Addicted to cross-border business, Dreame Technology officially announces its entry into the automotive industry. Does it have enough money?

The reshuffle in the new energy vehicle industry is brutal. Many star players have unfortunately been eliminated, yet newcomers continue to flock in.

On August 28th, Dreame Technology, a leading domestic cleaning appliance company, officially announced its entry into the automotive industry. Its first ultra-luxury pure-electric vehicle will be benchmarked against the Bugatti Veyron and is planned to be launched in 2027. The Dreame team claims that they aim to build the world's fastest car.

Dreame was founded in 2017. At the beginning, it mainly manufactured vacuum cleaners, robotic vacuum cleaners and other products for Xiaomi. In 2019, it broke away from Xiaomi's supply chain and shifted to the development of its own brand. At that time, the cleaning appliance industry was developing rapidly, and Dreame took this opportunity to become one of the industry leaders, along with Ecovacs, Roborock and Yunjing, known as the "Four Little Dragons".

Among the "Four Little Dragons", Ecovacs and Roborock have already gone public. In March 2024, there were rumors in the market that Dreame would go public within the year, but the company denied these rumors.

There has been no progress on going public, but there have been continuous news about "Dreame's cosmic explosion". In the past two years, Dreame has started to expand into more product lines, including power banks, large home appliances such as refrigerators, washing machines and air conditioners, drones, color TVs, and there are even rumors that it will enter the aviation industry. In March this year, Dreame officially announced that it has become a boundaryless ecological enterprise.

According to Economic Observer, the Dreame Group currently has a series of established business units/product lines, including robotic vacuum cleaners, floor scrubbers, vacuum cleaners, hair dryers, air purifiers, water purifiers, dishwashers, refrigerators, air conditioners, smart TVs, routers, pool robots (Surge Future), embodied large models (Qianjue Technology), lawn mowing robots, window cleaning robots, trendy toys (Dreame Mart), coffee (Dreame Coffee), tea drinks (Shanye Mitea), and hot pot (Boiling Point Project).

Dreame was reported to have launched its automotive business as early as 2024. Since then, there has been a constant stream of news about Dreame's entry into the automotive industry.

In January this year, Xingkong Plan (Shanghai) Automotive Technology Co., Ltd. (hereinafter referred to as "Xingkong Plan"), the entity responsible for Dreame's automotive business, was established with a registered capital of 1 billion yuan and its headquarters located in the Lingang New Area of Shanghai. From the equity structure, Xingkong Plan has no direct connection with Dreame itself, but is indirectly held 80% by Yu Hao, the founder of Dreame.

In March, the Lingang New Area of Shanghai publicized a document named the "Xingkong Project", with a total land area of 414,400 square meters. There are reports that the Xingkong Project is the automotive factory of Xingkong Plan.

There is already a precedent for the robotic vacuum cleaner industry to cross over into the automotive industry. The Lunar Stone Auto founded by Chang Jing, the founder of Roborock (688169.SH), has been on the market for nearly two years.

In October 2023, Lunar Stone Auto under Chang Jing launched its first and so far only model, the Lunar Stone 01. It is an extended-range mid-large SUV priced from 299,900 yuan to 359,900 yuan.

Compared with leading new energy vehicle brands, the sales volume of the Lunar Stone 01 has been dismal. Statistics show that in nearly two years since its launch, the total sales volume of the Lunar Stone 01 has only been 11,800 units.

Why cross over?

Why have Roborock and Dreame successively entered the automotive industry?

In recent years, the cleaning appliance industry has been developing rapidly. According to data from Aowei Cloud Network, from 2019 to 2024, the market size of the cleaning appliance industry increased from 20 billion yuan to 42.3 billion yuan. The rapid growth of the cleaning appliance industry is driven by robotic vacuum cleaners and floor scrubbers. In 2024, the sales of these two products were 19.36 billion yuan and 14.09 billion yuan respectively, accounting for nearly 80% of the total cleaning appliance market.

