Xiaomi’s Electric Vehicle Gamble: Can They Compete in a Price War?

“Xiaomi has yet to grace the table, but BYD has boldly overturned it.” This jest has recently gained traction across the digital landscape.

On the 28th of December last year, Xiaomi Motors unveiled its inaugural vehicle, the Mi SU7. Since its debut, the pricing of the SU7 has garnered considerable attention. However, despite numerous rounds of speculation and rebuttals, Xiaomi Motors’ pricing remains shrouded in ambiguity.

As the Year of the Dragon commenced on the 19th of February, Wang Chuanfu, who had advocated for industry upheaval in 2023, spearheaded a paradigm shift in 2024, ushering in a new era of price warfare in the sub-100,000 yuan segment of the low-end market for electric vehicles. Subsequently, over 10 brands, including Tesla, Nio, Leapmotor, and Avita, initiated varying degrees of discounts, with the most substantial markdown reaching 50,000 yuan.

Renowned as the “price butcher” in the realm of mobile phones, Xiaomi now finds itself amidst a landscape where all new energy automobile manufacturers are slashing prices. Yet, Xiaomi’s own pricing remains undisclosed, a circumstance somewhat disconcerting.

Some opine that Xiaomi, sans a declared pricing for its vehicles, has managed to undercut its competitors. Do you find this feat commendable? Others contend that the table had been overturned prior to Mr. Lei’s arrival. Does this, then, leave Mr. Lei with an empty seat at the table?

The pricing conundrum surrounding Xiaomi’s vehicles persists. Is this a strategic marketing ploy or an impending crisis?

The trend of price reductions within the automotive industry persists.

Regarding Xiaomi’s pricing, rumors continue to circulate and be refuted, fueling ongoing internet fervor.

On the 30th of January, certain media outlets reported that a major insurance company had confirmed the insured price of Xiaomi’s high-end vehicle to be 361,400 yuan, swiftly sparking online discourse. Xiaomi promptly refuted this claim, asserting that the policy price did not reflect the actual selling price.

Subsequently, rumors surfaced alleging that “Lei Jun was withholding a major announcement, suggesting that initial buyers of Xiaomi vehicles might receive a complimentary license plate if their vehicles lacked one.” A Xiaomi spokesperson promptly debunked this falsehood, reiterating that all pricing, delivery, and sales policies would strictly adhere to officially released standards.

On the evening of the 22nd of February, Xiaomi hosted a new product launch event themed “Full Ecology for People, Cars, and Homes.” Many anticipated an announcement regarding vehicle pricing, propelling “Xiaomi car price” back into the limelight. However, despite the speculation, netizens were left waiting in vain for a glimpse of the elusive pricing details for the SU7.

On the 26th of February, Xiaomi Motors unveiled the Mi SU7 Gulf Blue at the 2024 Mobile World Congress in Barcelona. During an interview with the media, Xiaomi Group President Lu Weibing hinted at the imminent official release of Xiaomi Motors’ inaugural mass-produced vehicle, the SU7, with domestic deliveries slated to commence in the second quarter.

Xiaomi’s international showcase once again ignited discussions surrounding the pricing of Xiaomi vehicles.

Since the debut of the Xiaomi SU7 last year, its pricing has consistently remained a topic of interest, albeit now with a hint of fatigue. While the initial marketing intent may have been clear, Xiaomi now faces mounting pressure regarding its pricing strategy.

Following the Chinese New Year festivities in 2024, BYD led the charge in initiating the first salvo of the Year of the Dragon’s new energy vehicle price war. The BYD Qin PLUS saw a reduction from 200,000 to 79,800 yuan, marking the entry of the BYD DM-i model into the 70,000 yuan range for the first time. Subsequently, the BYD Han and Tang Honor editions were unveiled, maintaining BYD’s ethos of “cheaper electricity than gasoline” and significantly reducing the entry-level price point.

