Lei Jun has stirred up a storm

Author | Chai Xuchen

Editor | Zhang Xiaoling

On the evening of March 28th, at the Xiaomi car launch event, the heads of the new forces sitting in the audience may not have expected that the overwhelming sales of Xiaomi cars the next day would completely overturn the territory they had worked hard to establish.

With a total of 89,000 units sold in 24 hours, Xiaomi's CEO Lei Jun, with his Xiaomi SU7, set a new record for new car sales in the domestic car market, also shaking the nerves of players in the new forces.

Such a frenzy of subscriptions, even last year's "superstar" Aito M7 couldn't reach, perhaps only Musk's Cybertruck can compete with it.

Lei Jun's Xiaomi car has become a phenomenal bestseller, like a bomb hitting the entire automotive industry, not only reshaping the rules of the game and overturning the existing landscape, but also breaking through the price system of the mid-to-high-end car market, igniting a new round of price wars, with products at the same price point adjusting prices to defend.

At the same time, this powerful shockwave continues to spread to other industries, sparking a huge discussion frenzy, with traffic flowing back to the sales level of the SU7, forming a closed loop.

Xiaomi car is coming to overturn the traditional car industry landscape, and is entering the queue of future automotive giants. Lei Jun, the top player in the mobile phone industry, has once again become a disruptor across industries, and hopes to one day enter the top 5 global car companies.

However, Lei Jun's excitement seems to have only stayed on the stage that night. He, who wanted to have a good night's sleep, was soon surrounded by a series of new issues such as delivery, quality control, and production capacity. And all of this will be keenly captured by competitors, becoming a breakthrough to counter Xiaomi.

At this moment, Xiaomi car standing at the peak of traffic, is enjoying unprecedented attention, but also bearing unparalleled pressure.

"Building cars is the last venture of my life," Lei Jun, who said this, has just begun the journey to the top.

Craze

The popularity of Xiaomi SU7 caught Lei Jun off guard. Nearly 90,000 units were sold in the first 24 hours of release, and Xiaomi car's senior consultant Hu Zhengnan bluntly stated, "This year's production capacity has been fully booked."

Six days after its launch, the Beijing Yizhuang Xiaomi car factory welcomed the first batch of SU7 deliveries, with Lei Jun revealing that the car orders had exceeded 100,000 units, with lock-in orders exceeding 40,000 units. He jokingly called himself "Director Lei".

However, Xiaomi officially left a 7-day cooling-off period, until users manually or automatically locked in the configuration, the order would only be considered truly effective and put into production.

This important lock-in quantity exceeded 40,000 units on April 3rd. It is worth noting that even last year's "traffic superstar" Aito New M7 took 25 days to achieve the same level of achievement, while Xiaomi did it in less than a week.

The potential users of Xiaomi cars are not only in first and second-tier cities, many Xiaomi stores in third and fourth-tier small cities were crowded with people after the release of SU7, and the test drive queues even stretched into the early morning. The strong outreach and huge user base in the sinking market are what car companies have been longing for The enthusiastic fans not only snapped up the inventory of Xiaomi cars, but also quickly cleared out official shelves of car models, mugs, and other peripherals, which soon appeared on second-hand platforms at marked-up prices.

In the following days, a group of people appeared on social media collectively "demanding rights" to unsubscribe. Their reason for unsubscribing was that they accidentally locked in the configuration button due to a "slip of the hand," missing the opportunity to refund the deposit within 7 days without reason. Industry insiders pointed out that this was most likely due to netizens who wanted to "show off their orders" that day making a mistake. In any case, this undoubtedly added another layer of heat to Xiaomi cars.

The impact of Xiaomi SU7 also spread to the capital market. On April 2nd, the day before SU7 was officially delivered, Xiaomi Group surged by 16% at one point, eventually closing up about 9% at HKD 16.28 per share, reaching a market value close to a two-year high of HKD 406.2 billion.

Top investment banks have also expressed optimism recently. Goldman Sachs expects SU7 to become one of the top three high-end sedan models in China, raising Xiaomi's target price from HKD 18.9 to HKD 20.0; J.P. Morgan reiterated its "overweight" rating on Xiaomi, stating that its overall balance sheet is strong and can provide sufficient funds for its automotive business.

