Xiaomi President Lu Weibing: "The entire ecosystem of people, vehicles and homes" is accelerating globalization, and 10,000 Mi Homes will be opened overseas within five years.
On November 28, Lu Weibing, Partner and President of Xiaomi Group, gave a sharing titled "How to Take the 'Vehicle-Person-Home Full Ecology' Global" at the "WSIE King of Business" conference hosted by 36Kr. In the conversation with Feng Dagang, CEO of 36Kr, Lu Weibing started from the perspectives of Xiaomi's product methodology and high-end methodology, deeply analyzed the successful logic behind the popularity of Xiaomi SU7, Xiaomi 15, smart home appliances, and other products, and delved into important topics such as Xiaomi's high-end strategy, AI investment, and the globalization of the 'Vehicle-Person-Home Full Ecology'.
Lu Weibing, Partner and President of Xiaomi Group
Lu Weibing said that Xiaomi's globalization has completed the export of products and brands, and has entered the second stage of "model export". Xiaomi plans to open 10,000 Xiaomi Homes overseas in five years to bring the 'Vehicle-Person-Home Full Ecology' and Xiaomi's new retail model to the international market.
Regarding the highly concerned issue of high-end strategy, Lu Weibing said that Xiaomi has achieved "tremendous phased success" in high-end strategy. Not only the Xiaomi 15 series has been a great success, but almost all Xiaomi product categories are successfully moving towards the high-end. He particularly pointed out that the success of Xiaomi SU7 is not accidental, but an inevitable result of Xiaomi's product methodology and high-end methodology, and said that "all industries are worth trying with Xiaomi's methodology".
Lu Weibing, Partner and President of Xiaomi Group
For the AI topic that is widely discussed in the industry, Lu Weibing believes that AI will bring a revolutionary improvement in user experience and a significant increase in business efficiency. However, he also straightforwardly stated that the revolutionary disruption of AI to the mobile phone experience has just begun, and it will take some time to achieve the AIOS that Xiaomi desires.
The following is the transcript of the conversation.
Host: The long-term development of technology is not achieved overnight. It requires our patience, perseverance, and the courage to try and innovate. When it comes to innovation, we have to mention those Chinese brands that show strong competitiveness globally. They not only stand out in the domestic market but also shine on the international stage, interpreting the magnificent transformation from "Made in China" to "Created in China" with practical actions. Speaking of this, we have to mention a highly representative name - Xiaomi.
It not only changed people's perception of smart phones but also brought a convenient smart life experience to global users with a unique ecological concept. Next, we will enter the "Big Friend" session. Please welcome Mr. Feng Dagang, CEO of 36Kr, the initiator of this conversation, and at the same time, let's invite Mr. Lu Weibing, Partner and President of Xiaomi Group, to the stage to bring us a thematic sharing. Welcome!
Feng Dagang: First of all, congratulations to Mr. Lu. In the past few days, Xiaomi has released a very good and beautiful Q3 financial report. From the financial report, it can be seen that if Xiaomi had a period of confusion before, it has now completely emerged from it, and the situation is excellent. Xiaomi Automobile has found its own position and achieved stable delivery. Home appliances, the Internet, and other sectors have become key parts. The three growth curves of Xiaomi are organically intertwined. Such achievements are undoubtedly inseparable from the change in the management model. Today, I would like to talk about our own observations. In recent years, Xiaomi's management style has gradually transformed from the "entrepreneurial style" to the "Fortune Global 500 style", and Mr. Lu is the most representative member. Because Mr. Lu has led many key departments, such as the China region, the mobile phone department, the ecological chain department, and the home appliance department, and now he has become the president of Xiaomi Group. Your understanding of how Xiaomi has changed and how to look forward to Xiaomi's future is very crucial. Thank you again, Mr. Lu.
Lu Weibing: Thank you very much for this opportunity to communicate with you about Xiaomi's progress and thoughts.
Feng Dagang: Today's topics mainly cover three levels: from the company to the industry and then to the entire market. First of all, Xiaomi's excellent financial report results this time are not an accidental event, but an inevitable result based on the multiplier effect after the improvement of Xiaomi's methodology and core capabilities. So my first question is, how to understand Xiaomi's methodology, and how is this methodology formed? We heard that Xiaomi's methodology in the past few years was focus, extreme, word-of-mouth, and fast. Is it the same methodology as before? Is it a continuation or a subversion?
