The price war in the new energy sector has reached a dead end. Is Lei Jun leading the architecture department to tackle the profitability problem head-on?
While the outside world is still marveling at the popularity of Xiaomi SU7 and YU7 and speculating about the capabilities of the range - extended SUV undergoing road tests, Lei Jun has stepped out of his comfort zone.
According to the media outlet "36Kr Auto", Xiaomi Auto recently established a brand - new first - level department, the Architecture Department, which is mainly responsible for defining the next - generation technical architecture of intelligent electric vehicles. The new department will report directly to Lei Jun, and its members include the heads and core backbones of some R & D departments of Xiaomi Auto. For example, Cui Qiang, the person in charge of vehicle R & D, which self - evidently shows its strategic importance.
The core value of the Architecture Department is to lay a solid foundation for the iteration of next - generation models. After defining the standards for core modules such as the three - electric system, intelligent cockpit, and autonomous driving, car manufacturers can not only flexibly respond to market demands but also enable different models to share core technological advantages, reducing overall R & D costs and shortening the model development cycle.
Image source: Shot by Electric Vehicle Express
It is not uncommon for car manufacturers to plan for the next generation or even anchor the next ten or twenty years. The unique concept cars we see at major international auto shows are the direct calling cards for car manufacturers to claim their "foresight".
However, the default practice in the industry is that most car manufacturers assign the task of technological planning to second - level departments for implementation, while Xiaomi has elevated the forward - looking technological layout to the highest task level of the company. Such a high level of attention is quite rare in the industry.
From "Daring to Invest" to "Knowing How to Invest", Xiaomi Also Fears Wasting Money
Lei Jun once clearly stated that "although both YU7 and SU7 are developed based on the Xiaomi Modena platform, 90% of the components of the YU7 project have been redesigned."
The redevelopment of nearly 90% of the components involves far more capital and R & D investment than a regular facelift.
As early as the end of 2021 when Xiaomi announced its entry into the automotive industry, Lei Jun said confidently, "We have money! And we can afford to lose." Right after that, he showed off Xiaomi's cash balance of 108 billion yuan, laying a solid foundation for Xiaomi's long - term investment in the automotive business.
Image source: Xiaomi Auto official
It should be noted that many new car - making forces have established a foothold in the market with an investment of only a few tens of billions. Building cars has never been a business for making quick money. With a capital reserve in the hundreds of billions and the ability to withstand high upfront R & D investment, Xiaomi Auto is fully capable of bearing the R & D costs of the next - generation technical architecture. Moreover, it can be more stable and go further than its peers in terms of self - research on core components and the speed of technological iteration.
The sales figures can also prove this. Currently, Xiaomi only has two car series on the market, the Xiaomi SU7 and Xiaomi YU7. However, the cumulative sales of the Xiaomi SU7 in the first nine months have exceeded those of the BYD Han, making it the best - selling model in the mid - to - large sedan market. The Xiaomi YU7 is closely following the Tesla Model Y in the 300,000 - yuan pure - electric SUV market and has quickly established itself in the mainstream segment after its launch.
The technological breakthroughs are even more convincing. The mass - produced version of the Xiaomi SU7 Ultra has directly broken records on various race tracks. Xiaomi has proven with real - world product strength that its high investment has not been in vain but has been transformed into dual competitiveness in the market and technology.
Image source: Xiaomi Auto official
However, there is still pressure hidden in Xiaomi Auto's financial reports.
In the second quarter of this year, its revenue was 20.6 billion yuan, a 230.3% increase compared to 6.2 billion yuan in the same period last year. The quarterly operating loss has also narrowed, but the cumulative loss in the first half of the year still reached 800 million yuan, and the road to profitability still needs continuous efforts.
Although Xiaomi Auto has enough money and is willing to spend it, looking back, if the R & D requirements of the YU7 had been incorporated into the overall planning during the early - stage platform architecture design, the high - cost investment in re - tooling nearly 90% of the components in the later stage might have been avoided, further optimizing the cost structure.
The establishment of the Architecture Department not only represents Xiaomi Auto's forward - looking vision but may also be a review and correction of past experiences.
Image source: Xiaomi Auto official
As a first - level department responsible for defining the next - generation technical architecture, it can coordinate the R & D requirements of multiple future models from the top - level design stage. Whether it is a new SUV or a new sedan that may be launched in the future, or the configuration differences between different - level models, they can all be integrated into a unified technical foundation in advance.
The idea of "building the framework first and then filling in the content" allows Xiaomi to have an additional strategic consideration of "knowing how to invest" on the premise of "daring to invest". In this way, it can reduce the waste of resources like the "high - proportion reconstruction within the platform" of the YU7 and enable multiple models to share core technical modules, reducing R & D and production costs from the source and paving the way for achieving subsequent profit targets.
In the New Energy Vehicle Price Cut, Competing in Architecture is the Real Deal
As is well - known, the "price war" in the new energy vehicle market has escalated from "the same price for gasoline and electric vehicles" to "electric vehicles being cheaper than gasoline vehicles", indicating its intensity.
