Xiaomi enters challenging Chinese auto market with $29,870 electric car (updated)

Baic Motor

28/03/2024 13:54

(Updates with CEO quotes, details of product launch)
    By Sarah Wu and Yelin  Mo
       BEIJING, March 28 (Reuters) - Xiaomi  1810.HK  kicked
off sales of its electric car on Thursday, with the Chinese
smartphone company pricing its SU7 at 215,900 to 299,900 yuan
($29,870-$41,493) as it enters a fiercely competitive domestic
market.
        CEO Lei Jun told the launch event that the shift from
electronics to car manufacturing had not been easy, noting that
U.S. rival Apple  AAPL.O  had given up on such an idea.
    "In the three years of developing this car, my biggest
realization is that making cars is extremely difficult. Even a
giant like Apple gave up on it," Lei said to a packed audience
at the event, which included high-profile Chinese auto
executives, including the leaders of Chinese EV makers Xpeng
 9868.HK , Nio  9866.HK  and Li Auto  2015.HK . 
    "So today, every person who is still persevering in making
cars is a hero of our time,” said Lei.
        The company's standard SU7 EV model will be priced at
215,900 yuan, while the Pro and Max versions will cost 245,900
yuan and 299,900 yuan respectively, Lei said. Deliveries for the
Standard and Max models will commence from late April, and the
Pro models will follow by the end of May.
    All SU7 models will only be sold for now in China, the
world's biggest auto market. 
    Comparing Xiaomi's SU7 to Tesla  TSLA.O  and Porsche
 PSHG_p.DE  EV models, Lei highlighted its advantages, including
its minimum range of 700km which surpasses the Tesla Model 3's
567km.
    The launch fulfils an ambition of Xiaomi founder Lei, who
announced the company's foray into EVs in 2021, pledging to
invest $10 billion in its auto business which would be "the last
major entrepreneurship project" of his life. 
    The company formed a manufacturing partnership with
state-owned automaker BAIC Group and showcased the SU7 - short
for Speed Ultra 7 - sedan, in December.
    Analysts have been split on whether Xiaomi's car project
will succeed. Some say it is a natural extension for the
company, whose rice cookers, air purifiers and other electronics
are ubiquitous in Chinese homes. 
    In China's digitally oriented car market, "there are no
better companies at knowing how to monetise screens than mobile
device companies", said Bill Russo, CEO of Shanghai-based
advisory firm Automobility. 
    But, in a departure from the company's image as an
affordable brand, the Xiaomi's SU7 sedan price tag means that it
is entering a crowded, more premium  segment, competing with
more established EV makers like Tesla and Geely's Zeekr for
market share amid a brutal price war. 
    For instance, Tesla's Model 3 has a starting price of
245,900 yuan, while Zeekr's 001 and 007 models have starting
prices of 269,000 yuan and 209,900 yuan respectively.
    "Can (Chinese consumers) take that leap psychologically from
mass-market, cool, inexpensive consumer products and home
products to premium EV?" said Tu Le, founder of consultancy Sino
Auto Insights.

    DEEP POCKETS 
    The SU7 goes on sale as China's auto market battles
challenges on several fronts.
    "The current market environment is quite challenging for
newcomers with the top 10 players continuously expanding their
market share," said Gavekal Dragonomics analyst Ernan Cui. 
    "If Xiaomi can't sell at scale in a short time, it's facing
the risk of being a profit dragger for the company for longer."
    Working in Xiaomi's favour, however, is revenue generated
from other business units, said Le of Sino Auto Insights.
    "The risk is that they focus too much on the EV space and
lose focus on the sectors and products that got them there," he
said. 
    Xiaomi has deep pockets compared to other EV players, a
Bernstein analysis of 12 companies in January showed. It ranked
Xiaomi third, behind Huawei and SAIC  600104.SS , but ahead of
nine automakers including BYD  002594.SZ  and Xpeng  9868.HK ,
in terms of cash and cash equivalents.
    Moreover, analysts say Xiaomi's smartphone expertise gives
it an edge over traditional automakers when it comes to smart
cockpits - a feature Chinese consumers prize.
    The SU7 uses the company's self-developed Hyper OS as the
operating system that connects EV users to its other devices,
including smartphones.

($1 = 7.2277 Chinese yuan renminbi)

 (Reporting by Sarah Wu and Yelin Mo in Beijing; Editing by
Brenda Goh, Muralikumar Anantharaman and Susan Fenton)
 ((yelin.mo@thomsonreuters.com;))