Shares of China's Xiaomi (1810.HK) surged as much as 16% on Tuesday following the launch of its highly anticipated electric vehicle, the SU7 sedan. The stock reached its highest level since January 2022, adding $4 billion to Xiaomi's market value and surpassing traditional U.S. automakers General Motors (GM.N) and Ford (F.N) in valuation.
The SU7, nicknamed Speed Ultra 7, made its debut with an attention-grabbing price tag of under $30,000 for the base model, positioning it competitively against Tesla's Model 3 in China. Despite challenges in the crowded Chinese EV market, Xiaomi's strong interest in its electric vehicle has led to significant pre-orders, with nearly 90,000 received within the first 24 hours of sales.
However, analysts forecast Xiaomi to face substantial losses on each SU7 sold, estimating around $9,400 per car for the projected 60,000-unit production run this year. This prediction stems from the fierce price competition and subsidies prevalent in the Chinese EV market, leading to concerns about profitability within the 200,000 to 300,000 yuan segment.
Xiaomi's aggressive pricing strategy has triggered price cuts from other Chinese automakers, intensifying competition further. Despite these challenges, Xiaomi's deeper financial resources and expertise in smartphone technology, particularly in smart dashboards, provide an edge in catering to Chinese consumers' preferences.
The company has also encountered challenges in managing pre-order cancellations and refunds, with some customers facing difficulties due to accidental order locking. Additionally, reports of SU7 crashes and concerns about the traction control system have sparked discussions about the vehicle's safety and performance.
Nonetheless, Xiaomi's foray into the EV market represents a significant milestone in the company's expansion beyond smartphones. With ambitions to invest $10 billion in its auto business, Xiaomi aims to establish itself as a major player in the evolving automotive industry. Despite the initial hurdles, the success of the SU7 launch underscores the potential for Xiaomi to disrupt the traditional automotive landscape and carve out a prominent position in the burgeoning electric vehicle market.
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