Rising Expectations with Xiaomi's YU7 Electric Vehicle

Xiaomi's Success Story with YU7

Xiaomi showcased its YU7 electric vehicle, receiving approximately 240,000 confirmed orders within just 18 hours, establishing itself as a formidable competitor against established rivals like Tesla. This rapid order volume highlights the power of Xiaomi’s integration within the technology ecosystem and indicates increased consumer interest in efforts to transcend beyond smartphones.

The strong early demand for YU7 could reshape the investment narrative around Xiaomi’s premium product growth and ecosystem expansion. Being a Xiaomi shareholder requires confidence in the company's ability to sustain long-term growth by extending its premium product and smart ecosystem strategy beyond phones.

The approximately 240,000 confirmed orders for the YU7 electric vehicle not only provide a new catalyst in the short term but also bring to light the challenges underlying Xiaomi’s success in the premium electric vehicle market. Significant risks, such as international brand building and regulatory uncertainties, are becoming a major focal point for their achievements in this area.

Another important development directly linked to this momentum is Xiaomi’s plan to expand its collaboration with BASF Coatings, aiming to develop 100 special car paint colors for electric vehicles over the next three years. This partnership could enhance differentiation for the YU7 and future models, strengthening Xiaomi’s move into the premium automotive segment.

However, one point investors should be cautious about is that despite the success in electric vehicles, the high initial investments Xiaomi is making in new product categories could be risky.

It is projected that Xiaomi aims to achieve CN¥765.2 billion in revenue and CN¥69.6 billion in profits by 2028. To reach this goal, an annual revenue growth rate of 21.3% and an increase of approximately CN¥32.4 billion from the current CN¥37.2 billion in profits is required.

Xiaomi’s forecasts suggest a fair value of HK$64.87, which is 50% above its current price. Among the 16 members of the community, one member reflects various outlooks on Xiaomi’s growth expectations, with value estimates ranging from HK$31.49 to HK$80.26. As the premium ecosystem expansion accelerates and Xiaomi begins to test the scale and profitability of its electric vehicle business, you may want to compare these views.

A good starting point is our analysis, which highlights 3 main rewards and 1 key warning sign that could affect your investment decisions regarding Xiaomi.

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