Xiaomi's automotive mini-program indicates that the delivery time for SU7 orders ranges from 25 to 28 weeks, with the SU7 Pro and SU7 Max taking slightly less at 22-25 weeks and 20-23 weeks, respectivelyIn discussing production capabilities, Xiaomi Group's President Lu Weibing mentioned that "we're still in the stage of optimizing existing inventory." This implies that the company isn't considering expanding production capacities to shorten delivery times.
The efficient utilization of production capacities has yielded increased delivery volumes and translated into remarkable revenue growthIn the third quarter, sales revenue from SU7 surged from 6.2 billion yuan in the previous quarter to 9.5 billion yuan, marking a remarkable 52.1% quarter-on-quarter increaseSimultaneously, the average selling price of Xiaomi vehicles has seen improvement, growing from 228,600 yuan in the second quarter to 238,700 yuan in the third quarter, an increase of 4.4%.

Deliveries of the SU7 Pro and Max versions have increased, directly impacting the average selling price of the company’s automotive offerings

"Looking at the current situation, the SU7 Max's contribution is relatively high," noted Lu Weibing, indicating consumer interest in high-end modelsWith the launch of the upcoming SU7 Ultra, overall vehicle pricing is expected to rise significantly.

The rise in average selling prices has opened up more room for profitabilityAdditionally, reductions in the prices of key components and unit manufacturing costs have propelled the margin on innovative businesses such as electric vehicles to an 11% increase in the third quarter, standing now at 17.1%. This puts their overall profit margins on par with Tesla and slightly higher than the industry average of 15%.

Although Xiaomi's profit margins still trail behind competitors like BYD, Seres, Li Auto, and Great Wall Motors, which reported margins of approximately 25.6%, 25.53%, 20.9%, and 19.04% respectively, Xiaomi's automotive division ranks among the top five in the industry

Lu highlighted that achieving scale through flagship models underlies the growing margins: "The SU7, achieving production and delivery rates exceeding 20,000 units per month, is now the leading vehicle in the over 200,000 yuan sedan segment (including combustion vehicles). This flagship has naturally enhanced our cost levels."

Once the factory’s production capacity is fully utilized, the overhead costs are expected to declineThese strategies are effective measures that have enhanced Xiaomi's automotive gross marginsLu expresses confidence that "the margin performance in the fourth quarter will definitely surpass that of the third."

In the first three quarters of 2024, Xiaomi invested 8.8 billion yuan, most of which went towards research and developmentThe R&D expenditure increased to 6 billion yuan in the third quarter, representing an increase of 8.3% compared to the previous quarter and a year-on-year increase of 19.9%. In terms of investments, Xiaomi's intelligent driving technology is a primary focus, with internal directives stating that there is no ceiling on this area of expenditure.

Lu emphasized that Xiaomi's late entry into the market necessitates massive investments in critical areas as required

Aside from intelligent driving initiatives, Xiaomi's recent developments in “four-motor intelligent chassis technology” also represent significant technological inputs

Beginning October 30, 2024, Xiaomi's vehicles will receive city navigation assistance functions (City NOA) for the SU7 Pro and SU7 MaxMoreover, Xiaomi plans to roll out a pioneering version of its end-to-end all-scenario intelligent driving solutions by the end of December 2024. As of November 14, 2024, the activity rate for Xiaomi's intelligent driving technology exceeded 85%, accumulating over 80 million kilometers of total driving distance, with NOA routes comprising 82.4% of the total distance driven.

“In terms of our automotive business, many are eager for us to reach profitability quicklyI hope everyone can grant us some leewayThe automotive sector is indeed a new venture for us, and we are currently in the heavy investment phase for our first vehicle,” Lu Weibing stressed, highlighting that early profitability in a century-long competitive race is unfeasible

Profit Margins Reinforced by Automotive BusinessRecently, when the prototype of the Xiaomi SU7 Ultra, priced at 814,900 yuan, competed at the Nürburgring Nordschleife, it generated significant public attentionHowever, many overlooked that Xiaomi's "People, Cars, Home" strategy has already reached its one-year milestoneFor Xiaomi, the “car” has taken on a more substantial role than ever before.

There is a clear affirmative that the automotive business has brought tangible benefits to XiaomiXiaomi Home serves as an essential vehicle for promoting this ecosystemAccording to our previous visits to Xiaomi Home offline stores, staff indicated that since the arrival of the SU7 models, customer foot traffic has notably increased, bolstering overall product sales.

As growth in smartphone sales continues to taper, mobile manufacturers are increasingly pressed to seek new avenues for growth amid escalating competition

This context underscores the trend of companies like Huawei and Meizu entering the automotive marketData from China’s Information Technology Industry Development Institute indicates that smartphone shipments in the national market hit 25.37 million units in September 2024, down 23.8% year-on-yearYet buoyed by its automotive segment, Xiaomi hopes to achieve a one percentage point increase in market share each year.

After early 2024, Xiaomi's smartphone shipments increased from 146 million last year to approximately 170 million this year, with growth across regional marketsIn the third quarter, the smartphone segment reported revenues of 47.5 billion yuan, a 13.9% increase year-on-yearAlthough the earnings report did not specify how much the SU7's popularity contributed to the sales of Xiaomi’s smartphones or other products, company insiders confirmed, "The automotive business has positively affected the brand’s recognition and stimulated trends in new retail, thus contributing to improved performance and progress in the smartphone sector."

During the earnings call, Xiaomi executives highlighted the strengthening cross-impact and synergetic effects between the automotive and smartphone divisions, enabling Xiaomi to attract users at a foundational level and gradually foster engagement, effectively generating traffic for the mobile segment

For instance, smartphone users are progressively transitioning from being 'just' customers of Xiaomi’s smart devices to the purchase of Xiaomi automobiles.

Furthermore, according to the third-quarter financial report, it is evident that Xiaomi's strategy for upgrading its product line has yielded remarkable results.

For example, the Xiaomi 15 series has shown resilience in sales despite rising competitive pressures and chip pricing affecting overall pricing strategiesPost-price hike, these new models have even generated faster sales

From the perspective of specific price segments, Xiaomi achieved a market share of 18.1% for smartphones priced between 3,000 and 4,000 yuan in mainland China, an increase of 9.3% year-on-year; a market share of 22.6% in the 4,000 to 5,000 yuan range, reflecting a 9.7% improvement; and a 6.9% share in the 5,000 to 6,000 yuan category, up by 2.4% year-on-year.

Having entered the mobile phone industry with low-cost products, Lei Jun, the founder of Xiaomi, understands the difficulty of penetrating the high-end market

This historical hurdle has contributed to Xiaomi's struggles with high-end model sales over the yearsNonetheless, Lei Jun recognizes Xiaomi's long-standing public perception, and thus regards the automotive sector as a rare opportunity to elevate the brandAchieving an upscale market presence will help offset rising R&D costs in the long term.

In fact, the advantages of the automotive sector extend far beyond just revenue numbers for Xiaomi GroupAccording to Zhang Yi, CEO of iiMedia Research, Xiaomi Group, as a significant shareholder of Xiaomi Automotive, will eventually see the automotive segment contribute to the group’s overall performance, whether or not Xiaomi Automotive pursues an independent IPOThe revenue from a single vehicle far exceeds that of a smartphone, which will substantially bolster the company's revenue scale and aid in enhancing Xiaomi's overall market position