticism to recognition, Xiaomi Auto is showing the momentum reminiscent of Tesla's rise. According to predictions by Gasgoo Auto Research Institute, Xiaomi Auto is expected to reach its breakeven point by the end of this year. So, can it become the next "Tesla"?

Image source: Xiaomi Automobile

All are "big brands + big IPs"

Xiaomi and Tesla share similar car manufacturing logic, both backed by the dual advantages of a "big brand + big IP." Before entering the complete vehicle sector, both companies already had a large consumer base and a strong brand foundation.

Tesla, with the personal influence of Elon Musk and the backing of the "cutting-edge technology narrative," has gradually become synonymous with future mobility and smart electric vehicles. On the other hand, Xiaomi, leveraging over a decade of experience in the smartphone business and IoT ecosystem, boasts more than 800 million smartphone users and a unique "Mi Fan" culture. These are inherent advantages for both parties in the automotive market.

Image source: Tesla

Musk, in relation to Tesla, is not just an entrepreneur and CEO; he also plays multiple roles as a technology promoter, venture capitalist, and communicator. His tweets can influence stock prices and even drive market expectations for the entire new energy sector.

For Tesla, Elon Musk is “as effective as an entire PR team.” His ability to create buzz and attract attention ensures that every new product launch from Tesla becomes a global focal point. He continuously generates hot topics—whether it’s the FSD system, the 4680 large cylindrical battery, the pilot operation of Robotaxi, or the debut of the Optimus robot—constantly reinforcing his image as a technology leader and highlighting Tesla’s leading position in intelligent electric technology.

It is precisely this personal influence, highly tied to the market, that has enabled Tesla to grow from a startup into a leading automaker with a market value exceeding one trillion dollars. To date, Tesla's annual sales volume has reached 1.8 million vehicles, and its products are at the forefront of key new energy markets such as China, Europe, and the United States.

Image source: Xiaomi Automobile

In comparison, Lei Jun's "engineer persona" in the context of the Chinese internet aligns well with the cultural psychology of local consumers. He is both an entrepreneur and a tech evangelist who is approachable to the public. He shares technical details at product launches and interacts with users on social media, often presenting himself in a sincere yet professional manner. This credibility and approachability have helped Xiaomi's automotive division gain additional trust from users in a short period of time.

According to automotive industry analyst Zhong Shi, Lei Jun's communication style is more like that of a "tech-savvy friend," which is particularly effective in the Chinese market. This also resonates with Xiaomi's brand ethos, rapidly enhancing the acceptance and expectations of Xiaomi cars among users in the short term.

Meanwhile, the fan economy has demonstrated unique power in both companies. According to various sources, Tesla owners’ communities around the world often spontaneously organize gatherings and online discussions, proactively sharing everything from FSD system updates to the convenience of the Supercharger network, thereby invisibly expanding the brand’s influence. This kind of organic word-of-mouth marketing has significantly reduced the company’s customer acquisition costs. Tesla has also extended its reach into the restaurant industry, with its restaurant in the United States recently opening for business.

Image source: Xiaomi Automobile

Xiaomi, as a company that started with smartphones, has gained a large fan base by relying on high cost-performance and a strong sense of user involvement. What is more noteworthy is that Xiaomi's marketing psychological techniques demonstrate a level of sophistication far beyond that of most traditional automakers.

This stems from its long-term accumulated user research capabilities in the field of electronic consumer products. Mr. Zhong pointed out that Xiaomi has a very precise grasp of user profiling. Although Chinese consumers do not have very high purchasing power, they have high expectations for exterior design, in-car configurations, and intelligent experiences.

Xiaomi has continued its proven approach from the consumer electronics sector by entering the automotive market with highly competitive prices and class-leading configurations. For example, the SU7 targets the mid-to-high-end coupe market in the 200,000 yuan range, which was still a blue ocean at the time; the YU7 focuses on full-scenario connectivity among "people, cars, and homes." Both models meet consumers' demands for products that are "high-value, stylish yet practical, and technologically advanced." Coupled with Xiaomi's strong marketing strategies, both models became instant hits upon launch.

It can be said that both Tesla and Xiaomi have leveraged fan culture to transform users from "consumers" into "advocates." Although one leans more towards a narrative of technological pioneering and the other emphasizes approachable interaction, both models ultimately achieve the same goal.

All possess differentiated competitive advantages.

What truly determines whether a company can establish itself in the long term is the creation of differentiated competitive advantages.

