Xiaomi Debuts Affordable Electric Car, Undercuts Tesla Model 3 by $4,000

Xiaomi, the Chinese smartphone manufacturer, announced last week its entry into the electric vehicle market, promising a vehicle significantly cheaper than Tesla's Model 3. This move comes amid escalating competition in China's electric vehicle sector. Lei Jun, Xiaomi's CEO, revealed that the base model, SU7, will retail at 215,900 yuan (approximately $30,408) in China. He admitted that the company would incur losses on each car sold at this price. In comparison, Tesla's Model 3 starts at 245,900 yuan (around $34014) in the country.

Performance Comparison and Sales Success

Jun asserted the superiority of the SU7 standard model over Tesla's Model 3 in over 90% of its features. Despite acknowledging that Xiaomi might need three to five years to surpass Tesla in two specific areas, Lei emphasized the SU7's impressive attributes.

The SU7 boasts a minimum driving range of 700 km (approximately 435 miles), outstripping the Model 3's range of 606 km. This claim was further substantiated by the company's exceptional sales performance, with 50,000 SU7 orders secured within just 27 minutes of sales commencement.

Delivery Projections and Manufacturing Efficiency

Anticipation surrounds the projected commencement of SU7 deliveries by the end of April. Jun revealed that an SU7 can be produced at the company's auto factory in just 76 seconds, thanks to extensive automation.

However, the factory's current operational capacity remains ambiguous. Despite this, the CEO reaffirmed on social media that the SU7 is poised to dominate the sedan market, particularly for vehicles priced below 500,000 yuan ($69,328).

Insights into Market Entry Strategy

The SU7's market entry comes amidst fierce competition in China's automotive landscape, characterized by cost-cutting measures and a proliferation of new models. Telecommunications giant Huawei has also ventured into the automotive sector, collaborating with traditional car manufacturers to introduce the Aito brand, prominently featured in Huawei smartphone stores.

Consumer Options

Data from the Autohome website underscores Tesla's dominance in the Chinese market, with the Model 3 reigning as the best-selling new energy sedan. Competing offerings include the Han sedan, priced at 169,800 yuan ($23,488), and electric vehicles such as the Nio ET5 starting at 298,000 yuan ($41,221), the Xpeng P7 priced at 209,900 yuan ($29,035) and the Zeekr 007 sedan from Geely, also starting at 209,900 yuan ($29035).

The surge in sales of new energy vehicles, encompassing battery-only vehicles, is evident, with these vehicles now constituting over one-third of all new passenger car sales, as reported by the China Passenger Car Association.

Presence of Competing Startups

The Xiaomi SU7 launch event witnessed the presence of renowned figures from rival electric car startups like Nio, Xpeng, and Li Auto. Jun showcased various SU7 accessories during the event held on Thursday, including a smartphone holder, personalized front-window shade, and an in-car refrigerator.

Future Strategies and Competitive Dynamics

While Tesla's "Full Self Driving" feature for city streets remains unavailable in China, its Autopilot system, aiding drivers on highways, is operational. Lei previously expressed Xiaomi's aspiration to challenge Porsche's market presence, albeit acknowledging the SU7's need for refinement to compete effectively in the premium segment.

In response to Porsche's forthcoming Taycan, priced at 299,900 yuan ($41484), Xiaomi introduced the "Max" version of the SU7.

Furthermore, the SU7 aligns with Xiaomi's overarching strategy of "Human x Car x Home," aiming to leverage Xiaomi's HyperOS operating system for seamless device connectivity. While smartphones remain Xiaomi's primary revenue driver, the company generates approximately 30% of its revenue from the sale of appliances and other consumer goods. 

Shift towards Premiumization

In a recent CNBC interview, Lu Weibing, the president of Xiaomi, revealed a strategic shift towards offering more high-end products since 2020, despite the company's established reputation for affordable goods. He emphasized that there exists a sizable market of approximately 20 million potential buyers seeking products akin to the SU7.

For now, the SU7 will be exclusively available in China, with plans for expansion into other markets projected to take two to three years. The car made its debut at the Mobile World Congress in Barcelona in February, following an earlier unveiling in Beijing in December.