Following BYD’s price adjustments, over 10 brands, including Tesla, Nio, Leapmotor, and Avita, followed suit, offering discounts of varying degrees, with the most substantial markdown reaching 50,000 yuan. As prices of older models continue to plummet, automotive manufacturers persist in launching new models.

In the wake of BYD’s price adjustments, sales surged. Given that the primary market segment is currently below 200,000 yuan, subsequent vehicles are poised to encroach upon Xiaomi’s price range.

Shortly after BYD’s “enhanced configurations and price reductions” sparked market fervor, Geely Holding Group’s high-end intelligent electric vehicle brand, Ji Krypton Automobile, wasted no time in emulating the strategy to create another sensation.

On the evening of the 27th of February, Ji Krypton officially unveiled the new Ji Krypton 001, offering four models with varied configurations, all at reduced prices. Notably, the new Ji Krypton 001 boasts standard features such as lidar, an 8295 chip, 800V high voltage, and a silicon carbide motor. Priced 31,000 yuan lower than the 2023 model, it was lauded by industry experts as “setting a new benchmark in pricing.”

Following the press conference, Ji Krypton executives addressed questions from the media regarding Xiaomi vehicles, expressing admiration for Xiaomi as an exemplary company deserving of respect. While acknowledging Xiaomi’s prowess in internet technology, they emphasized the need for Xiaomi to glean insights from industry peers in technical aspects.

Prior to this, Geely had unveiled the Ji Krypton 007 coupe with a starting price of 209,900 yuan. Despite being on the market for just one month, official data from Ji Krypton Motors indicated that nearly 25,000 units had been allocated. Ji Krypton Vice President Lin Jinwen affirmed Ji Krypton’s intent to vie for the top spot in Chinese brand delivery volume exceeding 200,000 yuan, with a product lineup spanning the 200,000 to 500,000 yuan price range.

On the 24th of February, Zhiji Auto introduced the 2024 Zhiji L7, priced between 299,900 and 419,900 yuan, with the entry level reduced by 38,900 yuan.

On the 28th of February, Chery New Energy unveiled the iCAR 03, available in six models, with prices as low as 100,000 yuan, marking the first pure electric A-class SUV to break into the 100,000 yuan range. At the iCAR launch event, Chery announced a 20,000 yuan reduction from the presale price, positioning it as the ideal vehicle for younger demographics. The host boldly proclaimed, “Who else dares?!”

Among vehicles priced above 300,000 yuan, competitors such as the Ji Krypton 001, Avita 11, and Ideal L7 pose significant challenges for Xiaomi Motors. As electric vehicles address range anxiety for models priced over 200,000 yuan, consumer focus shifts towards intelligence and configuration. In this regard, apart from contending with threats from Tesla and Xpeng, Xiaomi’s primary competitor lies in Huawei’s Hongmeng vehicle system.

Automobile manufacturers persist in releasing new models and adjusting prices, prompting jests from netizens: “Can Mr. Lei (Lei Jun) find respite?”

Is Xiaomi Motors ensnared in a quagmire of pricing dilemmas?

On the 30th of March, 2021, Lei Jun announced Xiaomi Group’s intention to establish a wholly-owned subsidiary tasked with overseeing the smart electric vehicle business, with an initial investment of 10 billion yuan and an expected investment of 10 billion US dollars over the ensuing decade.

Subsequently, in September 2021, Xiaomi Auto Co., Ltd. was registered and established in the Beijing Economic and Technological Development Zone, with a registered capital of 10 billion yuan, and Lei Jun appointed as the company’s legal representative. The company’s primary focus is the smart electric vehicle sector.

Three years later, Xiaomi Motors’ inaugural vehicle officially garnered public attention. On the 28th of December, 2023, at the Xiaomi Auto Technology Conference, Lei Jun unveiled Xiaomi Auto’s five core technologies, including electric propulsion, batteries, large-scale die-casting, intelligent driving, and smart cockpits, alongside showcasing Xiaomi’s maiden vehicle, the Mi SU7.

