Introduction

Introduction

Some people just love making comparisons.

"Xiaomi Motors loses 60,000 yuan per car. Why sell so many when you're losing so much? This would've been called dumping in the past."

This quote has been widely circulated online recently. While the specifics are not the focus here, let's take a look at Xiaomi Motors' financial report for the second quarter of 2024. A closer analysis reveals much more interesting insights than mere criticisms.

"Revenue from innovative businesses, including smart electric vehicles, reached 6.4 billion yuan, with smart electric vehicles contributing 6.2 billion yuan. A total of 27,307 SU7 series vehicles were delivered in the quarter. As of the end of the reporting period, Xiaomi Motors' overall gross margin was 15.4%."

These figures have been thoroughly analyzed by the industry, but one metric that might not be as immediately apparent is gross margin. For comparison, here are some relevant data points from other new energy vehicle manufacturers:

Tesla's automotive gross margins from 2021 to 2023 were 25.3%, 25.6%, and 18.2%, respectively;

BYD's automotive gross margins for the same period were 17.39%, 20.39%, and 23.02%;

Lixiang ONE's automotive gross margins were 20.6%, 19.1%, and 21.5%;

NIO's automotive gross margins were 20.1%, 13.7%, and 9.5%;

XPeng's automotive gross margins were 11.5%, 9.4%, and -1.6%;

In the second quarter of 2024, Lixiang ONE's gross margin was 21.8%, XPeng's was 14%, and NIO's is estimated to be above 10%.

Gross margin is the percentage of gross profit to sales revenue or operating income. A higher gross margin indicates stronger profitability and larger profits, suggesting a company's products have strong competitiveness.

From the perspective of the overall gross margin levels of these automakers, 15.4% is undoubtedly a relatively high figure. The new energy vehicle industry faces multiple challenges such as rising raw material costs, significant investments in R&D, and fierce market competition. Therefore, companies that maintain high gross margins typically excel in cost control, pricing strategies, and product competitiveness.

As a newcomer, Xiaomi Motors' ability to achieve such a high gross margin in a short period demonstrates its strengths in these areas. Achieving a gross margin similar to or even higher than industry leaders in such a short time is undoubtedly a remarkable achievement.

This excellent gross margin may be attributed to Xiaomi Motors' effective strategies in supply chain management, cost control, product pricing, and market positioning. Additionally, innovations in intelligence, electrification, and customer service may have provided Xiaomi Motors with additional competitive advantages, supporting its high gross margin.

Many argue that while the industry is impressed by Xiaomi Motors' 15.4% gross margin in the second quarter of 2024, it is more curious to see if Huawei's HarmonyOS-powered vehicles can maintain technological innovation while achieving good cost control and market pricing, resulting in a satisfactory gross margin performance.

Of course, this might prove challenging. While both HarmonyOS-powered vehicles and Xiaomi Motors operate in the intelligent and connected vehicle sector, their development paths and market positioning may differ. Therefore, direct comparisons are not entirely appropriate. However, two vehicles can be compared.

One is XPeng's MONA M03 with a starting price of no more than 135,900 yuan, and the other is AITO's M5 EV with a pre-sale price of 700,000 yuan.

Although sales figures for these two vehicles are not yet available, they undoubtedly represent two extreme yet outstanding examples in China's smart electric vehicle market.

Firstly, these two vehicles differ significantly in price, with one targeting mass adoption and bringing smart electric vehicles to a wider consumer base, while the other focuses on luxury and exclusivity for consumers seeking premium quality and unique experiences.

This significant price difference profoundly illustrates the diversity and complexity of China's automotive market.

XPeng's MONA M03, with its affordable price and excellent cost-effectiveness, has attracted considerable attention from consumers interested in smart electric vehicles but with limited budgets.

It represents a significant force in China's smart electric vehicle market, striving to popularize these vehicles through technological innovation and cost control. Its emergence proves that low prices do not necessarily equal low quality and showcases China's potential and determination to meet the diverse needs of consumers across different segments.

On the other hand, AITO's M5 EV, with its high pre-sale price and luxurious configurations, exemplifies another pole of China's smart electric vehicle market.

It caters to consumers who prioritize extreme quality, unique experiences, and premium brand images. The launch of AITO's M5 EV validates the existence and potential of the high-end smart electric vehicle market in China, demonstrating Chinese brands' competitiveness and innovative spirit in this segment.

The price difference and distinct positioning of these two vehicles are microcosms of the diversity in China's automotive market. This vast and complex market encompasses a wide product line ranging from low-end to high-end vehicles and from traditional gasoline-powered cars to smart electric vehicles.

This diversity is not only evident in product prices and brand positioning but also in technology, marketing strategies, and consumer demands. This diversity enriches China's automotive market with vitality and innovation, offering consumers more choices and better driving experiences.

Therefore, despite their substantial price difference, XPeng's MONA M03 and AITO's M5 EV are both integral parts of China's smart electric vehicle market. They showcase the market's charm and potential in unique ways, jointly witnessing its diversity and prosperity.