Such a level of viral spread in the automotive industry is rare, demonstrating Lei Jun's extraordinary ability to "promote sales" in the Chinese consumer industry.

Some say Lei Jun is best at marketing, but he is more of a product manager. Xiaomi did not enter the market in the guise of an internet celebrity or extreme innovator. Instead, the "traffic password" of SU7 is closer to the mainstream population.

Because Xiaomi has a large user base in China, and this user segment may lack sufficient awareness of electric vehicles or cutting-edge intelligence. Lei Jun uses popular introductions, easy-to-use features, a Dream Car exterior benchmarked against Porsche, and a price range of RMB 215,900 to RMB 299,900 to tell them the sexy story of Xiaomi's high cost performance.

On stage, Lei Jun, besides shouting the slogan of surpassing Porsche in 5 years, did not demonstrate revolutionary technology and scenes, but focused heavily on "pragmatism" in terms of endurance, appearance, and the Xiaomi ecosystem.

This also indicates that Xiaomi did not choose to please those curious electric vehicle players, but instead focused on the mainstream crowd, which is somewhat contrary to the strategies of some new players.

Perhaps only Lei Jun, who has a keen grasp of consumer psychology and extraordinary marketing skills, dares to make what seems like a "counter-current" move.

Subversion

Before Xiaomi, tech companies entering the car-making field included giants like Apple, Baidu, and Huawei. Apart from Huawei's success with Aito, other tech giants have all failed. Apple even abandoned its internal car-making project.

Xiaomi seems to be becoming the exception.

Thirteen years ago, Lei Jun, who entered the terminal market with Xiaomi phones, achieved success by offering ultimate cost performance. Now, Xiaomi cars are once again using ultimate cost performance to create the "best smart car under 500,000 RMB," stirring up a muddy water in the automotive industry.

An example of Lei Jun's implementation of the cost performance strategy is that before the launch event, he held a meeting overnight to decide to reduce the price by another 30,000 RMB, stating, "We are already losing money, and production capacity is limited, so let's be sincere to the end." On the evening of the press conference, Wei Jianjun, Li Bin, He Xiaopeng, Li Xiang and other heads of car companies were invited by Lei Jun in a respectful manner, but the entire electric vehicle industry was given a solid lesson by Xiaomi's SU7.

(Image source: Internet)

SU7 has entered the "must-win territory" of the top domestic new energy vehicle players, with prices ranging from 200,000 to over 300,000. Tesla, BYD, Huawei, Nio, Li Auto, XPeng, Geely, SAIC, GAC, and others have all made their presence in this segment. The most typical representative is the Tesla Model 3; this price range of vehicles is also the most favored and willing to pay for by mainstream consumers.

The appearance, configuration, price, and service of Xiaomi's SU7 have made it the most attention-grabbing model in this segment. Especially after the price was announced, it became a bombshell, causing waves in the entire automotive market. Players in the same price range have all played their price cards, adjusting their stance to prepare for the battle.

On the night of its listing, Geely's Geometry E8 announced a price reduction of 5,000 yuan; the next day, Aito's New M7 reduced the price by 20,000 yuan, lowering the threshold to 229,800 yuan; XPeng G9 also reduced by 20,000, with a starting price of 243,900 yuan; ZEEKR 007 launched a rear-wheel drive version, priced at 209,900 yuan with an additional 20,000 yuan optional package; Nio introduced a subsidy for gasoline car replacement, totaling 1 billion yuan.

In fact, at the end of March, XPeng's all-electric sedan P7i had already taken the initiative to make concessions to the market, while Aito broke its own "price bottom line" of 300,000 yuan and released a new Aito 12 starting at 265,800 yuan.

After BYD overturned the A-class car track, the shockwave of this "traffic bomb" dropped by Lei Jun ignited the second wave of price wars this year.

In the mainstream vehicle market of 200,000 to 300,000 yuan, Xiaomi's SU7 has become a catfish, bringing unprecedented traffic and popularity to car companies, breaking through a new path and making many previous models and brands pale in comparison.

Amidst the surging undercurrents, the ultimate test has also begun.