The automotive industry chain is vast and complex, with extremely high barriers to entry. Relying solely on sentiment and fan economy is far from enough to support a car company in the long run. Looking back at the paths of Tesla and Xiaomi, the two have shown clear differentiation in their strategic choices and industrial logic, each forming a unique competitive moat.

Tesla’s approach to car manufacturing is more akin to being “the Apple of the automotive world.” Since its inception, it has adhered to a vertically integrated, closed-loop model, striving to control as much as possible—batteries, motors, electronic controls, chips, and even software—thereby securing a dominant position in the industry chain.

Image source: Tesla

The self-developed FSD chip, 4680 large cylindrical battery, integrated die-casting process, and continuously iterating pure vision-assisted driving system form a comprehensive industry-leading systemic advantage. This vertical integration not only reduces external dependency but also enhances production efficiency through global supply chain optimization. For instance, the commissioning of its Nevada lithium iron phosphate (LFP) cell factory further reduces battery costs.

Thanks to this, despite the general pressure faced by global automakers, Tesla's automotive gross margin in Q2 2025 remains around 17%, higher than that of some multinational automakers such as BMW and General Motors.

In comparison, Xiaomi’s car is more akin to the “Android of automobiles.” Instead of striving for self-development and originality in every aspect, it leverages deep integration of the supply chain and rigorous cost control to rapidly achieve scale advantages. This approach closely mirrors Xiaomi’s strategy in its smartphone business—attracting users with exceptional value for money, then enhancing user retention through ecosystem stickiness.

The core technologies of Xiaomi's two car models, SU7 and YU7, mostly come from leading foreign suppliers such as Bosch, Gestamp, and Benteler. The remaining key components are sourced from domestic suppliers, with procurement standards placing greater emphasis on a balance between stability and price. The direct result of this approach is that the overall manufacturing cost of the vehicles is kept relatively low, thereby achieving a more competitive cost-performance ratio.

This strategy has already been reflected in the company’s financial performance. In the second quarter of 2025, the gross profit margin of Xiaomi’s smart vehicle business reached 26.4%, an increase of 11 percentage points year-on-year. Industrial Securities pointed out that the improvement in Xiaomi Auto’s gross profit margin mainly comes from the increase in Ultra deliveries, its platform-based strategy, and end-to-end integration capabilities.

Zhong Shi also emphasized that Xiaomi's industrial manufacturing experience and strict supervision of the commissioned production process are fundamentally different from other emerging forces. "The founders of new forces like Li Bin and Li Xiang actually do not have a complete industrial manufacturing background, whereas Xiaomi's team is obviously more experienced in cost management and supply chain coordination."

Image source: Xiaomi Auto

Differentiated competition is also reflected in the approach to ecosystem construction. Tesla insists on a closed loop, striving to turn electric vehicles into a closed intelligent system, creating a strong lock-in effect similar to Apple's iOS.

Xiaomi emphasizes open collaboration, leveraging its accumulation in mobile phones, smart home, and IoT to position automobiles as a new core entry point, extending into more life scenarios. The so-called "human-vehicle-home" seamless interconnection refers to incorporating vehicles into the overall layout of the smart ecosystem.

Xiaomi's long-term advantage does not lie in a disruptive breakthrough in a single technology, but in its ability to integrate a consumer-grade smart ecosystem. Through the combination of "smartphones + automobiles + IoT," Xiaomi aims to build a differentiated moat, making the car the central hub of smart living rather than just a means of transportation.

Of course, in terms of technological research and development, Xiaomi does not rely entirely on external sources. Its self-developed Surge O1 chip provides computing power support for its assisted driving, and, together with the Xiaomi Pilot 4.0 system, enables multi-modal integration of perception, planning, and decision-making, ensuring that it does not fall behind in key technological areas.

From this perspective, Xiaomi's differentiated competitive advantage lies in its "completeness," achieved through the integration of the entire chain, the coordination of the supply chain, and the expansion of its ecosystem to reduce risks and improve efficiency. The strength of Xiaomi's model is its ability to rapidly penetrate the market and gain market share in a short period. In contrast, Tesla builds deep barriers through a closed-loop technology system and in-house research and development capabilities, becoming an industry-defining player.

Xiaomi's approach to car manufacturing offers a new possibility for the industry: not all cross-industry car makers need to replicate Tesla's technological loop; relying on cost control and ecosystem synergy can also find a way to survive. Yet, in the long term, whether Xiaomi can withstand fierce competition with this model remains uncertain. This also raises a question: can Xiaomi truly become the next Tesla?

