PMGM7014 Chap.6 Technology Shifts in Electric Vehicles and AI
Technology Shifts in Electric Vehicles and AI
Two outsiders entering shifting industries
The syllabus uses Xiaomi's move into new energy vehicles and the rise of DeepSeek to teach the technological environment. Neither firm grew up in the industry it entered. Xiaomi made phones and connected home devices before it announced a car subsidiary in 2021; DeepSeek grew out of a quantitative trading firm that had bought large numbers of GPUs for its own strategies.
The useful question is not whether each succeeded but what conditions made entry reasonable, and how you would test those conditions for a different firm.
How policy created and then withdrew support
China's electric car market was built step by step. Permits for the first hybrid vehicles came in 2005, pilot-city programmes with purchase subsidies followed from 2009, and a second round in 2013 reached 88 cities.
Early take-up disappointed, yet by 2023 the adoption rate stood at 31.6 per cent on one measure and almost 30 per cent on another. The purchase subsidy then ended after 14 years, just as forecasts pointed to more supply than demand.
An entrant therefore arrives into a market that policy grew and that competition now disciplines.
What Xiaomi transferred and what it lacked
Xiaomi brought a large installed base of connected devices, an operating system linking phone, home and car, years of investment in driving-related start-ups, and supply partnerships for batteries.
Its first sedan, the SU7, launched on 28 March 2024 from CNY215,900, about CNY30,000 below the Model 3 in China, and drew almost 90,000 orders within a day.
Against that sit a dominant domestic rival in BYD, dependence on imported battery minerals and foreign computing chips, uneven charging networks, and the need to learn vehicle engineering and safety from scratch.
What DeepSeek shows about constraint and openness
DeepSeek trained a competitive model on export-compliant chips at a reported cost that the case frames as a small fraction of rivals' budgets, and released its reasoning model under a permissive licence.
That capability was assembled early by the parent fund, which built a cluster of 1,100 GPUs in 2019 and a second with 10,000 A100 chips in 2021, well before DeepSeek itself was founded in July 2023. Its founder described the chip ban, not money, as the binding limit. The lessons are that a hard constraint can push a team toward efficiency, and that giving a model away can build reach a small firm could not otherwise buy.
Market reaction in January 2025, including a sharp fall in Nvidia's shares, shows how far that challenge travelled.
The skill this chapter trains
You will learn to run a short sequence of questions on any technology shift: does policy favour it, does the firm have or can it acquire the capability, is there an asset it can lever, and which input could be cut off.
You will also learn to add a crowding check, because conditions that let one entrant in usually let many in. The first lecture supplies the benchmark to test against: BYD led global EV brand sales in 2024 with 22.2 per cent.
What this chapter covers
- 01
Industrial policy stages from permits to subsidy exit
- 02
Adoption figures and why the metric must be named
- 03
Xiaomi's device ecosystem as an entry asset
- 04
Imported minerals and foreign chips as exposed inputs
- 05
High-Flyer's GPU clusters as DeepSeek's starting capability
- 06
Reported training cost and its two framings
- 07
Open weights under a permissive licence as strategy
- 08
Crowding and oversupply after easy entry
Worked example · free
Test a European motor supplier's plan for a China plant
- 2Assess policy support and how it has changed.
- 3Assess the supplier's capability relative to local rivals.
- 2Assess leverage and exposed inputs.
- 3Recommend an entry design with a crowding check.
Key terms
- New Energy Vehicle
- A new energy vehicle is China's policy category for cars powered wholly or partly by electricity, covering battery electric, plug-in hybrid and fuel-cell models, and the unit in which subsidies, targets and sales are counted.
- Purchase Subsidy
- A purchase subsidy is a state payment that lowers the price a buyer pays for a qualifying vehicle; China's NEV version ran for 14 years before ending in 2023.
- Device Ecosystem
- A device ecosystem is a set of connected products sharing one operating system and account base, which lets a firm like Xiaomi sell a new product into homes already using its devices.
- Export Control
- An export control is a government restriction on selling specified technology abroad; in the DeepSeek case, limits on high-end chips meant V3 was trained on a reduced-performance variant made for the China market.
- Open Weights
- Open weights means publishing a trained model's parameters so anyone may run, adapt or distil it; DeepSeek released R1 this way under the permissive MIT licence in January 2025.
- Crowding Check
- A crowding check is the final test of an entry decision, asking how many other firms the same favourable conditions will attract and whether the resulting supply will outrun demand.
Technology Shifts in Electric Vehicles and AI FAQ
Did BYD overtake Tesla in 2023 or in 2025?
The two course sources frame this differently. The Xiaomi case records BYD passing Tesla in pure electric vehicles in 2023, while a first-lecture slide carries a headline dating BYD's rise to biggest EV maker to 2025. The lecture also shows BYD with 22.2 per cent of global EV brand sales in 2024 against Tesla's 10.3 per cent. Quote whichever you use with its scope, rather than presenting one date as settled.
How reliable is the claim that DeepSeek trained V3 for USD5.576 million?
Present it as DeepSeek's reported figure. The case gives the training run as 55 days on 2,048 H800 chips, then compares the cost to rivals in two ways: as 1 to 5 per cent of similar models in one passage and less than a tenth of GPT-4o in another. Those framings differ, so cite the reported sum and avoid building an argument on a precise ratio.
Why did Xiaomi build its own factory instead of using a contract manufacturer?
The case lays out several routes, including building a plant as Tesla did or working through partners, and Xiaomi chose to own manufacturing as well as software. That gave it control of the value chain from design to sales, so gains and losses both stay inside the firm. Its Beijing plant's first phase had capacity of 150,000 units a year, and partnerships with CATL and BYD still supplied key components.
What makes open-sourcing a strategy rather than generosity?
Openness creates adoption a small firm cannot buy. DeepSeek, with around 150 staff by one count and no consumer platform, released R1 under a licence that let anyone distil it, then published infrastructure libraries in February 2025. Its founder argued the lasting advantage lies in the team's know-how rather than secrecy. Alibaba's pairing of open models with cloud revenue shows a commercial version of the same logic.
Exam move
Pick a technology shift outside the two cases, such as drones or battery storage, and run the chapter's entry questions on it in writing. For each question write one sentence of evidence and one sentence stating what would change your answer. Then draw the decision tree and mark where your chosen firm exits. Finish with a crowding check that names the kinds of rivals the same conditions would attract.
Compare your result with the Xiaomi and DeepSeek routes and explain in two sentences why your firm leaves the tree at a different point, or the same one.
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