Xiaomi’s stock experienced a significant surge on Tuesday, marking its first day of trade following the debut of its first electric vehicle (EV).
The stock soared by as much as 16%, contributing a remarkable $7.6 billion to the company’s market capitalization.
This surge follows the recent launch of the SU7 sedan, which grabbed attention with its attractive pricing strategy. Priced at just under $30,000, it notably undercuts the competing Tesla Model 3 in the Chinese market.
The response from consumers has been notable, with Xiaomi reporting nearly 89,000 orders within the initial 24 hours of its availability.
However, analysts have raised concerns regarding Xiaomi’s profitability in this venture, as the company anticipates losses on each vehicle sold. Some analysts predict potential deficits of up to $10,000 per vehicle.
One contributing factor to this expected loss is the intense price competition within the EV market. Rivals such as Xpeng and Huawei-backed Aito have announced aggressive price cuts in response to the SU7’s launch. Analysts at Citi caution that this could result in losses for all players in this segment of the market.
Nevertheless, Xiaomi has signaled its commitment to the automotive sector by pledging a $10 billion investment over the next decade. Leveraging its reputation as a prominent phone manufacturer, Xiaomi also brings expertise in smart dashboard technology, which is highly valued by Chinese consumers.
Founder Lei Jun has expressed his determination to make the car business a success, labeling it as the “last major entrepreneurship project” of his life.