Article Source: WeChat Official Account - Lei Jun

Today, the Xiaomi Group held an investor conference. I shared with investors and friends the latest development of the Xiaomi SU7: As of April 20, the number of Xiaomi SU7 locks has exceeded 70,000 units, and we are making every effort to expand production capacity, and we are aiming to deliver 100,000 units this year.

At the meeting, investors also raised quite a few questions, and I shared my answers with you.

1. What is the next plan for the “Entire Ecology of People, Cars, and Homes” strategy?

Relatively speaking, the Xiaomi product line is relatively long and complete. Three years ago, when we were making cars, we did an accurate analysis. We believe that smart electric vehicles are a fusion of automobiles and consumer electronics. After three years, we understand more and more that these categories have all been integrated. Xiaomi's real competitiveness lies in technology and ecology, so in the “entire ecosystem of people and cars,” Surge OS is used to connect to each other, giving users a different experience that surpasses other products.

Regarding the intelligence of the Xiaomi SU7, everyone gave us great recognition. For example, handcars are connected, car owners are connected, and Xiao Ai's experience of controlling the car is far beyond imagination. Among all today's voice-controlled cars, the Xiaoai Control Car is the most capable, and also supports large models on the end side.

Therefore, the “whole ecosystem of people and cars” strategy integrates all of Xiaomi's product lines into a whole, further highlighting the importance of Surge OS. Taking the user as the center, creating an operating system with a “whole ecosystem of people and cars” is our long-term technical strategy.

2. Regarding the underlying technology, what is the direction and investment plan chosen by Xiaomi?

The core is the three underlying core technologies of Surge OS, chips, and AI. Of course, for our different businesses, we also have their own underlying core technologies. For example, electric drives are definitely the underlying core technology. The reason behind the powerful performance of the Xiaomi SU7 is that we started from scratch three years ago and planned 7 or 8 important technology tracks to try to lead the world in every field. Materials are also very important. Our yield in the field of large die casting includes environmental protection and economy, and is also due to our progress only after material breakthroughs, including electric drives.

When we held our technical conference at the end of December last year, there were still quite a few people who didn't believe it. After the car was released, after being “carefully selected by millions of netizens,” everyone will find that we have actually achieved industry-leading levels in many fields.

3. How do you evaluate AI development and investment?

At our press conference in August of last year, we announced our science and technology strategy to the outside world, which is to “deeply cultivate underlying technology, continue to invest in the long-term, deeply integrate software and hardware, and fully empower AI.” AI is also part of our overall growth engine, so it's a top priority for us. In the past few years, due to heavy pressure from external factors, investors also criticized our performance growth. We talked more pragmatically about products and relatively less about AI, which caused misunderstandings.

In fact, starting in 2016, Xiaomi decided to do All in AI internally. Like a series of AI-related products, such as Xiao Ai's product experience, the product experience was so good because everything was self-developed since 2016. Another example is intelligent driving. As soon as we started, we did full-stack self-research and achieved a relatively high level. The reason behind this is Xiaomi's long-term and determined investment in the AI field. In the future, we will keep you updated on our progress in AI.

4. Why is the Xiaomi SU7 selling so well? What's the most important reason?

In the past, pure electric cars were considered a niche market. For example, Tesla's Model 3 was the champion in this field, selling an average of 12,000 units per month in China. If pure electric cars reach an average of 3,000 units per month, they can enter the top five. Everyone thinks it's a niche market.

There are various reasons why we chose a pure electric sedan, but almost no one is optimistic. My personal goal is 10,000 monthly sales. Our original goal was to deliver 72,000 units throughout the year, and I know that many investors expected less than 3,000, which is normal.

I think the reason behind the initial success of this launch is that the Xiaomi SU7 proved that pure electric cars are a big market. In the past, this market was small, but no one made it. In the traditional automobile industry, the market demand for SUVs and sedans is 1:1. In my opinion, in the field of pure electricity, cars are definitely the mainstream demand.

5. Investors are more concerned about Xiaomi's next product plans, such as whether an SUV will be released, and can they reveal the progress of subsequent products?

