By LIU Jiaxin, WU Yangyu
Xiaomi announced its Q3 financial results on Monday, revealing a year-on-year increase in R&D spending from 4.1 billion yuan (US$580 million) in 2022 to 5 billion yuan in Q3, the company’s highest quarterly R&D expenditure in nearly two years. Xiaomi attributed the increase to its smart electric vehicle business.
Only the beginning
The company reported a total revenue of 71 billion yuan for Q3, a year-on-year increase of only 0.6 percent, but ending a six-quarter losing streak. The IoT and Internet businesses showed relatively significant growth, while revenue declined in the core phone business.
Xiaomi committed to significant investments in its car venture from the beginning. The development of new energy vehicles requires substantial investment, especially in the R&D of vehicle models.
The time-consuming R&D process and the high cost of human resources contribute to the significant costs. Xiaomi’s automotive R&D team now consists of around 3,000 personnel. Developing a new car typically takes two years, with costs of several billion yuan.
CEO LEI Jun announced in 2021 that Xiaomi planned an initial investment of 10 billion yuan in its car project and a total investment of US$10 billion (70 billion yuan) over the next decade. The first phase of autonomous driving alone is expected to cost 3.3 billion yuan.
High costs mean high sales targets
Xiaomi’s R&D investment in new businesses passed 3 billion yuan in 2022. In H1 this year, 2.5 billion yuan went into cars alone.
The initial investment is higher than that of most new carmakers. Telsa, Nio, and Xpeng typically spent between 1 billion and 2 billion yuan in the initial stages. High costs can only be offset by high sales.
