Xiaomi’s maiden EV, selling at a loss, turbocharges price war forcing China’s small players out of business

Strong sales of smartphone vendor Xiaomi’s first electric car have exacerbated a price war in the sector that is squeezing the profit margins of most players in China.

The SU7, with a driving range of 700 kilometres, has locked in more than 40,000 orders since it went on sale on March 28. Xiaomi’s CEO Lei Jun admitted at the launch ceremony that the company was selling the cars at a loss based on current prices.

The three variants of the SU7 are priced at 215,900 yuan (US$29,850), 245,900 yuan and 299,900 yuan.

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Goldman Sachs said in a research note on April 1 that it believed the fully electric sedan “is highly competitive and demonstrates Xiaomi’s capabilities of becoming a potential price leader in the market rather than a price follower.”

The SU7, fitted with intelligent features such as an autonomous driving system and digital cockpit, hit the market three years after Xiaomi ventured into electric vehicles (EVs) to diversify its business.

It boasts sports-car level performance, which is powered by Xiaomi’s HyperEngine electric motor that produces up to 21,000 revolutions per minute.

In December, when Lei unveiled details of the car, he expressed his ambitions of building a dream vehicle on par with Tesla for mainland Chinese consumers.

More than a dozen domestic rivals including Zeekr, a premium EV unit of Geely, Nio, a leading assembler of intelligent cars, and Aito, backed by telecommunication equipment giant Huawei, have either slashed the prices of their vehicles or offered incentives to lure buyers since the presales of SU7 began.

Zeekr priced the entry-level edition of its refreshed Zeekr 007 at 209,900 yuan, down 20,000 yuan from the previous version.

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Nio, which traditionally does not lower the prices of its cars, said that drivers who replaced their petrol vehicles with its EVs would receive a “subsidy” of 10,000 yuan each from April 1.

Aito marked down the price of the M7 sport-utility vehicle’s basic edition by 20,000 yuan to 229,800 yuan on April 1.

“Xiaomi’s SU7 has become more than a game-changer in China’s EV market because it is not only grabbing a market share from the existing carmakers, but forcing them to adjust their pricing strategies to survive the cutthroat competition,” said Gao…