Chinese smartphone company Xiaomi’s new car is selling better than expected, putting it closer to break-even despite undercutting Tesla’s Model 3 on price.
When Xiaomi launched its SU7 electric sedan, CEO Lei Jun said the company would be selling each car at a loss. However, on Tuesday April 23, he estimated gross profit margin of around 5% to 10% for Xiaomi’s auto business.
Xiaomi has invested heavily in its electric car venture as the CEO has long-term ambitions to become one of the top five automakers in the world.
Xiaomi has received more than 70,000 orders for its electric SU7 sedan as of April 20, close to the company’s original full-year target for deliveries this year.
The company now aims to deliver 100,000 of its new EV this year, As per Lei.
The SU7 was made available by Xiaomi at the end of March for about $4,000 less than Tesla’s Model 3, and deliveries have begun. The Chinese cell phone organization updated its cars on Thursday April 25, when the Beijing Auto Show started off.
Citing the investor day, a Citi analysts’ report states that breakeven would be achieved if annual sales reached $300,000 to $400,000. They raised their cars fragment net revenue conjecture to 6% this year, versus a 10% deficit recently anticipated.
This year, Citi analysts increased their estimate of earnings per share by 25% and now anticipate that Xiaomi will ship 100,000 cars this year, 200,000 cars next year, and 280,000 cars in 2026.
In the fourth quarter of the previous year, Li Auto had a gross margin of 23.5 percent, while Nio had a gross margin of 7.5%. Both of these numbers were up from the previous quarter.
Meanwhile, Tesla’s gross margin has successively declined over the past five quarters to 17.4% in the first three months of this year. Gross margin figures don’t account for operating expenses.
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When Xiaomi launched the SU7 last month, Lei said the company would be selling each car at a loss.
But on Tuesday, he said that Xiaomi’s auto business would have a gross profit margin of between 5% and 10%. He also said that sales are higher than expected and thanked suppliers for cutting costs.
According the CEO, the company is currently in discussions with supply chain partners on how to increase production capacity and further support on costs.
However, he informed investors on the day of the launch that the business intends to solely concentrate on the domestic market for the next three years.
Lei pointed out that Xiaomi already does business in more than 100 countries.
Xiaomi also has plans for its next electric car, an SUV, set to be released in the second half of 2025.