Lu Weibing: After the release of the financial report every quarter, I have to do roadshows. This year, investors often ask me a question during the roadshows: Xiaomi SU7 is so successful. Can your second car be successful? Can the third car be successful? Is the success of Xiaomi SU7 accidental or inevitable? This is a question that I have to repeat every quarter.
In response, what I talk more with investors is Xiaomi's product methodology and Xiaomi's high-end methodology. We say that The success of Xiaomi SU7 is the culmination of Xiaomi's product methodology and Xiaomi's high-end brand methodology. These two methodologies have created the success of Xiaomi SU7 today. So what I tell them the most during the roadshows is that this success is inevitable. This success is the result of the strategic planning after we decided to build cars at the end of March 2021. It is not accidental.
They ask me, what exactly is Xiaomi's methodology and what is Xiaomi's product methodology? I thought about how to explain it to investors. In fact, Xiaomi's product methodology is one word, which is "hit product". That is, how can you create a hit product and then use the hit product to change the market pattern.
Before the launch of Xiaomi SU7, Mr. Lei invited many people - industry insiders and those who have been in the car industry for decades - to give us suggestions and guess how many units of Xiaomi SU7 could be sold. At that time, the highest guess was that it would be very good if 5,000 units could be sold per month. Many people also said that it might be only 1,000, 2,000, or 3,000 units. Because they had a benchmark model, Tesla Model 3, which sold about 45,000 units in a quarter. It would be very good to sell one-third of Tesla's sales. In fact, as we can see, the monthly delivery of SU7 has exceeded 20,000 units in October.
Feng Dagang: How much did Mr. Lei guess? How much did you guess?
Lu Weibing: We set an annual target of 76,000 units in the first year for 9 months. The monthly delivery was less than 10,000 in the early stage and more than 10,000 in the later stage. But in fact, as we can see, the monthly sales of this car have exceeded 20,000 units. This is because if you open the Xiaomi Automobile APP today, you will find that the delivery cycle is still about 20 weeks, which is about 5 months. We don't know today. If our delivery cycle is one or two months, what should the sales volume be? We haven't seen the upper limit of sales today.
That is to say, when our delivery cycle is still more than 20 weeks, our sales volume has exceeded Model 3. Previously, people said that it is very difficult to make a pure electric sedan with a price of more than 200,000 yuan. But people forget that a real hit product can change the industry. This is the value of the Xiaomi SU7 product to the industry. Not only the SU7 product is successful, but we can also see that all pure electric sedans are selling very well because a large number of Xiaomi's orders have spilled over to other competing products. This is a hit product that can change the industry pattern.
Some people may ask a question, how did you create the SU7? If we summarize it in one sentence, it is what Mr. Lei said: Use 10 times the investment to build a good car with a down-to-earth attitude. The R & D cost we invested in the SU7 is 10 times that of a traditional car manufacturer. So when we first entered the automotive industry, many teams asked: How does Xiaomi do the "model spectrum"? I said that this is not Xiaomi's way of making products. Xiaomi's approach is to make one product well, and one product is equivalent to 10 or 20 products of theirs. People say that "having more children is better for fighting", but we are not. We make a child well and raise it well. This is the biggest difference between Xiaomi and other enterprises.
Feng Dagang: But isn't this a bit risky?
Lu Weibing: We think that Doing more is more risky than doing less, and dispersing forces is more risky than concentrating forces. It seems to reduce risks, but in fact, it increases risks. So today, you can see that in any industry category of Xiaomi, such as the air conditioning field, the number of Xiaomi SKUs is one-tenth of that of traditional air conditioning companies; in the mobile phone industry, Xiaomi is the third in the global market, but the number of our models is 1/2 to 1/3 of that of the fifth and sixth companies.
We want to make hit products in any category, reduce the number of product SKUs, and must make concentrated investments. What is the premise of concentrated investment? It is to have a strong user insight and technical insight. We need to combine user insight and technical insight to form a product. Why make many products? It is because you don't really know what users need that you make many products. Since Xiaomi was founded 14 years ago, we have followed this methodology. This methodology seems to be contrary to common sense, but we firmly believe in it.
Feng Dagang: Well, contrary to common sense. In a sense, why I said this is risky just now is because this seems to be a "common sense": Most people think that if you make 10 products, some will be successful and some will fail. Why does Mr. Lu say that making one product is safer than making ten products? On the contrary, diversifying and making many is unsafe? In fact, behind this is Xiaomi's confidence based on a deep understanding and insight into users and the market.
