Morgan Stanley has highlighted the disruptive force of Xiaomi’s electric vehicle (EV) as the company’s first model, the SU7, sees strong early sales, potentially impacting other local EV startups.
“We raise Xiaomi’s price target on the back of upbeat EV sales performance. We believe its disruptive force is unfolding but Xiaomi needs to deliver more to convince investors,” analyst Andy Meng’s team wrote in an April 11 research note.
Xiaomi officially launched the SU7 on March 28, and the model received 88,898 firm orders in the first 24 hours. The SU7 is offered in three variants with starting prices ranging from RMB 215,900 ($29,840) to RMB 299,900.
Morgan Stanley noted that the Xiaomi SU7’s reasonable pricing and positive sales performance, with orders close to their bull case, indicate strong customer satisfaction with Xiaomi’s vehicle design and ‘Smartphone + EV + AIoT’ concept.
The team sees Xiaomi’s disruptive force unfolding as the company arrived later than its competitors but has received positive market feedback due to customer-oriented innovations.
Production, delivery, and service will be key factors in the near term, while continued innovation in Advanced Driver Assistance Systems (ADAS) and smart cockpit features will be long-term value drivers, according to Morgan Stanley.
Morgan Stanley expects Xiaomi EV to have a base case intrinsic value of RMB 89 billion and an average selling price of RMB 250,000 in 2024-2025, with a higher probability of a bull case generating a higher value of RMB 110 billion.
The research note also mentioned that while Xiaomi EV’s impact on other EV startups’ share prices may be limited for now, these startups will face an inevitable battle.
“Valuation-wise, Xiaomi’s EV peers like Nio’s and Xpeng’s share prices have already corrected substantially YTD (down 40-50 percent vs. HSI +1 percent YTD); hence, actual impact to EV startups’ share prices could be relatively minor at the moment, as more meaningful volume upside still comes from ICEV replacement in our view,” the note said.
Morgan Stanley highlighted that Xiaomi’s success with the SU7 goes beyond the product itself, demonstrating an effective combination of marketing, branding, and an established ecosystem.
Competing with tech veterans like Xiaomi appears to be an uphill battle for auto OEMs, but startups’ rapid adaptability to the competitive landscape could be a bright side, according to the report.
The success of Xiaomi’s SU7 could impact internal combustion engine vehicles, especially entry-level models from luxury brands and mass-market brands’ C-segment sedans, as the SU7’s superior spec and pricing could attract young couples/families looking for mid/large-size sedans, Morgan Stanley said.
