Apple can’t make cars. Meet the Chinese tech giants who can

As one of the designers of the Jidu Robocar 07 whizzed by at extremely unsafe speeds, he calmly told reporters how electric vehicles (EVs) work. One enticing feature is its entertainment system – he’s playing a racing game (luckily, the actual car is stationary). Many features of electric vehicles are controlled via voice commands, with few buttons or knobs. It has self-driving capabilities, a sporty design, and the manufacturer claims it can travel 900 kilometers in 12 minutes on a single charge. When it goes on sale in early September, it’s expected to cost just 220,000 yuan ($30,850). “This is the future of driving,” the designer said, slamming his virtual race car into the railing.

Another noteworthy feature of the electric car is that it is funded by Baidu, the technology company that operates China’s leading search engine. In recent years, more and more Chinese technology giants have entered the automotive industry, and Baidu is one of them. Telecom equipment company Huawei has also entered the industry. Xiaomi, known for its smartphones and home appliances, is another example. In March, it launched its own electric car, the SU7. On August 21, the company announced sales of more than 27,000 vehicles in the April-June quarter; it aims to sell 120,000 vehicles by the end of the year. Xiaomi’s electric vehicle business currently has 87 sales centers in 30 cities in China.

Cars have been a source of disappointment for Western technology companies. Amazon has made a large investment in Rivian, an electric truck maker that has lost about 90% of its market value since its 2021 initial public offering. Waymo, the Alphabet-controlled self-driving car project, faces regulatory scrutiny over its safety record. Apple spent nearly a decade and about $10 billion on a project codenamed Titan before abandoning it earlier this year with little to show for it. Dyson, the British company best known for its vacuum cleaners and hairdryers, has also tried and failed to develop electric cars.

China is different, in part because the country’s average car buyer is much younger than in the West. Many people in China judge cars by their software and entertainment systems – Chinese electric cars are often described as “smartphones on wheels”. This makes it easier for technology companies to break into the market. It’s clear that several of China’s successful EV brands were founded by tech veterans. Li Auto, one of China’s largest electric and hybrid car manufacturers, was founded in 2015 by internet entrepreneur Li Xiang. In 2014, He Xiaopeng co-founded Xpeng Motors, another large electric vehicle company in China, and got his start in software development.

Chinese technology companies are entering the industry in different ways. Baidu has formed a joint venture with Chinese automaker Geely, JIDU; the technology company holds a 48% stake in the business. That frees it from the hassle of learning how to build cars, allowing it to focus on delivering technologies like voice recognition and self-driving software. For Baidu’s robotaxi business Apollo Go, the vehicles are also provided by Chinese car brands such as Hongqi and Arcfox.

Huawei has gone in a different direction. In return for a cut of sales, it helps automakers such as Seres, the maker of AITO-branded electric vehicles, with software, hardware, design and marketing. In the first half, it helped develop and sell 200,000 vehicles. In the Huawei flagship store on Beijing’s main commercial street, the windows are filled with cars, as if to mock the Apple store opposite. Investors are pouring in. State-backed electric car brand Avatr has purchased a stake in one of Huawei’s automotive solutions businesses, valuing it at $16 billion, according to disclosures to regulators on August 20.

Xiaomi is the furthest along in becoming a full-fledged automaker. The company announced plans to build the car just three years ago, initially hiring Chinese automaker BAIC Group as its contract manufacturer. Last month, the company received permission from the Chinese government to build its own cars. That could be transformative for the company, which started selling stylish but cheap smartphones online in 2011 and has grown into one of the country’s leading electronics makers. Success in car manufacturing would also provide final vindication for a company long accused of copying Apple products.

Still, the road to profitability may be bumpy. Although self-driving cars are growing in popularity in China, regulatory hurdles could limit the technology’s opportunities. What’s more, every new entrant into China’s EV industry intensifies an already vicious price war. Xiaomi may need to sell 300,000 to 400,000 cars a year to become profitable. Huawei says its automotive division breaks even when cars sell for 300,000 yuan; some AITOs currently sell for 250,000 yuan. Chinese technology companies have become formidable competitors in the automotive industry. But making money is another story.

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