The SU7 is available in three colors: Gulf Blue, Elegant Gray, and Olive Green. With a battery capacity of 101kWh and a CLTC cruising range of 800km, it features 800V super-fast charging, capable of providing a range of 220km after just 5 minutes of charging.

Despite these specifications, Xiaomi Motors is yet to deliver its inaugural vehicle. In the fiercely competitive landscape of the new energy vehicle industry, factors such as timing and pricing hold paramount importance.

While Xiaomi has historically leveraged price competition in the mobile phone market, pricing has emerged as a contentious issue in its foray into automotive manufacturing.

Analysts suggest that within this price-sensitive industry, Xiaomi Auto may struggle to compete solely through stringent cost controls. While Xiaomi’s mobile phones benefit from a mature supply chain and partnerships with industry giants like Foxconn, its venture into automotive production, necessitating the establishment of its own manufacturing facilities, entails higher costs. Additionally, Xiaomi must augment its automotive technology and resources through strategic acquisitions, further inflating costs compared to traditional automotive incumbents and even newer entrants.

At the Xiaomi Auto Technology Conference late last year, Lei Jun asserted that the price would no longer cater to the masses. Xiaomi Auto’s collaboration with CATL for Kirin batteries incurs substantial costs. Moreover, when juxtaposed with high-end models like the Porsche Taycan Turbo, Xiaomi vehicles, such as the SU7, boast impressive performance metrics, such as accelerating from 0 to 100km/h in 2.78 seconds.

Lei Jun emphasized, “Hence, a price tag of 99,000 yuan is unattainable, and discussions around 149,000 yuan are futile. We must respect the technological prowess behind Xiaomi SU7. While the price may seem steep, the experience it offers will surpass expectations.”

Recently, Lu Weibing reiterated that Xiaomi Motors had invested 10 billion US dollars (approximately 72.1 billion yuan) in development, spanning a spectrum of price points from entry-level to luxury. He argued that Xiaomi Motors offers the performance equivalent to two traditional internal combustion engine vehicles priced at three million yuan. Thus, prices ranging from 99,000 to 199,000 yuan are not only reasonable but represent a formidable value proposition.

From its inception, Xiaomi has championed highly cost-effective mobile phone products. However, in venturing into the automotive sector, Lei Jun opted for a high-end positioning from the outset. While the high-end positioning itself is neither right nor wrong, amidst the evolving landscape of new energy vehicles, pricing has emerged as a pivotal determinant of success.

2024 marks the onset of intense competition for Chinese automotive brands and the commencement of a decisive era. It promises to be a year of unparalleled excitement for major automotive players, defined by price fluctuations, product innovations, service enhancements, and traffic optimization.

Certain automotive enthusiasts posit that Xiaomi missed an opportune window in its automotive endeavors, akin to the timing of Lao Luo’s foray into mobile phones. Faced with limited novelty and a need for substantial innovation to justify premium pricing, Xiaomi’s vehicles may struggle to attract consumers willing to pay premium prices. Moreover, to command premium prices, Xiaomi must appeal to consumers in their 30s and above, a demographic that encompasses both older and younger individuals, for whom a comfortable SUV remains a preferred choice.

With its prolonged silence on pricing, Xiaomi Motors risks testing the patience of prospective consumers. Concurrently, the downward price trend across major automotive brands threatens to erode Xiaomi’s potential customer base.

In January of this year, Lei Jun boldly proclaimed Xiaomi Motors’ aspiration to become one of the top five automotive manufacturers globally within 15 to 20 years.

While Lei Jun’s ambition remains undimmed, Xiaomi Motors finds itself besieged by the burgeoning new energy vehicle market. Its pricing strategy and subsequent sales trajectory await validation by market forces and the passage of time.

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