Xiaomi's Electric Vehicle Launch Causes Stock Surge Amid High Demand
Shares of China's Xiaomi experienced a significant surge, climbing as much as 16% on Tuesday, following the launch of its electric vehicle (EV), which has garnered substantial interest. Despite a brokerage's prediction that Xiaomi would incur a loss of nearly $10,000 per car this year, investor enthusiasm led to a noteworthy increase in the company's market value.
At its peak during the trading day, Xiaomi's valuation reached $55 billion, surpassing that of traditional U.S. automakers General Motors and Ford, which are valued at $52 billion and $53 billion respectively. This milestone was achieved on the back of the launch of Xiaomi's debut car, the SU7, which boasts design elements reminiscent of Porsche, and has set the stock at its highest since January 2022.
The Xiaomi SU7, priced under $30,000 for the base model, enters the highly competitive China EV market with an aggressive strategy. Despite challenges posed by a fierce EV price war and slowing demand, analysts believe Xiaomi has an advantage due to its deep pockets and smartphone expertise, particularly in smart dashboards—a feature in high demand among Chinese consumers.
In an impressive show of demand, Xiaomi announced it received 88,898 pre-orders within the first 24 hours of sales, indicating customer willingness to wait four to seven months for delivery. This enthusiasm was further highlighted as Xiaomi rolled out 5,000 "Founder's Edition" SU7 vehicles, offering early buyers additional accessories.
Xiaomi's entry into the EV space aligns with CEO Lei Jun's vision, marking a significant milestone in what he has dubbed the "last major entrepreneurship project" of his life. Despite projected losses on the SU7, with analytics firm Citi Research estimating a net loss of 68,000 yuan per car, Xiaomi's bold move into the segment underlines its commitment to innovation and market disruption.
Amidst Xiaomi’s push, other Chinese EV brands have responded with price cuts and subsidies, setting the stage for an intensifying battle within the 200,000 to 300,000 yuan EV segment. Notably, with Xiaomi's request to suppliers to increase the SU7's monthly production capacity to 10,000 units, it's clear that the company is gearing up to meet the soaring demand.
The launch of the SU7 not only reflects Xiaomi's strategic diversification but also underscores the rapidly evolving dynamics of the global EV market. As competitors adjust their strategies in response, the industry watches closely to see how Xiaomi's foray into EVs reshapes the market landscape.
Analyst comment
Positive news: Xiaomi’s electric vehicle launch causes a surge in stock value, with shares climbing 16%. The company’s market value surpasses that of General Motors and Ford. The SU7, priced below $30,000, receives high demand and 88,898 pre-orders within 24 hours. Xiaomi’s deep pockets and expertise in smart dashboards give it an advantage in the Chinese EV market. The company plans to increase production capacity to meet soaring demand.
As an analyst, the market for Xiaomi is expected to see continued growth and success in the EV space, driven by high demand, market disruption, and competitive advantage in China. The company’s strategic entry has the potential to reshape the global EV market as competitors respond and adjust their strategies.
