The 2024 Beijing Auto Show has come to an end, and the speech given by Lei Jun, Chairman of Xiaomi Group, at the auto show has sparked industry attention. Lei Jun expressed his disappointment after visiting the Beijing Auto Show, criticizing Chinese auto companies for blindly engaging in homogenization relying on “bluffing”.
During the recent 2024 Zhongguancun Forum Annual Meeting, Lei Jun explained why Xiaomi only focuses on producing one car, stating, “Every car manufacturer produces a range of cars, but having a few good cars is enough. Why do we need so many homogenized cars?”
Lei Jun expressed his despair after attending the auto show, believing that the industry is indulging in homogenization, stating, “What you are doing is not about creating products, but solely relying on bluffing.”
According to reports from The Paper, Lei Jun’s statements are in line with his actions and the interests of his company. His perspective does hold some merit. With the decreasing technological threshold in China’s electric vehicle industry, many new companies find it easier to enter the market. Reports suggest that the current products from new forces mainly consist of smart cabins based on comfort features like sofas, refrigerators, and smart voice control, as well as misleading self-driving assistance systems, flooding the market.
The report argues that the car manufacturing by emerging companies in China is akin to a “buffet model”, where everyone picks items from one plate, resulting in a mix of similar cars. As homogenization reaches a “saturation stage”, car manufacturers often resort to a low-price strategy, lowering costs to attract consumers. However, this approach often sacrifices the drive for product quality and innovation, leading to an abundance of “cheap but not good” products in the market.
In March of this year, Xiaomi officially launched its first electric vehicle, the Xiaomi SU7. With the media’s attention, the Xiaomi SU7 saw a hot market response.
However, during the Xiaomi SU7 launch event, Lei Jun mentioned that the first car would be sold at a loss, citing the ongoing price war as a major pressure on pricing. Eventually, the standard version of Xiaomi SU7 was priced 30,000 yuan lower than Tesla Model 3, with the top model priced at 299,000 yuan.
On April 15th, Citigroup released a research report estimating that for every SU7 sold by Xiaomi this year, the company would incur an average loss of 6,800 yuan, projecting a total loss of up to 4.1 billion yuan in the entire car manufacturing business. This data reflects the financial pressure Xiaomi faces when entering the automotive market.
Regarding the above data, Xiaomi Group responded, mentioning only orders but not directly addressing the projected annual losses.
Startup media under 36Kr, “PowerOn”, previously revealed that Xiaomi’s internal team has prepared for over 5 years of losses in the future. Lei Jun reportedly mentioned in an internal meeting that the first-year sales of Xiaomi Cars are expected to reach 100,000 vehicles.
In reality, Chinese electric vehicle companies generally operate at a loss. Nio’s financial report released on March 5 showed a net loss of 20.7198 billion yuan in 2023. From 2018 to 2023, Nio’s total net loss over six years reached a staggering 86.631 billion yuan.