On the surface, car manufacturers are engaging in a close - range fight with their competitors by cutting prices, and consumers only feel that they can "get higher - end configurations at a lower price". However, in fact, every price cut challenges the bottom line of a car manufacturer's cost control. More and more car manufacturers have realized that price cuts without focusing on the underlying architecture are just short - term consumption of "robbing Peter to pay Paul". Only by "competing in architecture" can they maintain a long - term price advantage and avoid falling into the quagmire of losses.
Xiaomi's establishment of the Architecture Department is not an industry exception. Chinese and foreign car manufacturers have long made heavy deployments in the architecture field.
In the era of fuel vehicles, GAC Toyota's TNGA architecture is quite representative. The component commonization rate of the platform architecture has exceeded 80%, nearly 35% higher than that of traditional platforms, directly reducing the production cost of a single vehicle by 12% - 15% (about 12,000 - 18,000 yuan), leaving sufficient room for price cuts of models.
Image source: Shot by Electric Vehicle Express
In the new energy vehicle era, BYD, which initiated the price war, did not rely on simple price cuts. Its e - platform 3.0 architecture uses the CTB battery - body integration technology, reducing the number of components by 40% and shortening the manufacturing cycle by 35%. It can even reuse the chassis of the Qin PLUS for the high - end Han EV, and the R & D costs are extremely well - shared, which is the core support for price cuts.
The new NIO ES8 has also achieved price cuts while maintaining gross profit through architecture optimization. Platform - based components such as the 900V rear - electric area and electric drive can be shared among the ET9, ES8, and L90. Leapmotor's LEAP3.5 architecture continues the modular design, shortening the R & D cost amortization period to 18 months and reducing the new product development cost by 40%.
Of course, for Xiaomi, increasing the component commonization rate is just a small challenge. The bigger problem is to make an architecture suitable for products with different characteristics.
Image source: Xiaomi Auto official
Since its inception, Xiaomi Auto has been closely associated with the "sporty" characteristic. The Xiaomi SU7, Xiaomi YU7, and Xiaomi SU7 Ultra are all typical representatives of performance in their respective market segments.
Since its birth, Xiaomi Auto has been labeled as "sporty". The SU7, YU7, and SU7 Ultra are all performance representatives in their respective market segments, and their chassis tuning and power response are all centered around "driving pleasure".
However, according to Xiaomi's product plan, large - scale range - extended SUV models will be launched in the future. The core user requirements for such models are "spacious and comfortable space, energy - efficient operation, and family practicality", and their requirements for chassis vibration filtering, seat comfort, and loading capacity are completely different from those of existing sporty models.
This means that Xiaomi's architecture not only needs to achieve the commonality of the three - electric and intelligent modules but also needs to have sufficient flexibility in chassis tuning and body structure design. It should be able to support the track performance of the SU7 Ultra and meet the comfort requirements of family - use SUVs. This "one - architecture - multiple - scenarios" adaptability places extremely high requirements on the foresight of top - level design and the refinement of module division.
Electric Vehicle Express believes that Lei Jun's decision to elevate the Architecture Department to a first - level department of the company is not simply an adjustment of the organizational structure but a "resource tilt" at the strategic level.
With its top - level department positioning, the Architecture Department can bypass intermediate levels and directly mobilize resources in various fields of the Xiaomi Group. This can not only avoid the problems of traditional car manufacturers, such as "difficult resource coordination and low implementation efficiency when a second - level department promotes architecture", but also enable architecture design to precisely match the requirements of multiple models, allowing Xiaomi to maintain the advantages of "low cost" and "multiple products" in the price war.
Conclusion
In the era of fuel vehicles, Toyota's core of profitability was "extreme cost sharing". As long as it did a good job in the "three major components" of the engine, transmission, and chassis and shared R & D costs through platformization, it could basically stabilize its position in the market. However, the competition in the new energy vehicle era has long broken through this framework. After the three - electric technology has become a basic threshold, "intelligent capabilities" such as autonomous driving, vehicle networking, and advanced driver - assistance systems have become the new keys to determining a car manufacturer's competitiveness.
This requires Xiaomi Auto to not only do a good job in the "hardware foundation" such as the vehicle platform and high - voltage platform but also have the two capabilities of "controllable cost" and "wide adaptability" in the "intelligent carriers" such as the electronic and electrical architecture and intelligent cockpit platform.
Electric Vehicle Express has noticed that domestic brands with rich product portfolios, such as Hongmeng Zhixing, Geely, and Chery, have already developed a mature "differentiated adaptation" strategy. They will precisely match corresponding technical capabilities according to the price range, core characteristics, and target population of each product. For example, although Hongmeng Zhixing applies Huawei's ADS 4 advanced intelligent driving technology to its models, not all models and versions are equipped with the "full - fledged intelligent driving" system.
In this way, products can achieve "no waste of cost and no blurry positioning". It will neither push up the price of low - end models due to redundant technology nor make high - end models less competitive due to the lack of technology. Ultimately, it can cover more niche markets while firmly maintaining the balance between cost and profit.
For Xiaomi, if it can learn from this kind of differentiated adaptation idea and deeply integrate the unified technical foundation built by the Architecture Department with the positioning of models, it may be able to quickly find a balance between "technology implementation" and "market profitability" in the new energy vehicle competition.
This article is from "Electric Vehicle Express" and is published by 36Kr with permission.