Xiaomi's car manufacturing faces headwinds

The other side of traffic

Author | Wang Xiaojuan

Editor | Zhou Zhiyu

Traffic can both carry a boat and capsize it. As a disruptor entering the automotive industry, Xiaomi, which has become a top player, is now facing challenges.

Recently, many owners of the Xiaomi SU7 Ultra have jointly requested to return their cars due to the actual performance of the optional "carbon fiber perforated hood" not matching the promotional claims. This incident has repeatedly made it to Weibo's trending topics. Although Xiaomi previously issued an apology and stated that compensation would be provided through points, consumers remain unsatisfied.

From the traffic accident in Anhui at the end of March, to locking horsepower without communicating with car owners, and now the "carbon fiber perforated hood" rights protection issue, Xiaomi is undergoing an unprecedented test of trust.

With the Xiaomi YU 7 set to launch soon, whether it can overcome the current difficulties and reshape its image in the minds of consumers is a pressing challenge for this newcomer in the automotive industry.

Xiaomi Group's founder, chairman, and CEO Lei Jun, who has been silent for a long time, has recently resumed updating his Weibo account, an action seen as preparation for the Xiaomi YU7 launch. However, he still needs to face the aforementioned controversies and provide an explanation to users.

Xiaomi's current challenges also offer some insights for the industry, as marketing has entered a new turning point. In the fierce market competition, the automotive industry must return to the essence of safety; beyond marketing, car manufacturers need to focus on rational evolution. This is an inevitable path for the Chinese new energy vehicle market after years of rapid growth.

Continuous Turmoil

In the past two months, Xiaomi's automotive division has faced a series of controversies, with one wave not yet settled before another arises.

The latest controversy involves the "carbon fiber perforated hood" rights protection storm. The issue arose when the first batch of Xiaomi SU7 Ultra owners eagerly tested the carbon fiber perforated hood they had opted for at a cost of 42,000 yuan, only to find that a tissue placed on the hood did not move at all when blown by a fan.

It is important to note that during the selection process, this was touted as a "black technology" feature typically found in top sports cars, capable of achieving "dual airflow efficient diversion," meaning it could serve both cooling and downforce functions.

Lei Jun had previously stated in a live broadcast: "The carbon fiber front hood not only changes the appearance but also modifies the internal structure, with dual airflow directly guiding to the wheel hub, supporting wheel hub cooling." Xiaomi's automotive website had also described it as a "track-level cooling design," even claiming that this device could improve brake cooling efficiency by 15%.

Such statements led users to believe that this configuration replicated the functionality of the Nürburgring prototype, directly enticing them to place orders enthusiastically. Previously, Xiaomi stated on its official Weibo that the selection rate for the "carbon fiber perforated hood" reached 63%.

A series of tests have left both current and prospective car owners greatly disappointed. As of now, over 300 people have joined the rights protection group shared by prospective owners.

In response, Xiaomi Automotive issued an apology, stating that the previous information was not clearly communicated: "The carbon fiber dual airflow front hood, in addition to meeting the needs of replicating the external shape, provides some airflow diversion and assists with front hood cooling."

For car buyers, Xiaomi's earlier proposed solution was: for undelivered orders, a limited-time modification service would be offered to switch back to an aluminum front hood; for those who have already taken delivery and selected the option before the end of this limited-time modification, they would receive 20,000 points (approximately 2,000 yuan) as a gesture of goodwill, but it did not mention whether a return of the car was possible Many car owners do not buy into this plan. One car owner told Wall Street News, "This is a trust issue. I can accept that it is merely a decoration with no practical effect, but I cannot accept being deceived."

In addition to the actual loss of rights, for consumers of models priced over 500,000 yuan, they care more about emotional value, and this time, it is precisely the emotional value that has been harmed.

Some car owners have already entrusted lawyers to defend their rights. Regarding the above controversy, a lawyer stated that if the operator's description of the product's performance and functions significantly differs from the actual effect, it may constitute false advertising. If market regulatory authorities determine that false advertising is established, Xiaomi Auto may face corresponding fines.

Wall Street News learned that Xiaomi Auto's latest solution for car owners is to communicate with customer service to cancel their orders, but the deposit will not be refunded. If the car owner still wishes to pick up the car, they need to communicate within 60 days to continue production; otherwise, it will be regarded as a lack of intention to pick up the car, and the order will be negotiated for cancellation.

On May 12, some car owners received feedback from customer service. The customer service stated that orders for car returns would not continue production, and the expected delivery cycle would no longer be relevant, rendering the previously expected delivery cycle void.

Many car owners expressed dissatisfaction with the inability to refund the deposit.

In addition to the perforated carbon fiber hood, this car has recently also fallen into a horsepower locking controversy.

