Lei Jun Stays Positive About Loss of 60,000 Yuan per Xiaomi SU7 Sold

TMTPOST--In response to concerns about Xiaomi's reported loss of over 60,000 yuan (US$8,200) per Xiaomi SU7 vehicle sold, the company’s CEO Lei Jun clarified that Xiaomi Auto has delivered a solid financial performance, particularly considering that it is still in its investment phase.

While the smart vehicle and other innovative business sectors posted a loss of 1.8 billion yuan in the second quarter of 2024, Lei explained that this figure represents a significant investment in the company’s future. He expressed confidence that Xiaomi Auto will easily break even once the business reaches a certain scale, reassuring stakeholders that there is no need for alarm.

XPeng reported revenue of 8.1 billion yuan ($1.1 billion), with a net loss of 1.28 billion yuan ($175 million) and a gross margin of 14%.

Zeekr delivered 54,811 vehicles, generating more than 20 billion yuan ($2.7 billion) in revenue, with a gross margin of 17.2% and a net loss of 1.8 billion yuan ($247 million). Leapmotor delivered 53,300 vehicles and reported total revenue of 5.36 billion yuan ($735 million), with a gross margin of 2.8%.

Although leading EV makers NIO and Li Auto have yet to release their Q2 reports, their Q1 data offers a comparison. NIO delivered 30,053 vehicles in Q1, generating 9.9 billion yuan ($1.35 billion) in revenue, with a net loss of 4.9 billion yuan ($672 million) and a gross margin of 4.9%.

Li Auto, on the other hand, delivered 80,400 vehicles in Q1, with a revenue of 25.6 billion yuan ($3.5 billion), a net profit of 1.3 billion yuan ($178 million), and a gross margin of 20.6%.

Compared to its peers, Xiaomi’s quarterly revenue in the EV sector ranks in the mid-range, only slightly higher than Leapmotor. However, its gross margin is already above average, trailing only Li Auto and Zeekr.

Lu Weibing, the president of the International Business Department of Xiaomi Group, highlighted the company’s solid performance in the Q2 earnings call, noting that the 15.4% gross margin exceeded expectations. He emphasized that many automakers struggle with low gross margins for extended periods, but Xiaomi's performance stands out.

Regarding the 1.8 billion yuan of loss in its first quarter of deliveries, Lu gave explanations from two aspects. First, the delivery volume was still relatively small, and the auto business is heavily reliant on economies of scale. Without sufficient scale, profitability is challenging. Second, Xiaomi invested heavily in each vehicle. Lei had previously mentioned that the company would invest tenfold in the SU7, and it will take to absorb these investments.

Xiaomi’s confidence in its automotive business stems mainly from the strong delivery performance of the SU7. Since deliveries began in April, the SU7 has quickly become a major player in its segment. In April, Xiaomi delivered 7,058 units, ranking sixth in the mid-to-large sedan category. In May, deliveries reached 8,646 units, moving up to fifth place. By June, deliveries surged to 14,296 units, placing the SU7 third in the market. In July, it climbed to second place with 13,120 units, just behind the Mercedes-Benz E-Class.

Xiaomi EV app shows that the current wait time for the SU7 Standard Edition is 24-27 weeks, while the SU7 Pro Edition has a delivery cycle of 19-22 weeks. The SU7 Max Edition takes 22-25 weeks for delivery. Clearly, the shortest waiting period now exceeds four months.

Lu also disclosed during the earnings call that the SU7 Max's delivery cycle has already been shortened by five to six weeks, with further efforts underway to increase production capacity.

Looking ahead, Xiaomi remains committed to its ambitious target of delivering 120,000 vehicles by the end of 2024, with plans to complete 100,000 deliveries by November.