(Bloomberg) — The incursion of Xiaomi Corp. into the electric vehicle sector is casting a shadow on the recovery prospects of China’s beleaguered automotive startups.
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The excitement surrounding the debut and surpassing initial orders for the SU7 model have propelled a surge in Xiaomi’s stock price. Meanwhile, investors have increased their positions betting on the decline of EV manufacturers NIO Inc. and Xpeng Inc., with significant short interest in their US listings, accounting for approximately 86% and 36% of total shares outstanding, respectively.
In stark contradiction to the failed car aspirations of Apple Inc., Xiaomi and Huawei Technologies Co. are showing early accomplishments in transferring their expertise in smartphones to the competitive EV sector, where fierce price competition is having an impact.
“The foray of Xiaomi and Huawei is a notable disruption, particularly leveraging their proficiency in consumer technology and supply chain management,” mentioned Bing Yuan, fund manager at Edmond de Rothschild Asset Management. “Their emphasis on intelligent features sets a high standard for consumer expectations in terms of vehicle functionalities.”
In addition to the fresh competition, the wider EV industry is facing challenges due to evolving consumer preferences, the slowdown of China’s economy, and concerns of rising interest rates in the US and other regions.
Year-to-date, Tesla Inc.’s shares have decreased by 35%, while Nio and Xpeng have seen a 50% decline in US trading.
The capital-draining Chinese startups are perceived as more susceptible to the adverse effects of across-the-board price reductions compared to long-standing traditional automakers like BYD Co. They may also need to implement significant changes to compete with the new players from the smartphone industry.
“The disruption transcends the product itself – it actually stems from the potent amalgamation of effective marketing, branding, and, to a great extent, established ecosystem,” Morgan Stanley analysts, including Tim Hsiao, pointed out in a report. “The competition against tech stalwarts seems to pose a challenging yet unavoidable battle for automakers.”
The outstanding marketing capabilities and strong appeal to the youth audience that Xiaomi has cultivated are effectively utilized in its EV venture. The SU7 model has generated significant buzz on Chinese social media platforms, backed by Lei Jun, the company’s…
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