With a R&D team of 3,400 people and a fund of over 10 billion, Lei Jun even personally test-drove more than 150 cars to learn from experience. With such a huge investment of manpower and money, Xiaomi Su7 was born. But it's a little embarrassing that the Xiaomi Su7 seems to be a little afraid to price it.
The delay in announcing the price is because Xiaomi's cost cannot keep up with market competition. Lei Jun mentioned, "Everyone shouts 19The 90,000 ** are all joking. "It is almost certain that the SU7 is unlikely to be a model priced at around 200,000 yuan. The ZEEKR 007, which is comparable to the SU7 configuration, has already hit the starting price to 20 by virtue of its scale and cost advantages990,000. It's like a Xiaomi car hasn't been put on the table yet, but the table has been lifted by a friend.
In fact, compared with when Xiaomi decided to build a car three years ago, the market has changed dramatically, the industry has gone from the blue ocean to the knockout round, and the profits of car companies have fallen sharply. After Apple's withdrawal, it was time for Xiaomi to re-examine its strategic choices.
This article holds the following views:
1. Xiaomi cars have no pricing power. Xiaomi cars have not yet been delivered, and they cannot compete with the competition through scale and cost control. As a result, Xiaomi maintains high pricing, and it is difficult to compete with competitors with the same configuration and performance parameters, but ** lower, but the price is lowered, and Xiaomi cars are likely to face long-term losses.
2. Xiaomi's organizational ability cannot keep up with the great changes in the market. The organizational structure of Xiaomi has the characteristics of emphasizing speed and ignoring research. This made Xiaomi make a misjudgment, did not have insight into the changes in the car market, and the sales of the sedan it bet on hit a bottleneck, missing MPV, SUV and other medium and large incremental models. In the long run, such an organizational structure also makes Xiaomi lack hardcore technical capabilities, which puts a ceiling on the car.
3. Xiaomi needs to re-examine its car-making strategy. Xiaomi's mobile phone profits are already low, and with the addition of cars that are difficult to make profits in the short term, Xiaomi's profits will be even worse. Brokerages are also worried about car investment and have lowered the target price of Xiaomi. When car manufacturing has gradually become a negative asset in Xiaomi's value, Xiaomi also needs to re-examine its car manufacturing strategy.
01 Xiaomi Auto has no pricing power
Xiaomi cars have been unveiled for more than two months, but its ** is still a mystery. The delay in releasing the price is not because Xiaomi wants to make a fuss, but because it is indeed stuck in the quagmire of non-up and down.
If the established high-end strategy is maintained and the price is high, it will be difficult for it to compete with competitors with the same configuration and performance parameters, but ** lower, which means that the sales of Xiaomi's first listed car may be dumb, and it will be difficult to carry out the next step. If the pricing is lowered, although the huge traffic of rice noodles may make the sales break quickly, Xiaomi's original intention to increase gross profit will also be frustrated, and the automobile business is likely to face losses in the next few years.
Such a screwed pricing consideration actually reflects that Xiaomi cars have no pricing power. To put it bluntly, what affects the pricing of Xiaomi cars is nothing more than cost and market competition, and the status quo is that the cost of Xiaomi cars cannot keep up with market competition.
Let's talk about the cost first, according to the self-** "whip bull", the cost of the low-profile version of Xiaomi car is about 200,000-26670,000, the cost of the high-end version is about 300,000-400,000. According to this cost, the ** of Xiaomi cars is obviously not low, Lei Jun also emphasized that Xiaomi cars will not be too cheap, and even said at the press conference, "Everyone shouts 19."The 90,000 ** are all joking. "All indications indicate that the Su7 is unlikely to be a people-friendly model with a price of about 200,000 yuan.
But because Xiaomi can't reduce the cost, it doesn't mean that other car companies can't reduce it. For example, the benchmark model Zeekrypton 007, which is more in line with Xiaomi, has dropped its ** to 20990,000. You know,In terms of configuration,ZEEKR007 and SU7 are basically the same,For example, both are equipped with Qualcomm Snapdragon 8295 and NVIDIA Orin-X chips,Both are L2Level autonomous driving systems,And the total computing power of the standard version is 254TOPS。 In terms of cruising range, ZEEKR 007 even surpasses SU7.
There is no doubt that the equivalent configuration of the Zeekrypton 007 has brought great pricing pressure to the Xiaomi SU7. What this reflects is that Xiaomi cars have not yet been delivered, and they cannot compete with the competition through scale and cost control.
Automobile is a business with a full scale effect, and the more deliveries, the lower the amortization cost of the car, which will eventually form additional profit margins to subsidize the cost. BYD is the best example, in the third quarter of 23, BYD Bicycle** fell 030,000 yuan, driving the sales volume to soar by 132% year-on-year, diluting the manufacturing and depreciation costs, and saving 090,000 yuan.
Xiaomi's passivity can be traced back to the three-year great changes in the new energy vehicle market and Xiaomi's own misjudgment.
