(March 30) (Bloomberg) -- Xiaomi Corp. plans to invest about 100 billion yuan ($15 billion) over the next three years to manufacture electric cars, a person familiar with the matter said, embarking on its biggest-ever overhaul to enter China’s booming EV market.
The Chinese smartphone maker is the latest to pile into an already crowded arena, where an array of automakers from Tesla Inc. to local upstarts Nio Inc. and Xpeng Inc. are battling for a slice of the world’s biggest EV market. Search giant Baidu Inc. and Geely Automobile Holdings Ltd. are also said to be teaming up to build electric cars. EV sales in China may climb more than 50% this year alone as consumers embrace cleaner automobiles and costs tumble, research firm Canalys estimates.
Xiaomi joins fellow tech giants from Apple Inc. to Huawei Technologies Co. in targeting the vehicle industry, betting cars of the future will grow increasingly autonomous and connected. Xiaomi will invest about 60% of the envisioned sum and plans to finance the rest, said the person, who asked not be identified because the plans are private. The smartphone maker had just under 100 billion yuan of cash and equivalents at the end of 2020.
The Beijing-based company will outsource car assembly to contract manufacturers, a model it uses for its smartphones, according to the person. Xiaomi relies on contract manufacturers such as Taiwan’s Foxconn Technology Group to make its mobile devices.
However, the company has no plans to choose “established” automakers for its manufacturing partners, the person said. Great Wall Motor Co. last week rejected a Reuters report it will help Xiaomi make EVs.
Billionaire Xiaomi co-founder Lei Jun led a review of the EV industry’s potential several months ago and a final decision to enter the arena was made in recent weeks, said another person familiar with the matter. Xiaomi has already hired engineers to work on software to be embedded in its cars, the person added.
It’s venturing into unfamiliar territory. Founded by Lei more than a decade ago, Xiaomi became the fastest-growing smartphone maker in China in the fourth quarter of last year after Huawei found it difficult to source key chips because of U.S. sanctions. Beyond phones, it’s best known for running internet services and making a range of cut-price home gadgets from rice cookers to robo-vacuums.
