10 million vehicles, hard!
Yesterday, Lei Jun, the founder of Xiaomi, sent out a series of tweets sharing his views on the electric car industry, which is also a response to the high concern of “rice fans” on the topic of Xiaomi’s car manufacturing.
The manufacturing threshold of electric vehicles is significantly lower than that of gasoline vehicles. 30,000 parts are highly modular, and the cost of batteries has dropped 80% in the past decade, and it is believed that there will be at least 50% cost reduction in the future.
Electric vehicle is a kind of electronic consumer product with intelligence, software and user experience as its core. The nature of the automotive industry will shift from mechanical development to an electronic consumer product, and market share is even more highly concentrated in the hands of top players.
When the electric car industry matures, the top 5 global brands will occupy more than 80% of the market share. In other words, the only way for Xiaomi to succeed is to be among the top 5 and ship more than 10 million cars per year. Competition in the electric vehicle market will be brutal.
This is not a new idea; he expressed something similar in the book “Thinking about Xiaomi’s Venture”. In the book, he not only predicted the shipments, but also gave a time limit for the race: 15-20 years.
Lei Jun set an extremely ambitious goal for Xiaomi to build a car, and also set a big tone for the future pattern of the industry – after 15-20 years of trial and error, adjustment, and elimination, the surviving electric car head enterprises should have the ability to ship 10 million units annually.
Compared to Li Bin’s “expectation to be among the top five in the industry in 2030” and Huawei’s Yu Chengdong’s vague statement that “there will be no more than five major players” in electric vehicles, Lei Jun directly erased the room for sloppy play.
Just, the annual shipments of more than 10 million vehicles, how good to reach?
In 2021, only Toyota Group sales exceeded 10 million units. The most serious epidemic in 2020, no global car companies annual sales of more than 10 million units. 2016-2019, three car companies annual sales of more than 10 million units each year, but all less than 11 million units. The first time a car company crossed the 10 million annual sales mark was in 2014 – 106 years after the Ford Model T was mass-produced. And those sales were accomplished by the group’s brands together, not by a single brand.
If shipments exceed 10 million units per year, shipments would have to exceed 830,000 units in a single month. From the electric car manufacturers wholesale sales in September this year, the first BYD more than 200,000 units (pure electric and hybrid), the second Tesla China 83,000 units, SAIC-GM-Wuling relying on God car also sold more than 52,000 units, behind there is no monthly sales of more than 50,000 new energy car companies, even monthly shipments of more than 10,000 units are only 15.
And new entrants to enhance production capacity is not an easy task, even Musk has slept in the factory and workers together with a difficult walk through the “production territory”. In the number of factories, Toyota has more than 40 factories around the world; Tesla has four super factories for the production of vehicles and two factories for the production of batteries and accessories, including the Shanghai Super Factory expansion to reach an annual capacity of 750,000 units – to complete Lei Jun’s goal, Xiaomi will need 14 such factories. It is understood that Xiaomi Auto will build a complete car factory in Beijing Economic and Technological Development Zone in two phases, the cumulative annual production capacity of the factory is expected to be 300,000 units, the first and second phase of production capacity of 150,000 units.
In short, to reach the goal of “shipping more than 10 million units per year” is quite difficult.
Can the experience of the smartphone market be used to predict the electric vehicle market? There is no way to compare the speed of smartphone penetration in the world with that of electric vehicles. There is a set of data: the median smartphone ownership in developed countries is 76%, and even in developing countries the median is 45%. And the first half of this year, China’s electric car ownership is only 3.2%. Therefore, the penetration of electric vehicles is unlikely to complete the global user “re-education” in just ten years like smartphones. Moreover, the rise of smartphones has kicked most feature phone giants off the table, because smartphones and feature phones are two completely different things – and electric cars dare to say they are two completely different things from fuel cars? Today you don’t use your smartphone and life is almost inching along. It’s always unlikely that someday in the future you won’t be able to get around without driving an electric car – unless you’re not allowed to get gas.
Compared to a smartphone that you can buy and use, an electric car needs a series of infrastructure such as charging pads to work properly on the road, and in most developing countries, this will take a relatively long process. If the infrastructure is not solved, the imagined explosion of electric vehicles will hardly come as expected. Even in China, the distribution of charging piles is very uneven, and part of the EV user experience is still limited by the number of charging piles and charging speed.
In addition, can Xiaomi reproduce the supply chain integration capability in the EV sector that it has shown in the cell phone and other consumer electronics sectors? Will it be able to get its share of the limited production capacity of car gauge chips and power batteries, and the situation that each family fights for it? Management of 10 million vehicles production capacity, but also a long time to settle.
Lei Jun also said, “the nature of the automotive industry will turn from mechanical development to electronic consumer products”, does it mean that the future of the car will be as frequent as the replacement of cell phones, so that it may be easier to reach 10 million annual shipments. But there is a problem: everyone is so rich to change cars, where do the parking spaces come from?