However, compared with large home appliances such as refrigerators, washing machines and air conditioners, the cleaning appliance industry is still a relatively niche market. As emerging products, robotic vacuum cleaners and floor scrubbers have a relatively high penetration rate only in first- and second-tier cities, and a relatively low penetration rate among all households. In 2024, the penetration rates of robotic vacuum cleaners and floor scrubbers were only 5.5% and 3.1% respectively, far lower than the 13.5% of vacuum cleaners.

The industry ceiling is looming, and the leading companies in the cleaning appliance industry have to compete for market share through internal competition. Taking robotic vacuum cleaners as an example, since 2021, brands such as Roborock, Dreame and Yunjing have been eroding the market share of Ecovacs, the industry leader, through continuous innovation. However, after several years of intense competition, the industry competition has reached a stalemate, and no company has gained a decisive advantage.

Meanwhile, new competitors are constantly entering the market. Since this year, Roborock, which originally focused on robotic vacuum cleaners, has started to focus on the floor scrubber business. In August this year, DJI, the leading drone company, launched its first robotic vacuum cleaner product, targeting the high-end market. This also brings competitive pressure to the brands in the industry.

Against this background, cleaning appliance manufacturers have started to cross over into other industries. Among them, Roborock is not only deploying in the floor scrubber business but also starting to develop washing machine products. Dreame has an even wider range of business, planning to expand into the fields of refrigerators, washing machines, air conditioners, drones, color TVs, etc. Even the relatively conservative Ecovacs has developed intelligent household appliances such as cooking robots.

Due to the high penetration rate, the market size of large home appliances is much larger than that of cleaning appliances. In 2024, the total market size of the three major white goods - refrigerators, washing machines and air conditioners - was about 478 billion yuan, more than ten times that of the cleaning appliance industry. In comparison, the market size of the automotive industry is even larger. According to Zhiyan Consulting, it is expected to exceed 1.43 trillion yuan in 2026.

Does Dreame have enough money to build cars?

Compared with manufacturing floor scrubbers and robotic vacuum cleaners, building cars is obviously a capital-intensive project that requires a large amount of investment in the R & D stage. Even if the product is successfully launched, it is difficult to make a profit without sufficient sales volume.

Taking Xiaomi Auto, which has been very popular recently, as an example, at the beginning of the official announcement of entering the automotive industry, Lei Jun claimed that the company had a cash reserve of over 100 billion yuan and could afford to lose money. Later, Lei Jun also said that Xiaomi had spent more than 13 billion yuan on the R & D of Xiaomi Auto, and about 30 billion yuan in total including factory construction and salaries. Since the launch of Xiaomi Auto, the business has been in a loss-making state. In 2024, the cumulative loss exceeded 6 billion yuan, and the loss in the first two quarters of this year was also 800 million yuan.

Chang Jing of Roborock also invested a large amount of money in building cars. According to Tianyancha, from 2021 to 2024, Luoke Intelligence, the operating entity of Lunar Stone Auto, raised funds in 7 rounds, and the total amount of the 3 rounds with disclosed financing was 1.3 billion US dollars, equivalent to more than 9 billion yuan in RMB.

So, does Yu Hao and Dreame have enough funds to support the car-building project announced this time?

According to data from Aowei Cloud Network and IDC, in 2024, Dreame's market share in the global robotic vacuum cleaner industry was second only to Ecovacs and Roborock. In the floor scrubber industry, Dreame's sales were second only to Ecovacs.

Last year, Ecovacs' revenue was 16.542 billion yuan, and its net profit attributable to shareholders was 806 million yuan; Roborock's revenue was 11.945 billion yuan, and its net profit attributable to shareholders was 1.977 billion yuan.

Overall, Dreame is not a very powerful player, and the new energy vehicle industry has entered the elimination stage. There is a big question mark over how much interest the capital has in new entrants.

According to media reports, Dreame's market strategy for building cars this time is to "target the ultra-luxury market and prioritize overseas markets". Is this going to follow the path taken by Jia Yueting?

This article is from the WeChat public account "Damo Finance" (ID: damofinance). Author: Damo Finance. Republished by 36Kr with permission.