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China’s Xiaomi sells so many electric cars that it almost breaks even

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China's Xiaomi sells so many electric cars that it almost breaks even

The Xiaomi SU7 on display at Mobile World Congress 2024.

Arjun Kharpal | CNBC

BEIJING – Chinese smartphone company Xiaomi‘s new electric car is selling better than expected, bringing it closer to breakeven despite undercutting Tesla‘s Model 3 on price.

Xiaomi has received more than 70,000 orders for its electric SU7 sedan as of April 20, close to the company’s original annual target for deliveries this year, CEO Lei Jun told investors on Tuesday.

The company now aims to deliver 100,000 of its new electric vehicles this year, he said.

Xiaomi released the SU7 in late March at a price about $4,000 lower than Tesla’s Model 3, and has started deliveries. The Chinese smartphone company will livestream a car update at 9:20 a.m. on Thursday as the Beijing auto show gets underway.

“Break-even would be achieved if annual sales reached 300[k]-400k,” Citi analysts said in a report, citing Investor Day. They raised the gross profit margin forecast for the auto segment this year to 6%, versus a previously expected loss of 10%.

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The Citi analysts have increased their earnings per share forecast by 25% this year and now expect Xiaomi to ship 100,000 cars this year, 200,000 next year and 280,000 by 2026.

For context, Tesla According to the China Passenger Car Association, China sold more than 600,000 cars last year. Li Autowhich technically sells mainly hybrids, sold 376,000 cars last year Nio sold just over 160,000 cars last year, the data showed.

Li Auto had a gross margin from 23.5% in the fourth quarter of last year, while Nio’s gross margin amounted to 7.5%, both higher than the same period last year.

Tesla’s gross margin has fallen consecutively for the past five quarters, falling to 17.4% in the first three months of this year. Gross profit margin The figures do not take operating costs into account.

When Xiaomi launched the SU7 last month, Lei said the company would sell each car at a loss.

But on Tuesday he estimated gross profit margin for Xiaomi’s auto division at around 5% to 10%, noting that sales are higher than expected while thanking suppliers for cutting costs.

“We are currently in discussions with supply chain partners on how we can increase production capacity and further support costs,” he said, according to a CNBC translation of a Chinese-language transcript of the investor day provided by the company.

For now it will remain with China

Xiaomi has invested heavily in its electric car venture as Lei has long-term ambitions to become one of the top five automakers in the world.

But over the next three years, the company plans to focus entirely on the domestic market, he told investors on Tuesday.

Lei pointed out that Xiaomi already does business in more than 100 countries.

“We have a base of global influence and Xiaomi fans,” Lei said. “When we are ready to enter the global market, that should be a given.”

Xiaomi also has plans for its next electric car, an SUV, to be launched in the second half of 2025, Chinese business news site 36kr reported on Wednesday. citing sources.

Lei declined to share details on Tuesday when asked about SUV plans.

“I think one of the reasons for the success of the launch of SU7 was its confidentiality,” he added.