Xiaomi's CFO Alain Lam believes traditional European OEMs are falling behind by focusing too heavily on the 'electric' aspect of EVs, while neglecting the 'smart' features. He argues that customers, especially Xiaomi's, desire seamless integration with their broader ecosystem of phones and home devices, which is a key competitive weakness for incumbents.

Unlike clean-sheet EVs, legacy vehicles use a "field of weeds" architecture with up to 150 siloed Electronic Control Units (ECUs) from different suppliers. This makes coordinated, over-the-air software updates for complex features incredibly difficult, hindering innovation compared to the centralized OS of modern EVs.

Japanese carmakers, historically dominant due to their expertise in mechanical engineering for petrol cars, are struggling because electric vehicles are fundamentally different. EVs are more like 'computers on wheels,' where competitive advantage lies in software and features, an area where Japanese firms have lagged.

Incumbent automakers evolved with 100+ separate computer modules, creating a complex system. Newcomers like Rivian and Tesla start with a centralized, "zonal" architecture. This clean-sheet design dramatically simplifies over-the-air updates, reduces costs, and enables more advanced, integrated AI features.

BYD's dominance wasn't built on having the absolute best battery cells. Their key advantage came from masterfully integrating their own 'good-enough' batteries into a complete vehicle system, optimizing the entire package rather than just one component.

BYD's strategy of controlling its entire supply chain, a past strength, is now hindering its competitiveness. Rivals are gaining ground by forming tech partnerships for software and autonomous driving, while BYD's insistence on in-house development isolates it from the collaborative ecosystem.

The Chinese EV market has shifted, with younger consumers valuing sophisticated software and entertainment systems more than flashy hardware features like floating cars. This puts manufacturing-focused BYD at a disadvantage against tech-first rivals founded by internet tycoons.

RJ Scaringe argues that while Chinese EV costs are low due to economic factors like cheap capital and labor, their more significant advantage is their advanced, clean-sheet software and electronics platforms—an area where legacy automakers are far behind and which tariffs cannot easily address.

Unlike legacy automakers transitioning from gas-powered cars and complex supply chains, Chinese OEMs built new EV-native architectures from the ground up. This "clean slate" approach, with fewer legacy burdens, allowed them to rapidly adopt software-defined vehicle concepts and innovate faster than established competitors.