South Korean media: Why did Xiaomi succeed where even Apple failed?
On September 19, South Korean media "Today's Finance" published an article stating that Xiaomi Group's electric vehicle business, which has been in operation for just one year, has achieved performance close to 20% of the group's total sales. The group's senior management said they believe the strong growth of the electric vehicle business will help the group achieve its annual goals. In a field where even Apple failed, Xiaomi successfully established an electric vehicle business and has now announced its imminent entry into the European market.
According to Xiaomi Group's second-quarter financial report, the group's revenue reached 116 billion yuan, an increase of 30.5% year-on-year. Adjusted net profit reached 10.8 billion yuan, up 75.4% year-on-year.
Xiaomi's core businesses such as smartphones and smart home appliances performed well in the second quarter, but the industry's attention was focused on the electric vehicle business. In its second year, the electric vehicle business generated 20.6 billion yuan in sales in the second quarter, accounting for about 18% of Xiaomi Group's total revenue. This business rapidly grew from 9% last year to become a significant source of revenue, reaching double digits in terms of proportion.
The gross margin for the electric vehicle business in the second quarter was 26.4%, a significant increase from 15.4% last year, far exceeding the smartphone business (11.5%). Due to an increase in the delivery volume of the high-end model "SU7 Ultra," the average selling price of Xiaomi electric vehicles increased by 10.9% year-on-year to 253,662 yuan, leading to a significant rise in the gross margin. According to local Chinese media reports,
Following the popularity of the "SU7" launched last year, the reservation volume for Xiaomi's first electric SUV "YU7," launched in June, also saw a significant increase, with an average delivery waiting time exceeding one year. In response to the unprecedented delivery delays, Lei Jun, Chairman of Xiaomi, recently recommended the Tesla Model Y as an alternative on social media, saying, "If you need a car urgently, buying other domestic models is also a good choice."
However, the electric vehicle business remained in a loss state in the second quarter. The operating loss narrowed from 500 million yuan in the previous quarter to 300 million yuan. Although the manufacturing business has strong profitability with a gross margin approaching 30%, the company is still struggling with the huge initial investment costs in factories, infrastructure, and marketing. Xiaomi has invested over 30 billion yuan in the electric vehicle business. This explains why, after deducting fixed costs related to initial investments from the gross profit, the business is still in a loss state.
Nevertheless, it is expected that the operating loss will be resolved soon. Li Weibing, President of Xiaomi, stated at the earnings call: "At the current pace, the electric vehicle business can achieve monthly or quarterly profitability in the second half of the year. Our top priority is to deliver all orders as soon as possible. The cumulative delivery volume in the first half of the year was 157,000 units."
In the electric vehicle industry, Xiaomi's success in a market where even Apple could not enter is attributed to China's dominant position in the electric vehicle value chain. Currently, Chinese companies lead the global market in every aspect of the value chain, including key components of electric vehicles such as batteries, cathode materials, and minerals used in cathode materials. Most importantly, China, as the world's largest electric vehicle market, is Xiaomi's "home market." Despite fierce domestic competition, Xiaomi has formed a unique competitive advantage based on customized features provided through data from most of its appliance R&D and manufacturing.
With this advantage, the electric vehicle business quickly became Xiaomi's flagship business within just one year of its launch. According to Bloomberg, Li Weibing expressed confidence at the earnings press conference: "Thanks to the strong growth of the electric vehicle business, we are certain to achieve the group's overall annual goal this year." Xiaomi Group's main annual goal this year is a 30% year-on-year increase in group sales and 350,000 electric vehicle deliveries. Based on confidence in the electric vehicle business, Xiaomi announced its entry into the European electric vehicle market when releasing the second-quarter financial report. Li Weibing said, "Xiaomi's strategic plan for electric vehicles is to enter the European electric vehicle market by 2027."
Original: www.toutiao.com/article/1843668234829963/
Statement: The article represents the views of the author.