A burnt-out vehicle and three dead: Chinese electric car manufacturer Xiaomi is under pressure

The crowds at the Shanghai Auto Show, the world's largest auto show, were immense. However, one exhibitor experienced an unusually large number of people pushing through its booth last week. The line of visitors demanding access to Xiaomi's booth was more than 100 meters long. In the dense crush, the Beijing-based electric car manufacturer's sports cars were barely visible.

The mostly young visitors touched and admired the cars painted in bright colors, and photographers snapped scantily clad models lounging on the hoods. Xiaomi has sparked a hype among young Chinese people.

Only one person stayed away from the spectacle: Xiaomi CEO and founder Lei Jun. Unlike last year, Lei was absent from the auto show this year. And for good reason. The company is at a loss for explanation. On March 29, an SU 7 model crashed into a concrete guardrail on a highway in eastern China.

The car burst into flames, and the occupants, three university students, died. The SU 7 was being controlled by the driver assistance system at the time of the accident. The vehicle doors apparently could not be opened after the collision.

Six days later, an SU7 collided with an electric scooter in Guangdong Province in southern China. This time, the vehicle also burst into flames, killing two people. Xiaomi stated that the vehicle was being manually steered at the time of the accident. The fatal collision was caused by "severe compression and deformation" of the scooter's lithium-ion battery.

Both accidents have not yet been fully resolved. But suddenly, industry experts and consumers are asking questions about the reliability of driver assistance systems. The safety of electric vehicle batteries and their approval procedures are also increasingly being questioned.

Lei Jun founded Xiaomi in 2010. At that time, the company still manufactured household appliances such as kettles, humidifiers, and rice cookers. One year later, the company launched its first smartphone. What followed was a success story that could only have happened in China.

Last year, the Hong Kong-listed company generated revenues of nearly $42 billion. During the first quarter of this year, no other company sold more phones in China than Xiaomi. Lei Jun has managed to overshadow long-time market leader Huawei.

Four years ago, the company founder finally announced his entry into the automotive business – and committed $10 billion in investment. Lei Jun, who initially worked at a research facility of the Ministry of Aviation after graduating from Wuhan University, promised to personally lead the project. He thus tied his reputation to the success or failure of the automotive business.

In spring 2024, Xiaomi launched its SU 7, a sports car strikingly reminiscent of the Porsche Taycan. Like its mobile phone business, its automotive business was a resounding success. Between April and December 2024, Xiaomi sold nearly 137,000 cars, twice as many as planned. Lei Jun boasted just a few weeks ago that almost two-thirds of buyers ordered an SU 7 without ever having seen the car.

But recent accidents have tarnished the glittering facade. There appear to be deficiencies in quality and in the government approval procedures for batteries and driver assistance systems.

On the sidelines of the Shanghai Auto Show, an industry expert, who wished to remain anonymous, told the NZZ that accidents like those involving Xiaomi, presumably caused by overheated batteries or defective driver assistance systems, are not uncommon in China. However, authorities have so far ensured that they remain hidden.

The fact that the Xiaomi accidents have now been widely reported in the Chinese media is an indication that the government wants to increase pressure on manufacturers to do more to ensure vehicle safety.

Currently, manufacturers meet the minimum battery quality requirements set by the Chinese authorities. However, these no longer meet the current state of development of batteries for electric cars, as an automotive technology expert who wishes to remain anonymous explained to the NZZ. Possible battery fires caused by high-speed collisions, for example, are not taken into account under the current regulations.

Electric car batteries can heat up uncontrollably in extreme situations; the process is then almost impossible to stop. Furthermore, fires in such high-performance batteries are much more difficult to extinguish than conventional fires.

There's a simple reason why China's government has so far been rather loose in its regulations for the automotive industry. Beijing's goal was to develop the sector as quickly as possible and therefore didn't want to burden manufacturers with excessive costs.

Suppliers have developed products within certain price limits, says the automotive technology expert. Compromises have to be made; expensive batteries with very high safety standards make the cars unsellable.

Currently, numerous manufacturers in China are trying to compete with each other's customers by developing increasingly affordable, long-range electric cars in ever shorter timeframes. Xiaomi's SU 7, for example, is available starting at the equivalent of $27,000.

After all, the government tightened regulations for autonomous driving two weeks ago. The fact that the entire industry has a safety problem was also evident at the Shanghai Auto Show. Hardly any Chinese manufacturer advertised their vehicles with self-driving features. Unlike last year, the topic played no role at this year's auto show.