Challenge

Xiaomi stirred up a storm with a single car, but after the surge in orders, Lei Jun couldn't sleep. The "production capacity hell" that even Tesla has experienced, he probably can't avoid it either.

"If everyone comes to buy, you have to wait for one or two years, you will definitely be criticized harshly," Lei Jun's hesitation and worry before the launch of SU7 have now become a reality.

After locking in more than 40,000 orders, Xiaomi's delivery capability is undergoing a test. Currently, apart from the delivery of some Founder's Edition models, the delivery period for other versions of SU7 has been further extended since last weekend, all requiring more than 20 weeks, with the MAX version taking up to 8 months for delivery.

A waiting period of about half a year is bound to affect users' purchase intentions. Brands like Nio, Aito, XPeng, Li Auto, and others have learned from similar experiences with multiple products. After the initial peak of excitement for new products, as competitors launch and offer more discounts, consumers' decisions can easily be swayed According to sources in the distribution channels, the number of Xiaomi users entering stores has far exceeded the store's capacity to handle, and some customers have chosen to cancel their orders due to the inability to receive proper service and delivery times.

Currently, the delivery issues of Xiaomi cars mainly stem from factory production capacity.

Zhou Xin, Deputy General Manager of the Wuling brand business unit, revealed that Xiaomi's remaining production capacity for this year is around 80,000 units, obviously lower than the order volume of 100,000 units. Another source from the Xiaomi supply chain mentioned that the bottleneck for Xiaomi car factory assembly and painting makes it difficult to see substantial changes within the next six months.

This means that after this year's order saturation, the flexibility of Xiaomi's car production capacity and delivery capability is difficult to adjust significantly, which quickly raised concerns in the capital market. On April 3rd, Xiaomi Group's stock price fell, dropping more than 3% at one point after opening.

Xiaomi responded by stating that the factory is currently working at full capacity to increase production, and is mobilizing supply chain partners to ensure full supply. Hu Zhengnan also mentioned that after the press conference, he went straight back to the factory that night without sleeping, working overnight to find solutions.

Public information shows that Xiaomi's car factory Phase I was completed in June last year with an annual production capacity of 150,000 units, while Phase II is planned to be completed next year, bringing the total annual production capacity to 300,000 units.

For any new car manufacturer, overcoming the initial "production capacity furnace" is a hurdle that must be crossed. In the highly complex and mature automotive industry, it tests Xiaomi's capabilities in production, planning, and supply chain integration. Because behind the scenes, competitors are also eagerly attempting to "recapture" the loyalty of Xiaomi fans.

Lei Jun's many years of marketing and technological experience initially helped Xiaomi capture the minds of users, but only by stabilizing the production capacity can Lei Jun handle the overwhelming enthusiasm and pave the way for future products.

The market still holds considerable expectations for this. Goldman Sachs predicts that in the next two years, Xiaomi's car sales will reach 170,000 and 326,000 units, accounting for 1.5% and 2.5% of China's retail sales of new energy vehicles.

Lei Jun aims to make Xiaomi's car one of the top five global car manufacturers through 15-20 years of effort. Looking at the data from 2023, the threshold for the global top 5 club is over six million vehicles.

The emergence of Lei Jun and Xiaomi's car is a phenomenal event in China's new energy market over the past decade, which may completely disrupt the current market and supply chain landscape. Its impact may be comparable to Tesla's establishment of a factory in China years ago.

Currently, in the global new energy vehicle market, there are only two giants, Tesla and BYD, who can sell over a million vehicles each year. Geely, Li Auto, and Aiways have been performing well in the past two years, while Nio and XPeng have fallen behind, and Leapmotor and NIO have a lower presence. Now, with the entry of Xiaomi's car, the future of most of them is even more uncertain.

In the eyes of industry giants such as Wang Chuanfu, Li Shufu, Lei Jun, Richard Yu, and He Xiaopeng, the future market can only accommodate five or six giants, and they are all determined to succeed.

In this vast land of China, a trillion-dollar new energy vehicle market is rapidly evolving. Lei Jun, who sees building cars as his final entrepreneurial endeavor, is determined to win this battle.

The battle among giants has already begun