Xiaomi to buy VC-backed autonomous driving start-up

The purchase price is $77.4 million, according to a filing. Xiaomi will pay $9.5 million in cash and $52.9 million in stock for ordinary shares amounting to a 71.16% stake in Deepmotion. The balance comprises preferred shares, which it will acquire for $14.9 million.

Established in 2017, the target company has built a full software stack, including perception, localization, planning, and control, for use with advanced driver-assistance systems (ADAS) and automated driving applications. The founding team previously worked on artificial intelligence technologies at Microsoft.

Deepmotion posted a loss of RMB11.9 million for the 12 months ended December 2020, compared to a loss of RMB17.3 million the previous year.

The company received seed funding from Source Code in 2017 and a Series A from Source Code and Redpoint the following year. Source Code currently holds a 15.45% stake in Deepmotion, while Redpoint has 13.39%.

Xiaomi said the acquisition would support its smart electric vehicle (EV) business. The company, which generated RMB245.9 billion in revenue last year, rose to prominence as a manufacturer of mobile phones and operating systems. It then expanded into internet-of-things (IoT) and lifestyle products, such as TVs, scooters, and wearables. Xiaomi went public in 2018.

Earlier this year, the company announced it would enter the EV space, and plow $10 billion into this effort over the next decade. It committed RMB10 billion in initial funding to a new EV subsidiary, to be led by Lei Jun, Xiaomi’s founder, chairman and CEO.

“The decision was made after numerous rounds of deliberation among all our partners, and this will be the final major entrepreneurial project of my life. I am willing to put all my personal reputation on the line and fight for the future of our smart electric vehicle,” Lei said at the time.

He laid out several reasons why Xiaomi has a competitive advantage in EVs. These were: its deep understanding hardware-based internet service business models; its experience in software and hardware integration; its existing IoT ecosystem, which has 324.8 million connected devices; its core technologies that can be applied to EV; its strong user base; and its abundant financial resources.

Lei later said that Xiaomi’s first vehicle would be a sedan or an SUV priced at RMB100,000-300,000.

Three independent Chinese EV manufacturers – Nio, Xpeng, and Li Auto – have already gone public, while the likes of WM Motor and Enovate continue to attract private funding. Real estate developer is also targeting EVs. It followed up on the acquisition of Sweden's NEVS last year by securing funding for Evergrande New Energy Vehicle.

In autonomous driving, the likes of Weride and Pony.ai are working on mainstream vehicles, although they face a challenge from ride-hailing giant Didi. Another subset of companies focuses solely on technology. They include Deepmotion, as well as Hesai Technology, RoboSense, Innovusion, and Momenta.

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• Topics
• Greater China
• Trade sale
• Technology
• China
• automobiles
• Source Code Capital
• Redpoint China Ventures
• Xiaomi
• autonomous driving