China’s Xiaomi saw its market value overtake the likes of GM and Ford on Tuesday as investors piled in after the smartphone outfit launched its debut high-end electric sports vehicle.
Shares in the firm surged as much as 16% – even though one brokerage forecast Xiaomi would end up losing nearly $10,000 on every car it sold this year.
The stock touched its highest since January 2022 on the first day of trading since the Thursday launch of Xiaomi’s debut car, which draws styling cues from Porsche. It later pared gains to close 9% higher, adding $4 billion to its market value.
At the day’s highest, the Chinese company had a valuation of $55 billion at a share price of HK$17.34 – higher than that of traditional US automakers General Motors and Ford, at $52 billion and $53 billion, respectively.
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Xiaomi’s SU7, short for Speed Ultra 7, enters a crowded China EV market with an attention-grabbing price tag – under $30,000 for the base model, cheaper than Tesla’s Model 3 in China.
While the world’s largest auto market is challenging for newcomers due to a cut-throat EV price war and slowing demand, analysts have said Xiaomi has deeper pockets than most EV startups and its smartphone expertise gives it an edge in smart dashboards–- a feature prized by Chinese consumers.
Xiaomi has advised potential buyers of its sedan that they could face wait times of four to seven months, a sign of robust demand. On Friday, the company said it had received 88,898 pre-orders for the car in the first 24 hours of sales.
The company, which earns the majority of its $37.5 billion revenue from selling smartphones, has already produced 5,000 SU7 vehicles it dubbed the “Founder’s Edition” that it says come with additional accessories for early buyers.
On Tuesday, Xiaomi founder and CEO Lei Jun said on his social media account that deliveries from that first batch would start across 28 Chinese cities on Wednesday, marked by a ceremony at its Beijing factory.
The SU7 launch fulfils the ambition of Lei, who announced the company’s foray into EVs in 2021, pledging to invest $10 billion in the auto business as “the last major entrepreneurship project” of his life.
EV Price War
Xiaomi has said it expects to lose money on the SU7, and some analysts predict the loss would be substantial.
“We maintain our cautious view that ultimately everyone could be a loser” within the 200,000 to 300,000 yuan ($27,649.90 to $41,474.85) segment, Citi Research analysts said in a note on Tuesday.
Based on a projected volume of 60,000 units this year, Citi estimates the SU7 could generate a net loss of 4.1 billion yuan ($566.82 million) – on average, 68,000 yuan ($9,400.96) per car.
Following the SU7 launch, other Chinese EV brands with comparable models announced price cuts and subsidies. In 2024, the 200,000 to 300,000 yuan segment will see around 240 EV models vying for sales, up by almost a fifth versus the previous year, Citi analysts said.
Due to surging demand, Xiaomi has asked suppliers to raise the SU7’s monthly production capacity to 10,000 units, up from 3,000 in March and 6,000 in May, Chinese financial news outlet Yicai reported, citing sources.
Xiaomi did not immediately respond to a request for comment.
- Reuters with additional editing by Sean O’Meara
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