Chinese smartphone maker Xiaomi has put a lower-than-expected price tag on its first electric vehicle as it joins the fiercely competitive race in China's EV market.
Xiaomi is selling the standard entry-level version of its four-door sporty sedan for 215,900 yuan ($29,871.19), which according to its chief executive, Lei Jun, is much cheaper than the equivalent Tesla vehicle.
"It's CNY30,000 cheaper than the Model 3," Lei said late Thursday at a two-hour launch event, noting that the Tesla car starts at CNY245,900 in China.
After the launch, Xiaomi, which also makes consumer electronics, said that it had received 50,000 orders for its range of SU7 EVs in less than 30 minutes.
Xiaomi announced plans to build its own electric vehicle 2021, saying it would invest $10 billion in the business over the next decade. Lei referred to the venture as his "last major start-up project." Xiaomi took a different route than fellow smartphone maker Huawei, which chose to collaborate with existing automakers for its foray into EVs.
The Beijing-based company is entering the race at a time when major players like BYD and Tesla are aggressively cutting prices to gain share in the world's biggest auto market. This is happening as the Chinese economy slows amid weak consumer demand. The latest data showed that retail sales of electric and plug-in hybrid vehicles dropped 12% in China last month. EV makers NIO and Li Auto have both lowered first-quarter deliveries guidance due to soft sales.
Against this backdrop, Xiaomi's price strategy could give it a valuable edge.
"The prices are lower than street and our expectations," CCB International equity analyst Clint Su said, which should benefit sales volumes.
The more advanced pro and max versions of the SU7 will retail for CNY245,900 and CNY299,900, respectively. Xiaomi is positioning its cars to compete against Tesla's Model 3 and Porsche's Taycan, as well as Geely Automobile's Zeekr 007.
Lei said the max version can hit speeds of 265 kilometers per hour, faster than the top speed of the Porsche Taycan Turbo.
Xiaomi plans to start deliveries of the standard and max models in late April, with the pro versions expected to be available by the end of May. The company is targeting 39 Chinese cities by the end of the year but didn't say if it plans to sell the car overseas.
Citi analysts said initial orders for Xiaomi's SU7 look encouraging, and projects that shipments will reach 60,000 units in 2024.
If Xiaomi did indeed log 50,000 orders for its EVs, that could change market dynamics, Nomura analyst Joel Ying said.
However, the lower price tags may put short-term pressure on Xiaomi's gross profit margin, analysts say.
"Overall, we sense the confidence from the company in core business and commitment in EV business while investors still have concerns on competition and margin outlook," Citi analysts wrote in a recent note.
Xiaomi's U.S.-listed stock closed 12% higher overnight on Wall Street. Hong Kong markets are closed on Friday for the Easter holidays.
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