Lu Weibing: And there is another important reality that the resources of the enterprise and the energy of people are limited. The time you spend on making 10 cars is completely different from the time you spend on making one car. Because the resources of each enterprise are limited, and the time and energy of each person are limited, this is the biggest difference in our thinking.
Feng Dagang: A few years ago, when Xiaomi started to build cars, some people questioned it, saying that building cars requires a lot of money and there are many competitors. Now Xiaomi has a relatively abundant cash flow. Can we think that Xiaomi's car-building business has reached a relatively safe state? What are the remaining challenges?
Lu Weibing: In March 2021, after we announced the car-building plan, when I met with investors at that time, their biggest question was how successful Xiaomi Automobile would be. If Xiaomi Automobile is not successful, will it drag down all of Xiaomi's existing businesses? This was the biggest question that I had to answer to investors from 2021 to 2023. Everyone's view is that Xiaomi is a company that makes mobile phones. Why can it successfully enter the century-old automotive industry? After all, you have to face so many more powerful companies. So everyone is worried that Xiaomi's business may be a "double-kill logic": If the car is not successful, it will also drag down our existing business.
But in fact, when we decided to build cars in 2021, we thought very clearly. You can find that when we were building cars, we made very important decisions. That is, Xiaomi uses 100% of its own money to build cars. We did not, like many companies, turn the automotive business into an independent company for financing and use the money of external shareholders. We were still called "Mobile Phone × AIoT × Vehicle" in 2021. We have already regarded the vehicle as a very important part of Xiaomi's future ecological layout. Since it is a very important part, it must be within Xiaomi's own system, and there cannot be external funds that result in inconsistent interests, which will cause a lot of our losses. This is the first point.
After adding this top-level design, we made a second very important decision at that time, which is to invest 10 billion US dollars. This is what Mr. Lei said in March 2021. At that time (10 billion US dollars) was approximately 70 billion RMB. In such a large industry, if we do not firmly put 70 billion RMB on the table, it is very difficult for us to get on the table. This is the second very important decision we made.
The third very important thing is to figure out what is the essence of the smart electric vehicle industry? We keep asking this question. What is the great change in this century? What exactly is this great change?
Finally, we figured it out - Smart electric vehicles are a combination of consumer electronics and traditional industries, but they follow the laws of the consumer electronics industry. This sentence is very important. What is the law of the consumer electronics industry? It is to define hardware with software, and the future industry pattern will further converge. We believe that the top five in the industry will converge to occupy 70% of the market share.
This is why we want to be one of the top five global automotive brands. If we are not in the top five globally, we are "others", and this is the future. Therefore, we are determined to become one of the top five global car manufacturers in 15 - 20 years. This is the basic logic of our strategic deduction. After our (Vehicle-Person-Home Full Ecology) strategy was formed in 2023, our strategy can be closed-loop in 2024.
In the process of the deductive logic, everyone will find that the existing business has become healthier and healthier in the past few years. When we announced the car-building plan in 2021, we had approximately 100 billion RMB in cash reserves on the books. Now we have 151.6 billion RMB in cash. In the past three years and more of building cars, our cash on the books has increased by more than 50 billion RMB.
Feng Dagang: So building cars not only did not burn money, but also increased it.
Lu Weibing: The car is still at a loss, but our existing business is still very healthy. So after we disclosed the financial report of the automotive business in Q2 this year, I told investors that Xiaomi's three growth curves have all been formed: Personal devices with mobile phones as the core are the first curve, home devices with televisions, air conditioners, refrigerators, and washing machines as the core are the second curve, and the third curve is travel equipment - automobiles . This is the development situation of Xiaomi today.
Feng Dagang: Mr. Lei has previously mentioned three core management concepts: simplified management, flattening, and finding like-minded people. Now Mr. Lei has placed more responsibility on the car, and you have taken on more management responsibilities. What do you think is the "right thing"? We have just talked about a lot of logic. Mr. Lu has a complete set of thinking methods behind it. I don't know if it is only suitable for Xiaomi or also for others?
Lu Weibing: I am currently in charge of personal devices, home devices, Internet business, global theater areas, and the sales, delivery, and service business of automobiles at Xiaomi.
Many people ask me a question, how do you allocate your time to manage so many businesses? In my management, I will stratify and classify the work. The farthest layer is called strategic control. We manage the business with a strategic approach, only managing strategy and budget.
The second layer, a little closer to the business, is called operational control. Not only do we look at its strategy and budget, but we also need to enter into key operations, such