Is Xiaomi car in danger? Smartphone giant logs first-ever quarterly sales fall

The going may have been tough for Xiaomi Corp. in recent years but tough seems to be getting tougher still with the smartphone giant recently reporting its first-ever quarterly sales decline. While a big part of the reason for the fall is believed to be strict lockdown restrictions in China with Covid-19 cases once again rising, the road ahead may continue to be riddled with challenges with doubts also being cast on an ambitious electric vehicle (EV) business being worked on by co-founder Lei Jun.

Jun has committed $10 billion to enter the mobility space in a possible attempt to make the most of the shift towards EVs. There is enormous scope. But there are also enormous challenges. Building an EV business from nothing is not just about big bucks but having the right people at the right time and all aligned for the right - to be read as common - objective. And it isn't as if the automobile business is faring much better than businesses dealing in consumer electronics.

Covid pandemic has had a major impact on production and supply while the crippling and unprecedented shortage in semiconductor chip - used both in electronic items as well as automobiles - has hit operations hard. There is no respite in sight as the shortage in semiconductor chip is more than likely to continue for the better part of 2022 at least. What it also means is companies like Xiaomi would continue to have an uphill climb in the core business of consumer electronics.

The silver lining though is demand. “The second half of 2022 is likely to be a peak season for the consumption of electronics products, boosting the firm’s results growth," China International Capital Corp. analysts Hu Peng and Hanjing Wen wrote in a note to investors, as per Bloomberg. If true, Xiaomi could well return to green and it may be a drive back to a quicker lane for the EV venture as well.

Xiaomi wants to storm the global EV business by 2024 by entering the mass-market space. The objective is to take on established and well-entrenched automotive brands in an EV space which, say many, has leveled the competing ground. Tesla has a massive lead here but traditional auto brands like Mercedes, BMW, Audi, Hyundai, Volkswagen, Ford, among others, are focused to play catch up.