Xiaomi’s EV launch propels its market value above GM and Ford

Shares of China's Xiaomi surged as much as 16% on Tuesday as the electronics maker's sporty electric vehicle launched last week drew strong interest, though a brokerage forecast the firm would lose nearly $10,000 (about R189,143) per car this year.

Xiaomi added about $7.6bn (about R143,754,380,000) to its market value as its shares touched their highest since January 2022 on the first day of trading after the firm on Thursday launched its debut car, which draws styling cues from Porsche.

The Chinese company, which gets most of its $37.5bn (about R709,314,375,000) revenue from being a smartphone vendor, has a valuation of $55.2bn (about R1,044,110,760,000), higher than that of traditional US automakers General Motors and Ford, at $52.4bn (about R991,148,620,000) and $53.1bn (about R1,004,038,695,000), respectively.

Xiaomi's SU7 - short for Speed Ultra 7 - enters a crowded China EV market with an attention-grabbing price tag  under $30,000 (about R567,253) 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 underway and slowing demand, analysts 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 they could face wait times of four to seven months, a sign of strong interest. It said on Friday it had received 88,898 pre-orders for the car in the first 24 hours of sales.

The company has produced 5,000 SU7 vehicles it dubbed the "founders edition" that it said come with additional accessories for early buyers. On Tuesday, Xiaomi founder and CEO Lei Jun said on his social media account deliveries from that batch would start across 28 Chinese cities on Wednesday and would include a ceremony at its Beijing factory.

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 (about R522,816.75 to R784,225.13) 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 4.1bn yuan (about R10,717,687,629) - on average, 68,000 yuan (about R177,616.10) per car.

The launch fulfils the ambition of Lei, who announced the company's foray into EVs in 2021, pledging to invest $10bn (about R188,934,000,000) in the auto business as "the last major entrepreneurship project" of his life.

Following the SU7 launch, other Chinese EV brands with comparable models announced price cuts and subsidies. In 2024, the 200,000 (about R522,256) to 300,000 yuan (about R783,384) segment will see around 240 EV models vying for sales, up by almost a fifth versus the previous year, Citi analysts said.