The launch of Xiaomi's electric car, the Xiaomi SU7 (Speed Ultra 7), has increased the company's market value

The launch of Xiaomi's electric car, the Xiaomi SU7 (Speed Ultra 7), has increased the company's market value

Shares of Chinese company Xiaomi (1810.HK) surged 16% on Tuesday amid increased interest in its sporty electric vehicle, unveiled last week, despite a brokerage firm's forecast that the company will incur losses of nearly $10,000 on each car this year.

Share prices reached a peak since January 2022 on the first trading day after Thursday's presentation of Xiaomi's debut car, which features styling reminiscent of Porsche. The gain later narrowed to 9%, increasing the company's market capitalization by $4 billion.

At the peak of trading, the Chinese manufacturer was valued at $55 billion with a share price of 17.34 Hong Kong dollars - higher than traditional American automakers General Motors (GM.N) and Ford (F.N) with market capitalizations of $52 billion and $53 billion, respectively.

Competitive Environment in China's Electric Vehicle Market

The Xiaomi SU7 (Speed Ultra 7) model enters China's saturated electric vehicle market with an attractive price tag - under $30,000 for the base version, cheaper than the Tesla (TSLA.O) Model 3 in China.

Although the world's largest car market is challenging for newcomers due to fierce price wars in the electric vehicle segment and declining demand, analysts note that Xiaomi has more resources than most startups, and its expertise in smartphones gives it an advantage in "smart" dashboards - a feature valued by Chinese consumers.

High Demand and Production Plans

Xiaomi has warned potential buyers of its sedan that they may face a wait of 4 to 7 months - a sign of high demand. On Friday, the company reported receiving 88,898 pre-orders for the car within the first 24 hours of sales.

The company, which earns most of its $37.5 billion revenue from smartphone sales, has already released 5,000 SU7 cars in the "Founder's Edition" version with additional accessories for early buyers.

On Tuesday, Xiaomi founder and CEO Lei Jun announced on social media that the first batch of deliveries will begin in 28 cities in China on Wednesday, marked by a ceremony at the company's Beijing plant.

Loss Forecasts

While the SU7 launch embodies Lei's ambitions to enter the automotive business with promised investments of $10 billion, Xiaomi expects losses from the sale of this model, with some analysts predicting significant losses.

According to Citi Research estimates, with a forecasted volume of 60,000 units this year, the loss from SU7 could amount to 4.1 billion yuan ($566.82 million) - averaging 68,000 yuan ($9,400) per car.

Following the SU7 presentation, other Chinese electric vehicle brands in the same class announced price reductions and subsidies. In 2024, about 240 electric vehicle models are expected to be introduced in the 200,000-300,000 yuan segment, nearly 20% more than in the previous year, Citi analysts note.

Due to growing demand, Xiaomi has asked suppliers to increase the monthly production capacity of the SU7 to 10,000 units compared to 3,000 in March and 6,000 in May, reported Chinese financial publication Yicai, citing sources.