Next Tesla?

Before discussing whether Xiaomi Auto can become the "next Tesla," it is first necessary to clarify the positioning of the two companies. Zhong Shi pointed out that neither Tesla nor Xiaomi can be simply defined as internet car companies.

Elon Musk's ventures span multiple capital-intensive high-tech industries, including electric vehicles, solar energy, and rockets. Tesla is not just a follower in the electric vehicle sector but also a leader.

Xiaomi, on the other hand, is a consumer electronics company that also operates a venture capital platform like Shunwei Capital. Xiaomi's foray into car manufacturing is more of a "business extension" rather than industry leadership.

In recent years, almost all of China’s emerging EV makers have been expected to become “China’s Tesla.” NIO, XPeng, and Li Auto once enjoyed great popularity in the capital market, but reality has revealed their limitations: NIO has struggled to achieve scale in the high-end market; XPeng’s investment in smart cabins and assisted driving has not translated into sufficient scale; and although Li Auto has secured a foothold with its range-extended models, its technological path remains singular. These companies all face common challenges: breaking through the one-million-unit sales barrier, insufficient profitability, and barriers to overseas expansion.

In contrast, the reason Tesla has truly established a global position lies in its ecological closed-loop—electrification, autonomous driving, Robotaxi, humanoid robots, energy storage, and charging networks collectively form a business model-driven ecological revolution, elevating it beyond the scope of a car company.

Does Xiaomi have the potential to compete with Tesla on the same level?

The variable for Xiaomi lies in ecological integration. Xiaomi is not simply manufacturing cars, but aims to use the automobile as a new hub for the "people-car-home full ecosystem," connecting smartphones, smart home devices, and IoT devices to provide consumers with a more complete user experience. This kind of cross-category collaboration is relatively rare globally and has a low success rate.

Sales of Xiaomi Cars from January to August 2025

In terms of performance, Xiaomi Auto has indeed demonstrated impressive strength. In the second quarter of 2025, revenue from Xiaomi's smart electric vehicles and AI-related innovative businesses reached 21.3 billion yuan, with operating losses narrowed to 300 million yuan, surpassing market expectations. In the first half of the year, the total delivery of new Xiaomi cars exceeded 150,000 units. In the second half, sales continued to rise, with monthly deliveries exceeding 30,000 units for two consecutive months, maintaining a high growth rate.

To meet market demand, Xiaomi Auto is making every effort to expand its production capacity. Its existing Phase I plant has a designed annual capacity of 150,000 vehicles and is already operating at near full capacity. The Phase II plant, also with an annual capacity of 150,000 vehicles, has begun production, and the Phase III plant is under construction.

Zhong Shi believes that in the Chinese market alone, Xiaomi Auto can be on par with Tesla. However, on a global scale, the gap between Xiaomi Auto and Tesla is still significant.

On one hand, Xiaomi lacks brand recognition and a user base in the European and American markets; on the other hand, Xiaomi has not achieved leading results in cutting-edge technologies, relying more on supply chain integration and cost advantages. This has provided ample room for its development in the Chinese market, but whether this can be replicated in overseas markets remains uncertain.

Tesla's Sales in China from January to August 2025

Tesla has already secured industry dominance through its self-developed chips, global data training, and energy networks. This means that for Xiaomi Motors to compete with Tesla on the global stage, it still needs to address shortcomings in both technology and brand strength.

The success of Xiaomi's automobiles is largely built on the rapid growth of China's new energy vehicle market and the high acceptance of intelligent products among consumers. In mature markets such as Europe and the United States, consumers have more established brand perceptions and higher demands for product safety and reliability. These are areas where Xiaomi needs long-term accumulation and proof.

If Xiaomi Auto wants to enter the European and American markets, it still needs to make efforts in original styling design. Some analysts speculate that Xiaomi's entry into Europe may involve selecting a new generation of products rather than the two models currently on sale. It is reported that Xiaomi Auto's International Department has established the "Automotive Overseas Sales Business Preparation Team" by the end of 2024, initiating recruitment for market research and other positions. At the same time, it has set up a R&D center in Munich, Germany, to prepare for entering the European market in 2027.

Can it become the "Century Ford"?

