At a time when the auto industry was grappling with BYD's meteoric rise, Chinese smartphone maker Xiaomi stormed the market — undercutting Tesla and pledging to become a global player. Even when Apple this year canceled development of a self-driving electric car, Xiaomi founder and CEO Lei Jun vowed that making the car would not just be his last legacy project, but a product that would transform the company into one of the top five automakers. in the world during the next two decades. Xiaomi's Hong Kong-listed shares last week rose to a two-year high after the company introduced its SU7 electric sedan at a price nearly $4,000 cheaper than Tesla's Model 3 — and with similar technical capabilities. Broader Analyst Attention In the past few days, Xiaomi has gained broader attention from auto and technology industry analysts beyond those who previously covered it as just a smartphone toy. “Add Xiaomi to the list of capable Chinese auto/tech companies that may represent attractive candidates for collaboration as legacy Western auto companies look for ways to achieve higher scale, improve capital discipline and reduce execution risk,” Adam Jonas, an auto analyst at Morgan Stanley, said in a report. “. Note Thursday. Meanwhile, Tesla revealed last week that its deliveries fell in the first quarter compared to last year. Jonas noted that, excluding Covid, this was the first drop in Tesla deliveries since 2012. While he still likes Tesla long-term, he and his team will hold a webinar for customers about Xiaomi, Tesla and global electric vehicles on Tuesday. “If Xiaomi can continue to outperform its peers in (driver assistance) and smart cabin features, we believe it is likely to become a disruptive force with potential,” Andy Ming, China's top technology hardware analyst at Morgan Stanley, said in a note on Monday. “Significant growth.” . Meng reiterated the bank's overweight rating on Xiaomi, and target price of HK$17.50 ($2.24). Xiaomi shares almost reached that price during last week's rally. The stock later gave up much of those gains, and is now little changed on the year. Meanwhile, Tesla shares are down 34% year to date. On Wednesday, Xiaomi said it had received more than 100,000 orders for the SU7, more than 40,000 of which are already in progress and not subject to cancellation. On the same day, it held a ceremony to celebrate the delivery of the first batch of cars. Six-month wait times Most customers face wait times of around six months or more, according to Xiaomi's online sales platform. Taylor Ogan, CEO of Shenzhen-based Snow Bull Capital, said he is watching to see how consumers actually like to drive a car before he commits to buying Xiaomi shares. “I don't think this will be particularly good for the stock price over the next couple of quarters,” he said in an interview on Friday. “Then, this can become a cash cow. This is something every passionate user of the Xiaomi ecosystem needs.” Months before the car's launch, Xiaomi announced a new operating system called HyperOS and a strategy to connect consumers to their homes and cars. The company generates most of its revenue from smartphones, but a significant share also comes from a range of home devices, many of which are controlled using the app. During the recent launch of the SU7, Xiaomi's CEO noted that when a driver approaches home, the lights and connected devices can automatically turn on to preset settings. Such an ecosystem offers “a built-in recurring revenue model that every CEO dreams of,” Ogan said. “And on top of that, you can get subscriptions.” He said he saw low odds of the SU7 failing, but said it would be difficult for Xiaomi to recover if the car was a disappointment. Although Xiaomi is trying to build its own ecosystem, the company also supports Apple Car Play and iPads. “We believe the end result (of Xiaomi's entry into the electric vehicle market) will be faster penetration of battery electric vehicles/new vehicles in China, so ICE brands or products will be the main losers,” said Nick Lai of JPMorgan. Head of China Equity Research and Head of Automotive Asia Pacific. Research, he said in a note Monday. He was referring to internal combustion engines, battery electric vehicles and new energy vehicles. Recognition and Money Xiaomi's advantages include existing brand recognition in China, and 110 billion yuan ($15.7 billion) in cash on its balance sheet, which could help the company weather a price war in the near term, the report said. Li said Xiaomi currently produces each car at a loss, but noted that the company has invested in its own factory to boost production. It's not clear if the facility is fully operational yet, but Lee claimed last month that the plant could produce a SU7 every 76 seconds in an almost fully automated process. “Xiaomi also showcased its electric vehicle factory that includes highly automated production lines for key processes (coating, stamping, die casting, body assembly, etc.), supported by its expertise in intelligent manufacturing. We believe that the high degree of automation should help accelerate Improving EV profitability in the medium to long term, said Gokul Hariharan, a technology analyst at JP Morgan, in a separate note. The bank has an overinvestment recommendation in Xiaomi, with a target price of HK$21. This is higher Up about 35% from where the stock closed on Friday. One risk is that China's ability to produce electric cars at prices far lower than overseas competitors, which has sparked warnings of rising trade tensions. Just on Friday, US Treasury Secretary Janet Yellen underscored concerns about China has spare capacity at the start of high-level meetings in the country. But while Xiaomi has hinted at its plans for cars abroad, it has promised to focus on the Chinese market first. For now, the company sells smartphones globally, but not in the United States
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Xiaomi is storming China's electric car scene in direct competition with Tesla
