In a surprising turn of events, Chinese smartphone company Xiaomi has seen a wave of success with its new electric vehicle, the SU7 sedan. CEO Lei Jun revealed that the company has received over 70,000 orders for the vehicle as of April 20th, nearing its full-year delivery target. Xiaomi’s initial target for this year was to deliver 100,000 units of the electric sedan, a goal that now seems within reach. The company’s decision to undercut Tesla’s Model 3 on price by about $4,000 has apparently paid off, leading to a surge in demand for the SU7.
Analysts at Citi have expressed optimism about Xiaomi’s electric vehicle venture, stating that breakeven could be achieved if annual sales reach 300,000 to 400,000 units. They have also raised their autos segment gross profit margin forecast to 6% for this year, a significant improvement from the 10% loss previously expected. This optimistic outlook has led to a 25% increase in earnings per share forecast for the year. The analysts now anticipate Xiaomi to ship 100,000 cars in 2021, 200,000 in 2022, and 280,000 in 2026.
Despite Xiaomi’s impressive performance, it still lags behind Tesla, which sold over 600,000 cars in China last year. Li Auto, a company that primarily focuses on hybrids, managed to sell 376,000 cars, while Nio sold just over 160,000 units. Notably, Li Auto boasted a gross margin of 23.5% in the last quarter of the previous year, while Nio’s gross margin stood at 7.5%. In comparison, Tesla’s gross margin has seen a decline over the past five quarters, falling to 17.4% in the first quarter of this year.
Xiaomi’s Shift in Strategy
Xiaomi’s foray into the electric vehicle market comes with ambitious long-term plans. CEO Lei Jun envisions Xiaomi becoming one of the top five automakers globally, however, the company’s immediate focus remains on the domestic market for the next three years. Lei highlighted Xiaomi’s existing presence in over 100 countries, indicating a strong foundation for global expansion in the future. The company is already in discussions with supply chain partners to ramp up production capacity and reduce costs for the electric vehicle business.
Looking ahead, Xiaomi has already hinted at its next electric car, an SUV set to launch in the second half of 2025. This move signals the company’s commitment to expanding its electric vehicle lineup and catering to a wider range of consumers. Despite Lei Jun’s reluctance to share specifics about the upcoming SUV, Chinese business news sources project a successful launch based on the secrecy surrounding the SU7’s release. The anticipation surrounding Xiaomi’s future electric vehicles is a testament to the company’s growing influence in the automotive industry.
Xiaomi’s success with the SU7 sedan indicates a promising future for the company in the electric vehicle market. With strong sales numbers, positive forecasts from analysts, and a clear vision for expansion, Xiaomi has set itself apart as a key player in the evolving automotive industry. As the company continues to innovate and introduce new electric vehicles, it is poised to make a significant impact on the market and solidify its position as a leading automaker.
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