China’s L3 EV Race Heats Up: Xiaomi Joins the Elite, While Musk Predicts ICE Demise

Is the End of Gas Cars Really in Sight? China’s EV Titans Move on Autonomous Driving

Are traditional internal combustion engine (ICE) vehicles facing an imminent, irreversible decline? That’s the polarizing prediction from Elon Musk, yet in China, the *real* action is happening on the road, where tech giants are rapidly escalating the race for autonomous capability. The latest major development centers on Xiaomi’s L3 autonomous driving license, marking a significant step for the smartphone giant as it challenges established automakers in the world’s largest EV market.

Xiaomi Auto has officially secured an L3-level autonomous driving road test license in Beijing, allowing the company to conduct regular, conditional autonomous driving tests on designated high-speed sections of the city’s intelligent connected vehicle roads. This is not merely a token gesture; it signifies that, under specific conditions, the legal liability for driving control can shift from the driver to the system itself—a regulatory watershed moment.

The New Beijing Autonomous Vanguard

For Western observers, this signals that China is moving aggressively from testing to regulated commercial application of high-level automation. Xiaomi joins a select, powerful few who have achieved this milestone in the capital:

• Changan Auto (Deepal): Received early access, focusing on L3 operation in specific congested areas of Chongqing.
• BAIC (ARCFOX): Authorized for L3 testing on specific expressway sections in Beijing.
• Xiaomi Auto: Now authorized for conditional autonomous driving tests on Beijing’s high-speed routes.

The significance here is the shift in liability and the increasing maturity of local ADAS tech. Xiaomi’s investment—over 7 billion yuan ($994 million) in AI research in 2025 alone—is clearly paying dividends as its smart driving team has swelled to over 1,800 members. This intensity contrasts sharply with the hesitant approach of some legacy players in the West, underscoring why many analysts believe China will lead this technological frontier.

The Musk Factor: Inevitable ICE Obsolescence

Juxtaposed against this concrete regulatory progress is Elon Musk’s characteristic bombast: the suggestion that traditional ICE vehicles are heading for obsolescence, akin to “riding a horse while using a flip phone.” This viewpoint is driven by the fundamental superiority—in performance, cost efficiency, and technological potential (especially for robo-taxis)—of the EV platform.

Analysis: Why Musk’s Prediction Resonates in China

While Musk’s comments often spark debate in the US, they find fertile ground in China’s fast-moving environment:

• Cost Trajectory: As battery costs drop, the lower long-term maintenance and refueling costs of EVs accelerate the decline in ICE resale value, according to some analyses.
• Autonomy Premium: The pursuit of L3 (and beyond) means that non-autonomous combustion vehicles become technologically archaic very quickly.
• Competitive Pressure: The rapid advancements by companies like Xiaomi put immense pressure on legacy automakers, forcing tough decisions, such as the recent pivot away from large EV programs by some global players.

For Western Investors: The granting of L3 road test licenses, especially to a tech-focused newcomer like Xiaomi, shows that China’s regulatory framework is actively enabling the next generation of mobility, solidifying the shift away from the ICE era. See our analysis on the latest Chinese EV market share shifts.

Other Key Moves in the Chinese Auto Ecosystem

The broader market continues to evolve at a blistering pace, touching on everything from international sales to component supply chains:

• MG’s European Success: SAIC’s MG brand reportedly surpassed 300,000 vehicles sold in Europe in 2025, securing its 11th consecutive year as the top-selling Chinese auto brand in the region.
• Changan Energy’s Ambition: GAC Energy has set a high bar, targeting 270,000 units in sales by 2026 and pushing towards a million-unit goal by 2028, while also planning tech rollouts like mechanical arm charging and Megawatt charging.
• Supply Chain Integration: Competitors are pooling resources, evidenced by the strategic cooperation between Joyson Electronics’ sub-unit (Junlian Zhixing) and Sinian Zhijia to focus on L4 solutions and embodied AI domain controllers.

BMW’s Electrification Milestone

In a sign of global transition, BMW announced its iconic 3 Series has surpassed 18 million global units produced. More critically for the West, the planning for the *eighth-generation* electric 3 Series is underway, with production slated to begin in late 2026 at the Munich plant, followed by China and Mexico facilities. This signals a dedicated, multi-market strategy for high-volume electrification from a traditional giant.

Recommended Reading for the Auto Analyst

To fully grasp the foundational challenges and opportunities in this sector, we recommend understanding the economics that underpin the transition away from internal combustion. Consider reading ‘Driving Change: The Race to Electrify the Global Automobile Industry‘ for deeper insights into the technological hurdles and capital required for this massive shift.