Xiaomi Group (01810.HK) shares surged on Friday, hitting an all-time high after the debut of its first SUV model, the YU7, the previous evening.
YU7's Strong Performance
Priced from 253,000 yuan to 329,900 yuan for the top-tier model, initial orders for the YU7 exceeded expectations significantly, surpassing 200,000 units within just three minutes and nearly 290,000 within the first hour.
The YU7 is positioned as a "luxury high-performance" SUV, boasting a range of up to 760 kilometers in its premium configuration, accelerating from 0 to 100 km/h in 3.23 seconds. It features an 800-volt high-voltage platform for fast charging, standard LiDAR, nine body colors, a large touchscreen, and massage seats, catering to Chinese consumer preferences.
Comparison with Tesla
Lei Jun compared the YU7 to the Tesla Model Y high-end version, asserting that the YU7 offered superior performance and better value. This echoed Xiaomi's original strategy of challenging the iPhone in the smartphone market.
Analyst Outlook
Analysts are generally optimistic about the YU7's performance. Citi suggests that if Tesla wants to compete effectively in the Chinese market, it may need to further reduce prices and offer a "full self-driving" assistance package. Data shows that Tesla's market share in China has fallen from 15% in 2020 to 7.6% at the beginning of this year.
Citi anticipates that Xiaomi's stock will benefit from strong YU7 orders, with potential for an upward revision of the full-year shipment target of 400,000 units. Second-quarter results and third-quarter guidance are seen as key upcoming catalysts. Goldman Sachs raised its target price to HK$69, believing that the YU7 demand exceeds expectations and will help solidify Xiaomi's position in the high-end EV market.
Morgan Stanley issued a research report stating that the YU7 will be disruptive to the industry and a significant catalyst for Xiaomi's performance. They project Xiaomi's revenue to reach 1 trillion yuan and net profit to reach 100 billion yuan by 2030, with a potential market capitalization of 2.5 trillion yuan. Morgan Stanley set a target price of HK$62 and gave the stock an "overweight" rating.
Bank of America Securities believes the YU7's pricing is reasonable, although the Max version is slightly higher than expected, it outperforms the Tesla Model Y. With nearly 290,000 orders in the first hour of sales, it significantly exceeds the SU7's 89,000 orders on the first day. Bank of America Securities maintains a "buy" rating on the stock with a target price of HK$66.
Significance of YU7 Launch
The YU7 launch represents a critical validation of Xiaomi's car manufacturing capabilities, especially after a fatal accident involving the SU7 raised regulatory scrutiny and order fluctuations. Currently, there are growing concerns about "price wars" in the Chinese car market, and regulators are requiring automakers, including Xiaomi, to regulate sales and pay suppliers in a timely manner to ensure supply chain stability.
Lei Jun's Ambitions
Despite the challenges, Lei Jun remains confident in Xiaomi's entry into the automotive industry, viewing the YU7 as a sign of Xiaomi entering the main battlefield of automobiles. Known for challenging Apple, Lei Jun is now targeting Elon Musk, and may even regard the electric vehicle business as the "final battle" of his career, pledging to invest 200 billion yuan over five years to build a global leader in smart devices.
Investor Response
Investors are responding positively to Xiaomi's automotive strategy, with the company's market capitalization rising by over 70% this year, making it one of the best-performing large-cap stocks in the Asia-Pacific region. The market widely expects the YU7 to help Xiaomi's automotive business achieve profitability in the second half of the year, potentially becoming the first new car brand to achieve profitability.
The EV Market Dynamics
The launch of the YU7 highlights the intensifying competition in the Chinese electric vehicle (EV) market. While Tesla has been a dominant player, domestic brands like Xiaomi are rapidly gaining ground by offering feature-rich vehicles at competitive prices. This competitive landscape encourages innovation and provides consumers with a wider range of choices.
It's important to note that the EV market is subject to various factors, including government policies, technological advancements, and consumer preferences. These factors can influence the success of individual companies and the overall growth of the market.
MS
