Xiaomi’s electric cars should be safe from bankruptcy

If Xiaomi had predicted that its new SU7 sedan would make it lose money, this would ultimately not be the case. While the electric car is enjoying great success, it could actually bring in big profits for the manufacturer.

If you probably know Xiaomi for its smartphones, the Chinese firm founded in 2010 has also recently become an automobile manufacturer. And for good reason, at the very beginning of the year it unveiled its first electric car, the new SU7.

Larger margins than expected

The latter hunts directly in the territory of the Tesla Model S, the Nio ET5 or even the BYD Seal, among others. And it could seriously hurt its rivals, due to its price displayed below 30,000 euros in China as well as its technical sheet and its impressive technologies. Moreover, the electric sedan is already very successful, with the manufacturer announcing that it has received no less than 75,000 orders, three to five times what was initially planned.

So much so that delivery times are soaring, despite starting early. We must now count between six and eight months, while the boss of the company, Lei Jun, encouraged customers in a hurry to opt for another electric car. However, it was far from won for the new electric sedan, which even worried some specialists. The latter believed that it could simply put Xiaomi in danger over the coming years, because of the losses it could cause.

Indeed, Xiaomi’s finances were in decline, and its profits are quite low. However, we know that producing an electric car is expensive and is not always profitable. Tesla, for example, paid the price, coming close to bankruptcy before the success of its Model 3 and even more so its Model Y. Moreover, Xiaomi also planned to lose money with your new SU7. According to its boss, the manufacturer was initially supposed to sell its cars at a loss. In any case, this is what he announced when orders were opened last month.

But in a short time, things have changed very significantly, while the electric sedan is very popular. So much so that the firm should ultimately make money with the latter. According to the latest estimates, the margin should oscillate between 5 and 10% per car sold. On a car costing around 27,650 euros, depending on the current exchange rate, Xiaomi would earn between 1,380 and 2,765 euros.

We imagine that the cheapest version could make Xiaomi lose money, but that the more high-end versions would make money. And perhaps the first sales figures show that consumers are moving towards the more expensive models.

A car that pays

Very good news for the manufacturer, which has already started the first deliveries of its electric sedan a few days in advance. If demand is currently already very strong, Xiaomi indicates that it is able to produce a car every 76 seconds, or just over a minute, thanks to the gigacasting method, also used by Tesla. This reduces production time and costs, and therefore optimizes the gross margin per vehicle produced.

Enough to compete with the American manufacturer, which gained around 8.2% per car in the first quarter of 2023, after reaching 16% at the end of 2022. A drop which was explained in particular by the fall in price of its cars, including the Model 3 and Model Y which lost no less than 13,000 euros in January. But with a margin of 15%, it is another manufacturer which is even stronger, namely Dacia. In September 2023, Stellantis reached 14.4%, while Renault peaked at 7.6%.

According to CNBC, Tesla’s profits reached the 17.4% in the first quarter of 2024, while the manufacturer remains the world number 1 in electric vehicles, ahead of BYD and Volkswagen, whose sales are declining. In any case, selling at a loss would not have been a problem for Xiaomi, and would even have been part of its strategy, in order to gain a good place in the market against the competition, and then gradually increase its prices . A method contrary to Tesla, which first launched its high-end Model S before ending with a very affordable Model Y, and whose prices have continued to fall over time.