Xiaomi’s electric vehicle debut sparks investor interest despite projected losses.

Shares of Chinese electronics giant Xiaomi soared by up to 16 percent on Tuesday, following the strong reception of its newly launched electric vehicle (EV), despite projections indicating substantial losses per car for the company this year.

Xiaomi’s market value surged by approximately $7.6 billion as its shares reached their highest level since January 2022. The boost came after the debut of Xiaomi’s SU7, or Speed Ultra 7, an EV with styling reminiscent of Porsche, which entered the competitive Chinese EV market with a price tag below $30,000 for the base model, undercutting Tesla’s Model 3 in China.

While the Chinese EV market poses challenges for newcomers due to fierce price competition and slowing demand, analysts note that Xiaomi’s financial strength and expertise in smartphones may provide it with an advantage, particularly in the realm of smart dashboards, a feature highly valued by Chinese consumers.

Despite Xiaomi’s anticipation of losses on the SU7, with projected losses of nearly $10,000 per car this year, the company has seen strong interest, with potential buyers facing wait times of four to seven months. Within the first 24 hours of sales, Xiaomi received over 88,898 pre-orders for the car.

However, analysts, including those at Citi Research, remain cautious about the long-term viability of Xiaomi’s EV venture, suggesting that fierce competition within the 200,000 to 300,000 yuan segment could result in losses for all players. Citi estimates that Xiaomi could incur a net loss of 4.1 billion yuan ($566.82 million) based on projected sales volume, averaging 68,000 yuan ($9,400.96) per car.

The launch of the SU7 marks a significant milestone for Xiaomi’s founder, Lei Jun, who announced the company’s entry into the EV market in 2021, pledging substantial investment in the auto business.

In response to Xiaomi’s entry, other Chinese EV brands have announced price cuts and subsidies for comparable models, intensifying competition in the segment. Citi analysts project a 20% increase in the number of EV models competing in the 200,000 to 300,000 yuan segment in 2024 compared to the previous year, further heightening competition in the market.