Shares of Chinese company Xiaomi soared by 16% after the Beijing-based tech company launched an electric sports car to significant market interest. Although there were predictions of Xiaomi losing close to $10,000 per car in 2024, its shares surged as investor interest in the tech firm exploded following its announcement and reached their highest level in more than two years.
Xiaomi shares went up by another 9% amid investor anticipation for its debut electric car, adding a whopping $4 billion to Xiaomi’s valuation and putting the tech company’s valuation above established carmakers. The Chinese company’s value ultimately peaked at $55 billion with a HK$17.34 ($2.29) share price. This valuation put Xiaomi higher than American carmakers Ford and General Motors, which were valued at $53 billion and $52 billion respectively.
The Xiaomi Speed Ultra 7 (SU7) will be the tech company’s first entry into China’s young but fiercely competitive electric-vehicle industry. The base model will cost roughly $30,000, making it cheaper than the extremely popular Tesla Model 3. However, Xiaomi may struggle to penetrate the Chinese electric vehicle market and make its mark.
China’s EV industry is filled with more than a hundred startups and companies looking to capture a portion of the country’s expansive electric-vehicle market. Xiaomi will have to compete with electric-vehicle production giant Tesla as well as local players such as BYD that have been giving the American company a run for its money.
The tech company’s debut electric car comes at a time of extreme volatility in the Chinese EV market. Blisteringly stiff competition between Tesla, BYD and other automakers has resulted in a major price discount war that has seen Tesla cut EV prices across the board and contribute to a global drop in both new and second-hand electric cars.
But unlike most new EV startups, Xiaomi has a greater capital base and can focus on EV development rather than finding investors and raising capital. The company’s experience with consumer technology could also give it a leg up because it has a history of developing products that combine software with hardware, albeit at a significantly smaller level.
This experience will also give it an advantage in the development of smart dashboards, an extremely prized feature among Chinese consumers. Xiaomi has reportedly produced 5,000 Founder Editions of the SU7 and will start delivering the first batch of EVs across over two dozen Chinese cities this week.
The stiff competition within the EV space is giving various companies such as Fisker Inc. (OTC: FSRN) impetus to explore innovative ways to ramp up production and remain relevant in the market.
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