Chinese phone maker Xiaomi takes aim at bicycle market

(THE WALL STREET JOURNAL) Xiaomi Corp. is broadening its net beyond cheap smartphones, with products ranging from rainbow-colored batteries to a Segway-like scooter. Now the Chinese company is getting into bicycles.

IRiding, a startup Xiaomi has invested in, is launching a $3,000 “smart” bike in China this week. Assembled in Taiwan, the bike is aimed at bicycle enthusiasts and professionals, according to people familiar with the matter.

Built with lightweight carbon fiber and equipped with motion sensors and meters that measure the rider’s power output, the 7-kilogram, or 15.4-pound, road bike has already gained certification under European standards, according to documents that were viewed by The Wall Street Journal. The bicycle will be sold on one of Xiaomi’s e-commerce platforms under the brand QiCycle.

Xiaomi will also sell a more budget-friendly battery-assisted bike under its own brand to be unveiled in the coming months, according to these people. That bike’s cost is estimated to be in the $450-$550 range.

It will be a hybrid model where the battery complements pedal power, the people said, similar to battery-powered bikes in Europe.

Prices for Chinese electric bikes range from $230 to $600, according toLu Jinlong,head of the electric-bike commission under the China Bicycle Association.

A $3,000 road bike may raise eyebrows in a country once known as the bicycle kingdom but where cars are increasingly replacing the utilitarian two-wheelers.

It is also a departure for Xiaomi, which pioneered a way to make cheap smartphones cool in China by cultivating fan clubs and “flash” sales.

Xiaomi was China’s No. 1 smartphone seller last year, according to research firm Canalys and Strategy Analytics, although it missed its own sales target for the year of 80 million smartphones by 10 million.

As phone competition intensifies, Xiaomi is cultivating what it terms an “ecosystem” of smart products to fit into broader plans for the Internet of Things—the network of physical objects that can connect to the Internet.

The catalog of Xiaomi-branded products now includes a scale that sends weight data to the owner’s smartphone; air and water purifiers; and a lamp that turns off when a Fitbit-like bracelet tells it the owner has fallen into deep sleep.

Many of the devices are made by partner companies in which Xiaomi has taken a stake and most aim to combine high-end components and bright designs with bargain prices.

Not all of the products are smart or high-end: The catalog also includes a power strip and AA batteries in a variety of colors.

Some in the industry have questioned whether Xiaomi’s diversification strategy is well thought-out. The company’s supporters, meanwhile, see promise in its efforts to build the Internet of Things, with its phone business as its core.

“Xiaomi’s investment in those ecosystem companies might seem a bit wide-ranging but I think this would help them occupy the market and users faster and they could attract more consumers to their various products,” saidYang Fan,senior analyst with Beijing-based research firm Analysys International.

Xiaomi acknowledges that the wide diversification may have confused consumers, who have trouble distinguishing between products made by Xiaomi itself and ones marketed by its partners, people with knowledge of the situation say. To avoid any misperceptions, Xiaomi plans to create a new brand for the ecosystem products by the end of March, according to one of these people.

China’s economic slowdown, along with turbulence in the country’s stock market, is prompting investors to take a second look at startups like Xiaomi, which has a $46 billion valuation based on plans to generate substantial revenue from Internet services that it has yet to realize.

Xiaomi’s spokesman declined to comment on the ecosystem strategy.

At China’s National People’s Congress, its annual legislative session now under way in Beijing, Xiaomi founderLei Junappeared confident in the company’s prospects and singled out its 49 yuan ($7.54) power strip as an example of good-quality manufacturing.

He related to legislators last week how remarks he made several years ago about poorly made Chinese power strips prompted a businessman to work together with Xiaomi and produce a higher-quality product.

“When we rolled out this product, it was very popular,” Mr. Lei said as he urged fellow captains of industry to foster a “spirit of craftsmanship” and turn “Made in China” into a coveted label for consumers.

“China’s consumption needs are being upgraded. Everyone has more money and wants to lead a better life,” he said. “We need to quickly upgrade the quality of our products so as to meet consumers’ demands.”