02 Organizational capabilities cannot keep up with the great changes in the market
Li Xiang predicts that by the fourth quarter of 2024, the new energy market of more than 200,000 will have the result that the top three brands will eat up 70% of the market share. Whether the prediction will be realized is not yet known, but it reflects the huge changes in the new energy market: the current market is completely different from what Xiaomi originally envisioned.
Three years before Xiaomi decided to build a car, the industry was still a blue ocean, and the sales of new energy vehicles in 21 years increased by as much as 16 times, the new forces also rely on single products to fight the world, and the industry war is impossible to talk about. But today, the car market has entered the knockout round, the first war has become the norm, the profits of car companies have declined sharply, even if it is as strong as Tesla's gross profit margin has fallen by 7 percentage points in a year, Gaohe, Weimar and other initial head brands have gone bankrupt one after another.
After the great changes in the market, Xiaomi's difficulty in entering the game has doubled, and the shortcomings of its organizational ability have also been magnified. A former employee on Zhihu commented on Xiaomi: The organization construction is developing in the direction of project delivery, and all resources and allocation are to enable the project to be launched and delivered quickly. Such a working environment makes long-term technical research lack the soil for survival.
The organizational environment of emphasizing speed and ignoring research also made Xiaomi make a misjudgment. When Xiaomi started building cars, the best-selling model was a sedan, but now the hottest models are medium and large cars represented by SUVs and MPVs. In 2023, sedan sales will only increase by 04%, while SUVs increased by 10% year-on-year3%, MPV increased by 18 year-on-year2%。
Xiaomi has no insight into market changes because of its blind pursuit of speed, and SU7, as a sedan model, will inevitably miss the incremental market of medium and large models such as MPV and SUV. What's more serious is that Xiaomi's need for rapid result output and traffic realization makes it lack basic technology research, making Xiaomi's technical capabilities superficial, and lacking hard-core technology to change the industry. This is also the biggest obstacle for Xiaomi cars.
Xiaomi Auto currently regards the "car people" all-ecological Internet model as an advantage. But ecologicalization is just the icing on the cake, and on the more basic hardware, Xiaomi cars are still controversial. At the press conference, although a number of self-developed hardware of Xiaomi Auto claimed to have achieved the first parameter, it was still exposed to moisture after that.
For example, the V6 motor at Xiaomi's press conference was questioned as a high contract three years ago. In the eyes of industry insiders, the motor is not too high a technical threshold, is one of the best components to make a breakthrough in new energy vehicles, and can be achieved by "vigorously producing miracles".
In the field of new energy vehicles, whether it can change the technical shortcomings also determines whether Xiaomi cars can be on the table. But a bigger question also arises: is it really a good thing for Xiaomi to get on the table in the car?
03 Strategic focus is not necessarily a good thing
Recently, there was a first-class news in the car manufacturing circle, after 10 years of long-distance running and an investment of more than 10 billion US dollars, Apple gave up building a car.
The direct reason for giving up is that there is no profit in building cars. According to Bloomberg's Mark Gurman, Apple decided to give up at the critical point of "to do or not to do" in building a car. After researching the automotive market, Apple believes that the profit margins offered by car manufacturing, if it can be profitable, are much lower than existing businesses. At the same time, Apple will not be able to improve the profitability of car manufacturing through differentiation in the medium and long term.
Even Apple is worried about the profits of making cars, and the impact of making cars on Xiaomi's profits is even worse. The profit margin of Xiaomi's mobile phone business is already low, and in the latest reporting period, Xiaomi's net profit margin was only 645%, the profit margin is only 1 5 of Apple, and the net profit scale is less than 3% of Apple.
The profit is already meager, and now there is a car that is difficult to make a profit in the short term, and the profit performance of Xiaomi will be even more bleak. Huatai** will adjust Xiaomi's 2023 2024 2025 non-GAAP net profit** by +4% -24% -29% considering the possible increase in Xiaomi's R&D and marketing expenses.
With the market's concern that car manufacturing will erode Xiaomi's profits, cars have become a potential burden on Xiaomi's value. After the car press conference, Xiaomi's share price has fallen by more than 20%. Bank of America** also lowered Xiaomi's price target, believing that Xiaomi Auto will increase its marketing spending from this year in order to establish its own distribution channels. CICC also lowered Xiaomi's price target by 16 percent because of concerns about Xiaomi's investment in electric vehicles8%。
When it is difficult to make a car to contribute profits, the valuation of the car business has become Xiaomi's negative equity to some extent. Xiaomi also needs to revisit its strategic choices in the automotive business. In the past, when the market changed dramatically and the business logic changed, strategic determination gave way to pragmatism.
For example, Meta has always insisted on investing heavily in the Metaverse in the early days, and the Metaverse once lost more than $10 billion, and Meta also suffered a loss due to the Metaverse, with a single-day **25%. However, with Meta's control of investment, the loss of the metaverse has been significantly reduced, and the company's stock price has begun to return to an upward trajectory. Apple, another typical pragmatist, has risen in stock prices instead of falling after giving up its car-making business.
From Meta to Apple, their trade-offs in business are confirmed, and in many cases, strategic determination is not a good choice. And now the choice question of whether to adhere to strategic determination or choose pragmatism is also placed in front of Xiaomi.