Xiaomi Buys Self-Driving Tech Startup to Propel EV Ambitions

(Bloomberg) — Xiaomi Corp. will buy autonomous driving technology startup DeepMotion for $77.4 million to help further its ambitions of getting into the fast-expanding field.

The company disclosed the acquisition after reporting better-than-expected results for the second quarter, when a recovery in key markets like India helped it overtake Apple Inc. to become the world’s second-largest phone vendor by shipments. Revenue surged 64% to 87.79 billion yuan ($13.6 billion) in the quarter ended in June, surpassing the 85.01 billion yuan average of estimates.

Co-founder and Chief Executive Officer Lei Jun, 51, is spearheading a drive to take Xiaomi beyond smartphones, leading a project to make electric vehicles. The company pledged an initial investment of $10 billion over the next decade. Lei said the company has deep enough pockets for such a project, which will require years of heavy investment in development and manufacturing before the first car can be sold.

The acquisition of four-year-old DeepMotion, which develops driver assistance software, is the latest in a series of Xiaomi moves to delve more deeply into a crowded field. A number of tech giants from Huawei Technologies Co. to Baidu Inc. have already spent years developing components and auto-driving technologies.

The purchase is intended to help Xiaomi develop Level 4 self-driving technology, which allows fully autonomous driving, President Wang Xiang said Wednesday.

“Through this acquisition, we hope to shorten the time to market for our product,” Wang told reporters after reporting financial results. “We want to speed up our autonomous driving R&D.”

While other details about Xiaomi’s carmaking efforts remain unclear, it’s kicked off a hiring spree to recruit 500 engineers for the project and has talked to multiple automakers and local authorities for potential partnerships. The company has also looked at investing in Black Sesame Technologies, a startup that develops artificial intelligence chips and systems for cars.

On Wednesday, Xiaomi reported that net income climbed more than 80% to 8.27 billion yuan in the three months ended in June. Lei this month set his sights on reaching the top spot in mobile phone sales within three years, taking advantage of the waning fortunes of local rival Huawei, whose capacity has been hobbled by U.S. sanctions.

After first gaining fame as a vendor of low-end phones sold through e-commerce channels in China, Xiaomi has been trying to overhaul its image with sleek designs and more sophisticated gadgets. The 11-year-old enterprise this month unveiled a handset — featuring the latest Qualcomm Inc. processors and a front-facing camera hidden under the display — that’s positioned to take on Apple’s iPhones in the luxury market.

“We view Xiaomi’s high-end smartphone strategy favorably and think the segment will enjoy profitability in 2021,” CICC analyst Hu Peng wrote in a memo before the earnings report.

Shares of Xiaomi were largely unchanged in Hong Kong Wednesday before the results were announced. Its stock has dropped nearly a quarter this year, in part because of a tech selloff, while the benchmark Hang Seng Index dipped 6%.

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