A further question is whether Tesla and Xiaomi Auto can, like Ford, Volkswagen, and Toyota, become century-old car companies. On this issue, different people have different opinions.

Some internet industry insiders believe that this is almost an impossible task. The reasoning lies in the fact that the growth logic of both is heavily influenced by internet thinking, which fundamentally differs from the rhythm of the traditional automotive industry. Internet companies often rely on rapid iteration and capital-driven expansion to achieve growth, but this path is not inherently suitable for the automotive industry, which requires long-term accumulation and steady operation.

Internet companies are more like representatives of "fast food culture," while century-old car manufacturers are fundamentally rooted in craftsmanship, systems, and cultural accumulation.

Image source: Xiaomi Automobile

These doubts are not unfounded. Tesla has shown some uncertainties in the past two years: Musk's involvement in politics has sparked public controversy. At the same time, the growth rate of demand for electric vehicles in the European and American markets has slowed, and the reduction of subsidies and intensified competition have also put pressure on it. In the first half of 2025, Tesla's global deliveries reached 720,000 vehicles, a year-on-year decline of 13%.

Xiaomi’s rapid boom in the domestic automobile market certainly demonstrates remarkable execution; it took only three years from announcing its car-making plans in 2021 to mass production and delivery, setting an industry speed record and successfully seizing the capital track.

However, Zhong Shi warns that this "compressed cycle" leaves hidden concerns. "Cars are different from electronic consumer products; what truly determines long-term reputation is safety and reliability." If Xiaomi encounters issues with consistency and safety, consumer trust may quickly erode.

Recently, the controversy surrounding Xiaomi's assisted driving feature reflects this very concern. Tesla is also experiencing similar issues. In August of this year, Tesla was ordered by a U.S. federal jury to pay $243 million in damages related to a fatality caused by its autopilot system.

In addition to technology and safety, corporate culture and values are also a focus of external skepticism. The reason Ford and Volkswagen have been able to last for a century lies in continuous innovation, including technological iteration as well as management and institutional innovation. These accumulations truly form the long-term competitiveness of the enterprise.

Reviewing the rise of century-old automakers, Ford revolutionized the industry with the assembly line, making cars accessible to the masses, while Toyota built long-term competitive strength through lean management and a culture of quality. These achievements are inseparable from profound institutional and cultural foundations.

Image source: Tesla

In contrast, the success of Xiaomi and Tesla relies more on traffic and capital dividends. Whether their models can evolve into long-term organizational capabilities and cultural accumulation remains to be seen. Especially for Xiaomi Auto, its growth depends more on the replication and improvement of the internet model. Although car manufacturing is efficient, there are still doubts regarding its originality and ability to set standards.

Some analysts have pointed out that Xiaomi Auto has a relatively short corporate history and has not yet experienced any major cyclical shocks, so it is still too early to conclude whether it can demonstrate true resilience.

Of course, this does not mean that Xiaomi Auto lacks a future. Zhong Shi explicitly stated that he is optimistic about the medium- and long-term development of Xiaomi Auto, believing that it is already ahead of most automakers in cost control, marketing skills, and understanding of users. However, he also reminded that the lessons Xiaomi Auto must make up for next are quality control and safety, which will determine whether it can achieve sustainable development.

As long as the shortcoming of "product safety and reliability" is addressed, Xiaomi Auto has a vast survival space in the Chinese market. Analysts from Gasgoo Auto Research Institute predict that in the Chinese market, Xiaomi is expected to become an ecological brand service provider in the future. Relying on core intelligent technologies and self-operated channels, it will integrate ecological services to directly serve consumers, with annual sales potentially reaching between 1 million and 1.5 million units, capturing about 3% to 5% of the market share.

As for Tesla, some industry insiders believe it has the potential to become a "great company." "Tesla has always been a leader in intelligent electric technology and also has highly attractive technologies and products in other fields."

Overall, although Xiaomi Automobile and Tesla have slightly different development paths and strategic choices, both demonstrate the potential to break the traditional automotive industry pattern. Whether Xiaomi Automobile can become "the next Tesla" depends on its ability to address shortcomings in safety, reliability, and internationalization after rapid expansion; meanwhile, for Tesla to maintain its leading position, it also needs to find new growth points amid intensified competition and slowing demand.

Whether the two can become "century-old car companies" like Ford and Volkswagen still requires long-term testing by time and the market. However, it is certain that the attempts of these two car companies are providing new models for the global automotive industry and opening up more possibilities for the future development of the industry.