Check out China's latest EV

Xiaomi, a well-known maker of smart consumer electronics in China, is joining the country's booming but crowded market for electric cars.

The tech company will start taking orders for the SU7, a sporty four-door sedan, following a launch event with founder Lei Jun in Beijing on Thursday evening. Analysts think it will be priced in the 300,000 yuan ($40,000) range.

Government subsides have helped make China the world's largest market for electric vehicles, and a bevy of new makers are locked in fierce competition. Most of the industry's sales have been domestic, but Chinese makers are pushing into overseas markets with lower-priced models, posing a potential challenge to European, Japanese and American auto giants.

Lei is not bashful about that challenge, saying at an unveiling of the SU7 in December that Beijing-based Xiaomi aims to become one of the world's top five automakers in the next 15 to 20 years.

"I believe that one day, Xiaomi EVs will be a familiar sight on roads around the world,” he was quoted as saying in a company news release.

Xiaomi, founded in 2010, is entering an overcrowded market that analysts expect will undergo a shakeout in coming years, with weaker startups falling by the wayside.

The combined share of EVs and hybrids in China's auto sales is likely to reach 42% to 45% this year, up from 36% in 2023, according to Fitch Ratings. But the agency said in a December report that the competition could put pressure on automakers' short-term market share and profitability.

Known for its affordable smartphones, smart TVs and other devices, Xiaomi aims to capitalize on that technology by connecting its cars with its phones and home appliances in what it calls a “Human x Car x Home” ecosystem.

Tu Le, the founder of the Sino Auto Insights consultancy, said that Xiaomi is trying to close the loop by adding transportation to a product mix already integrated into its customers' personal and professional lives.

“The ability to seamlessly be a continuous part of someone’s life is the holy grail for tech companies,” he said in an emailed response. “You probably don’t know anyone in Beijing that doesn’t have at least one Xiaomi product, be it a mobile phone, computer, TV, (air) purifier, or tablet.”

As a newcomer to automaking, the company is making an educated guess that it can design and develop a car that will sell, he said. Given the sluggish Chinese economy and an ongoing EV price war, he predicted it would take a year or two to see if Xiaomi can adapt to correct any missteps and succeed.

“They are a technology company, so that’s their advantage but they need to reconcile that with drinking through a fire hose to learn how to be a tech company that builds cars,” Le said.

CreditSights, a financial research firm, said it expects Xiaomi's EV division to sell 60,000 vehicles in its first year and lose money for its first two years because of high marketing and promotion costs.

Chinese automakers trying to expand abroad face political headwinds.

The EU is investigating Chinese subsidies to determine if they give made-in-China EVs an unfair market advantage overseas. The U.S. announced an investigation last month into Chinese-made connected cars that it says could gather sensitive information about their drivers.

“China is determined to dominate the future of the auto market, including by using unfair practices,” President Joe Biden said when the U.S. investigation was announced. “China’s policies could flood our market with its vehicles, posing risks to our national security. I’m not going to let that happen on my watch.’′

China pushed back this week, filing a World Trade Organization complaint that alleges that U.S. subsides for electric vehicles discriminate against Chinese products.

The U.S. Defense Department put Xiaomi on a blacklist in 2021 over alleged links to China's military, but removed it a few months later after the company denied the links and sued the U.S. government.