Xiaomi's automotive arm kicks off dual production cycles in June, aiming for 120,000 electric vehicle deliveries.
In a significant move, Chinese tech giant Xiaomi is set to establish its presence in the automotive industry, thanks to substantial financial support. The news was revealed in an article published by Connection, which features translated and adapted content originally published by 36Kr.
The article, penned by Xu Caiyu for 36Kr, delves into Xiaomi Auto's Research and Development foundation and financial support. Xiaomi's adjusted net profit for Q1 2024 stood at a robust RMB 6.5 billion (USD 897.8 million), providing a strong financial backing for new businesses, including Xiami Auto.
Xiaomi has invested a significant amount in its electric vehicle business and other new initiatives, to the tune of RMB 2.3 billion (USD 317.7 million). This investment is expected to increase, with Lei, the company's CEO, revealing that Xiaomi Auto's R&D investment in 2024 is expected to be RMB 24 billion (USD 3.3 billion).
The company's automotive factory is gearing up for production, with plans to start double-shift production in June. This move is expected to boost the monthly delivery volume of Xiaomi's automotive factory, which is anticipated to exceed 10,000 units starting in June. By May 15, Xiaomi had already delivered a total of 10,000 new cars of the Xiaomi SU7, with preorders reaching 88,063 as of April 30.
Xiaomi Auto's entry into the automotive industry will not be without competition. Established electric vehicle manufacturers such as Tesla and BYD, along with BMW, will pose significant challenges. Tesla, in particular, has shown a strong market position, with Tesla Motors Netherlands reporting a revenue of about 26 billion euros in 2023. BMW, on the other hand, is investing heavily in new electric models to compete effectively.
Despite the competition, Xiaomi is optimistic about its prospects. Lu, the company's President, stated that the growth of Xiaomi's main business can provide strong financial support for new businesses, including Xiaomi Auto. To further bolster its presence, Xiaomi plans to complete the construction of 143 service centers in 86 cities by the end of 2024. Additionally, the company aims to increase the number of retail stores to 219, covering 46 cities, by the same year.
Starting from the Q2 earnings call in August, Xiaomi will disclose more detailed information on automotive business revenue and gross profit margin. As for the current gross profit margin of Xiaomi SU7, it is between 5-10%.
In conclusion, Xiaomi's foray into the automotive industry is backed by substantial financial support and a strategic plan for expansion. With a robust financial standing and a commitment to innovation, Xiaomi is poised to make its mark in the competitive electric vehicle market.