I think one of the reasons why SU7 was successfully released was secrecy. Sorry, I really don't have a way to tell everyone right now.

The SU7 was our first car and has reached a pretty high level. I believe that the cars of the future will definitely be greatly improved.

6. How much is the gross margin of SU7, and what level will the overall break-even point be?

On this topic, I would first like to thank all partners around the world for their support, because they are still very optimistic about building Xiaomi cars.

Some experts took a look at the SU7. The original words of the evaluation were “full of RMB flavor,” because all of the components used are top products from top suppliers in various industries. Today, many people have dismantled our cars, and they all know that this is definitely not bragging; the vast majority of suppliers are BBA (Mercedes-Benz, BMW, Audi) suppliers.

With such expensive suppliers and such expensive components, the gross margin would actually not be very high. I am really grateful to the suppliers. From day one, they believed that Xiaomi could succeed and gave us very good costs and support. I would expect the gross margin to be around 5-10%.

Our sales volume today is much larger than expected, and we still need to carefully calculate the exact figures.

7. Will there be more cost reduction measures in the future?

Supply chain partners are discussing increased production capacity and further cost support with us.

8. Everyone is also paying attention to the trends of SU7's competitors, such as the price cuts Tesla just announced. What do you think?

Tesla's price increased on April 1, and the overall price dropped by 14,000 yuan on April 21. This really made me really admire Tesla and Musk. Facing the competitive environment, Tesla showed such a sensitive response, which made me very impressed. This is not at all like a multinational giant with a market capitalization of 5.6 billion US dollars. Musk is truly an amazing outstanding entrepreneur.

Tesla is also a friend to us. I think the best way to deal with competition is not only a price war, but more importantly, product power. I think the Xiaomi SU7 has a full range of product capabilities, such as sunscreen, storage, and ecology, all unique selling points, which are very attractive to the target customer base.

In the future, we will focus on improving the product, carefully collecting feedback from every user on this car, and striving to further improve it. This is the focus of our attention.

Improving product strength and making products good for users, I think it's also a better competitive strategy.

9. Do you think intelligent driving will become the focus of automotive differentiation in the future? How to evaluate the capabilities and future technical routes of the Xiaomi Smart Driving Team?

Over the past three years, I think our smart driving team has performed beyond my imagination. Our leader, Dr. Ye Hangjun, is a master's degree student in Tsinghua. Previously, he was the chairman of the Xiaomi Technical Committee. When I built a car three years ago, I transferred him full time to be responsible for intelligent driving. Judging from the results, the three-year performance exceeded everyone's expectations.

Currently, our smart driving team has a budget of about 1.5 billion yuan a year, about more than 1,000 engineers. We have invested continuously for many years. In the next step, we will expand to 1,500 people this year and 2,000 people next year, further increasing our investment in smart driving.

From the first day of car building, I thought smart driving was a watershed moment between the new forces building cars and traditional car builders. Moreover, I think intelligent driving can only really become a competitive point of differentiation if 100% of the capital is done by oneself. Smart driving algorithms and the underlying architecture are still evolving, and everyone is now making big models from end to end. In an age where technology is rapidly evolving, I think it's really difficult to just rely on supplier technology to keep up with the times.

10. When will Xiaomi consider overseas markets?

In terms of business deployment, we will focus 100% on the domestic market in the next three years, so doing well in the Chinese market is our first step. At the same time, since half of our business revenue comes from the global market, we do business in more than 100 countries and have offices and branches in more than 30 countries. We have global influence and a global rice noodle base, so it should be easy to become a global market when we are ready.

11. How are you allocating your personal time and energy now?

The past three years have been really busy. Based on the length of time I've worked, I've spent about half of my energy in the car.

Building a car was the last battle in my life to start a business, and I definitely can't lose. Three years ago, we established two very important strategic principles. Looking at it now, we have implemented our strategy quite well over the past three years.

