Xiaomi EV

Wuhan Seeks Cooperation With Xiaomi on Electric Vehicle Manufacturing

Rebbeca Ren

posted on April 7, 2021 5:29 pmEditor : Wang Boyuan

After Xiaomi's high-profile announcement of its entry into the electric vehicle manufacturing field, Wuhan, the megacity that sits in Central China, eagerly echoed. The local authority said that it has set up a working group to achieve cooperation with Xiaomi.

The smartphone maker announced that it plans to invest $10 billion over the next ten years in the EV business and set up a wholly-owned subsidiary with an initial phase of investment of 10 billion yuan ($1.52 billion).

For Wuhan, the opportunity is particularly critical because the city, known as China's "Detroit," has lost its first-mover advantage in the electric vehicle manufacturing industry.

As the race of becoming the EV production hub heats up, some regions have become front runners through cooperation with EV brands. For example, Anhui Province and Guangdong Province have established strategic partnerships with Nio and XPeng, respectively, which have extensively promoted the transformation and development of the entire automotive industry chain.

Automobiles have been the backbone of Wuhan's economy for years. In 1992, China's state-owned Dongfeng Motor and French carmaker Citroën established a joint venture in Wuhan to build cars, igniting the rapid development of the automotive industry in the region. Currently, the city accounts for nearly 10% of vehicles made in the country and is the home to hundreds of parts suppliers.

With the development trends of intelligence, networking, electrification, lightweight, and sharing, the region is advancing the transformation and upgrading of traditional autos to next-generation vehicles.

Besides, Lei Jun, founder and CEO of Xiaomi, has a special bond with Wuhan, which also raises the plausibility of cooperation between the company and the capital city of Hubei Province. Born in Xiantao, a small city in Hubei, Lei got his bachelor's degree in computer science from Wuhan University in the early 1990s. In 2017, Xiaomi established its headquarters in the city.

When the CEO visited the Wuhan headquarters in June 2020, he said that Xiaomi would further expand its investment in the city and build a super-large R&D center with 10,000 employees.

The Chinese central government is betting big on its EV industry. Consequently, local officials are proactively competing for electric car projects and injecting state-owned capital to support the carmakers. 

Nio has secured $1 billion of cash injections from entities led by the government of Hefei, the capital of Anhui Province, last April, alleviating concerns the startup was running out of cash. The New York-listed electric car manufacturer now possesses a market value of more than $60 billion.

In March, XPeng has reached a strategic cooperation agreement with Guangdong Yuecai Investment Holdings Co., Ltd., the Guangdong provincial government's investment arm. Under the agreement, Yuecai will invest a total of 500 million yuan ($76 million) in XPeng to further accelerate the company's business expansion.

EVs are vital to China, not only because of oil demand or environmental protection but also about competitive strength, CNBC wrote, citing Yergin, vice chairman at IHS Markit.

The State Council on last Nov 2 issued a circular aimed at boosting the high-quality development of new energy vehicles (NEV) from 2021 to 2035.

Sales of electric, plug-in hybrid, and hydrogen-powered vehicles in China, the world's biggest auto market, are forecast to rise to 20% of overall new car sales by 2025 from just 5% now, said the central government.

China's EV industry has been significantly improved through years of continuous efforts. In 2020, nearly half of the world's plug-in electric car production and 90% of heavy-duty electric vehicle production was in China. It also owns the world's largest public charging network: 6 out of every ten public electric car chargers in the world are in China.

Under the full cooperation between the government, industry, and research institutions, the EV producers can obtain corresponding policies, funds, and technical support to accelerate the large-scale commercialization of automotive technology and better adapt to the ever-changing market.

China's EV market is about three to four times that of the US, and the figure is only going to get bigger, a McKinsey report said, adding that it will drive Chinese EV makers into the global arena.