Xiaomi Exceeds Expectations in EV Sales, Raising Prospects for Accelerated Break-Even

Xiaomi has surpassed expectations with its electric vehicle (EV) sales, significantly boosting the likelihood of reaching a break-even point sooner than anticipated. This performance enhancement reflects positively on Xiaomi's strategic positioning in the EV market and promises potential growth in upcoming financial periods.

"Xiaomi's Electric Car Surpasses Expectations, Nearing Break-Even Despite Undercutting Tesla's Model 3"

1. Xiaomi's foray into the electric car market has yielded better-than-anticipated sales, positioning it closer to break-even despite offering competitive pricing against Tesla's Model 3.
2. Initially, Xiaomi's CEO Lei Jun disclosed plans to sell each car at a loss upon the launch of its SU7 electric sedan.
3. However, recent estimates suggest a gross profit margin of approximately 5% to 10% for Xiaomi's auto business, signaling a potential shift in profitability outlook.
4. Xiaomi's significant investments in its electric car venture underscore Lei's ambitious vision to establish the company as one of the top five automakers globally, highlighting its commitment to long-term growth and innovation.

Xiaomi’s latest electric vehicle, the SU7 sedan, has exceeded sales expectations, with over 70,000 orders received as of April 20th, according to CEO Lei Jun. This strong demand has brought Xiaomi closer to its break-even point, despite pricing the SU7 about $4,000 below  Tesla’s Model 3. With deliveries already underway, Xiaomi aims to achieve a target of 100,000 units delivered by the end of the year.

The company's success in the electric vehicle market has prompted optimism among analysts, with Citi analysts suggesting that breakeven could be reached with annual sales of 300,000 to 400,000 units. As a result, they have revised their forecast for the autos segment's gross profit margin to 6% for this year, a significant improvement from the previous expectation of a 10% loss.

Xiaomi is scheduled to provide a car update via livestream on Thursday, coinciding with the start of the Beijing auto show.

The Citi analysts have adjusted their earnings per share forecast for Xiaomi, increasing it by 25% for the current year. They anticipate Xiaomi to ship 100,000 cars in 2024, followed by 200,000 units in 2025, and 280,000 units in 2026.

For comparison, Tesla China reported sales of over 600,000 cars in the previous year, as per data from the China Passenger Car Association. Li Auto, primarily selling hybrids, achieved sales of 376,000 cars, while Nio sold slightly over 160,000 cars in the same period.

Li Auto boasted a gross margin of 23.5% in the fourth quarter of the previous year, whereas Nio's gross margin stood at 7.5%, both showing improvements compared to the previous year.

In contrast, Tesla's gross margin has experienced consecutive declines over the past five quarters, reaching 17.4% in the first quarter of this year. It's essential to note that gross margin figures exclude operating expenses.

Initially, Xiaomi indicated that it would sell each SU7 car at a loss upon its launch last month. However, Lei mentioned on Tuesday an estimated gross profit margin of approximately 5% to 10% for Xiaomi's auto business. He acknowledged that sales have surpassed expectations and expressed gratitude to suppliers for cost reductions.

Lei also mentioned ongoing discussions with supply chain partners to enhance production capacity and further reduce costs. This information was sourced from a CNBC translation of a Chinese-language investor day transcript provided by the company.

Xiaomi Focuses on China Market for Electric Cars, Delaying International Expansion Plans

Xiaomi has made substantial investments in its electric car venture, as Lei harbors long-term ambitions to position the company among the top five automakers globally. However, for the next three years, Xiaomi intends to concentrate entirely on the domestic market, as Lei conveyed to investors on Tuesday.

Highlighting Xiaomi's existing presence in over 100 countries, Lei emphasized the company's established global influence and loyal fan base. He expressed confidence that when Xiaomi decides to expand into the global market, it will do so seamlessly.

Regarding future plans, Xiaomi is reportedly developing its next electric car, an SUV, slated for release in the second half of 2025, according to sources cited by Chinese business news site 36kr on Wednesday. When questioned about these SUV plans during the investor meeting, Lei opted not to disclose details, citing the successful launch of the SU7, which benefited from confidentiality.

Source: CNBC