The first principle is to keep the right, be amazed, be afraid of the automobile industry, recruit the best talents, not pursue a particularly disruptive design and a particularly disruptive architecture, but strive to do the best in every existing field. Many people ask me why Apple doesn't make cars, or what they've been doing in the past ten years. I believe Apple must be thinking about disruption every day. I think our Xiaomi is not Apple; we are more pragmatic. Let's get to the table first, and now we've done it.

The second principle is to deeply cultivate underlying technology and continue to invest in research and development. Since we have been using mobile phones for 14 years, we are increasingly aware that the threshold for application innovation and integrated innovation, including business model innovation, is limited, so on the first day three years ago, we decided to innovate in core technology and rely entirely on self-research on several core tracks. If this strategy is implemented, it will also leave us without dead spots in 360 degrees today, and we can do OK in every field.

This year, we will also invest 11 billion to 12 billion dollars in new businesses, including automobiles. At the same time, we will further invest in several key areas, such as the underlying operating system. I also really hope investors can understand it here. My goal is not a low level of profit; my goal is to become one of the top 5 car manufacturers in the world in 15-20 years and become a new generation of global hardcore technology leaders. If we go towards this goal, I think we can only go further if we have a firm foundation. On the premise that our financial reports can support it, I hope to invest as much as possible and then ensure a leading edge.

While investing half of my energy in the automobile business, I am also always focusing on the mobile phone business and investing about 1/3 of my energy. Because the mobile phone business is the foundation for our survival, executives such as Mr. Lu (Lu Weibing) and Zeng Xuezhong (Zeng Xuezhong) have all spent a lot of time and are doing an excellent job. My participation is more to ensure that there are no losses, because at our current scale, no loss can occur in mobile phones.

12. What other businesses are you currently most concerned about?

My current focus is on the three businesses of automobiles, Surge OS, and AI. In addition, we are also paying special attention to two things: first, building a competitive R&D team. Today, Xiaomi has nearly 20,000 engineers, how to build an R&D team of 50,000 or even 100,000 people in the future; second, how to effectively sort out processes, processes, and informatization is our focus for future management and improving efficiency.

13. What does the initial success of the Xiaomi SU7 mean to Xiaomi?

The Xiaomi Auto team is a very young team, with only over 100 people from the original Xiaomi team. We formed a team of 6000 people in less than three years. Moreover, there are 6,000 people in different offices, from different majors, and extremely complex, making it unprecedentedly difficult to bring everyone together. What do you think is the real connection here? It's about how to let them understand the Xiaomi methodology, and then understand the Xiaomi culture and the Xiaomi model. It is only by relying on this set of things that can truly unite everyone. The next step is to win the war, win the battle one battle at a time, and the milestones of continuous achievement have quickly brought people from all over the world together into a team that can win the battle.

I think the initial success of the Xiaomi SU7 was not just a product success; it meant a lot to Xiaomi. I understand what SU7 success means to us? We have entered a major industry. We are already at the table in the automotive sector. Of course, it's too early to talk about success; we still have to go through the three hurdles of quality, delivery, and service to truly succeed, but we're already at the table.

At the same time, the initial success of Xiaomi Auto is of great significance to the implementation of the Group's strategy. First, the “whole ecosystem of people and cars” has officially closed its loop. Moreover, we have made breakthroughs in several strategic directions at the same time, such as product aesthetics, the female market, and high-end technology.

More importantly, the initial success of the Xiaomi SU7 fully proved that the Xiaomi model and Xiaomi methodology can be applied in different fields, and also fully proved Xiaomi's organizational ability and execution. In less than three years, we built an industry-leading smart factory, built 29 delivery centers, 59 stores, and more than 40 service centers all began delivering overnight. Moreover, in less than 30 days of publication, it actually achieved “release and delivery, increase quantity”. Everyone can review the speed and ability of the new forces to build cars, and Xiaomi is considered to have created another small miracle.

Finally, after the release of the Xiaomi SU7, I want to tell you that after three or five years of suffering and refinement, today's Xiaomi is very different from what it used to be, and I hope everyone has a deeper understanding of Xiaomi.