At the time of its launch, the selling point of this car was "1548 horsepower, 0-100 km/h acceleration in 1.98 seconds," but in a recent OTA update, some car owners found that the vehicle's horsepower was limited to 900 horsepower in daily driving mode, and the 0-100 km/h acceleration performance significantly dropped to 2.78 seconds. Unlocking full power requires paying thousands of yuan to participate in track assessments.

Subsequently, Xiaomi apologized again, stating that after receiving feedback, they had suspended this push. However, compared to the previous carbon fiber perforated hood, Xiaomi had previously stated that unlocking maximum horsepower requires "special training and unlocking procedures."

As the last entrant in the new energy vehicle circle, Xiaomi's every move since its launch has been placed under the spotlight, something that many marketing-savvy car companies cannot learn. But now, after reaping the benefits of traffic, Xiaomi has not escaped the black hole of traffic.

In the cycle of internet deification and deicide, Xiaomi and Lei Jun also need to face user doubts and practice their previous commitment to being user-centered to continue accumulating user reputation.

Controversy over Intelligent Driving

Xiaomi's recent dark experience can be traced back to a serious traffic accident over forty days ago.

On the evening of March 29, a standard version of the Xiaomi SU7 encountered a severe traffic accident in Tongling, Anhui. After the vehicle collided, it caught fire, resulting in the death of the driver and two passengers.

After the news broke, topics such as "Xiaomi responds to SU7 collision and explosion on the highway" briefly trended on social media, with netizens discussing doubts about Xiaomi's intelligent driving and the locking of the car doors in this incident.

Two days after the accident, a spokesperson for Xiaomi released the vehicle's driving data at the time of the incident. According to Xiaomi's disclosure, before the accident, the vehicle was in intelligent driving mode, maintaining a speed of 116 km/h, but the driver had removed their hands from the steering wheel, prompting a system reminder; during the accident, the intelligent driving system issued a warning about 2-4 seconds before the incident, simultaneously decelerating. The driver took over, began to steer and decelerate to avoid the collision, but failed to stop or change lanes, and the vehicle crashed into a concrete guardrail at a speed of 97 km/h It is worth mentioning that many controversies surrounding this incident remain unresolved. For example, the Xiaomi SU7 detected an obstacle and began to decelerate, but it has not been disclosed whether the AEB was triggered to stop; the cause of the vehicle fire after the accident and whether the doors could be opened have also not been explained by Xiaomi.

After the incident, Xiaomi's stock price fell from a high of HKD 59.45 per share this year to a low of HKD 36.05 per share, a decline of nearly 40%, with its market value dropping below HKD 1 trillion.

Xiaomi's accident has also become a catalyst for stricter regulations. The industry, which had previously promoted smart driving, has begun to apply brakes, changing the terminology to "assisted" and emphasizing the boundaries of this function.

On April 16, the Ministry of Industry and Information Technology announced that it had held a meeting to promote the management of product access and software online upgrades for intelligent connected vehicles, with nearly 60 representatives from major automobile manufacturers attending the meeting.

The announcement also specifically required car manufacturers to fully conduct combined driving assistance testing and verification, clarify system function boundaries and safety response measures, refrain from exaggeration and false advertising, strictly fulfill their obligation to inform, and take responsibility for production consistency and quality safety.

Around the Shanghai Auto Show, many car manufacturers and suppliers worked overnight to modify their presentations, changing "smart driving" to "assisted driving" and removing related promotional posters.

Many car manufacturers had previously defined different versions based on their smart driving capabilities, but this time, all expressions were modified. For example, Li Auto's new car for the Shanghai Auto Show was previously described as "Smart Driving New Version," but was changed to "Intelligent New Version."

Among the car manufacturers that renamed their smart driving features was Xiaomi. Xiaomi stated that this modification was in response to the national call.

After experiencing this incident, the so-called high-level smart driving has returned to a rational stage of intelligent assisted driving. Safety has become the new direction for car manufacturers.

During the Shanghai Auto Show, Huawei, in collaboration with 11 car manufacturers including GAC, SAIC, Jiangqi, Audi, Dongfeng Mengshi, Voyah, Deep Blue Automotive, BAIC, Avita, Seres, and Chery Automobile, released the "Smart Assisted Driving Safety Initiative."

Recently, a series of changes have also been transmitted to the sales end. Even in stores of new force brands that focus on L2-level intelligent assisted driving, promotional materials for this function have disappeared, and salespeople no longer actively promote this function as a main selling point.

Return to Essence

As the last new force to enter the market, there was concern about Xiaomi's success in car manufacturing when it decided to build cars.

Until just before the launch of the Xiaomi SU7, the market was still questioning whether Xiaomi could succeed in car manufacturing, believing that this newcomer in the automotive industry would find it difficult to make a significant impact.

The subsequent story broke the doubts from the outside. After the official launch of the Xiaomi SU7, it has been smooth sailing, with orders, stock prices, and public attention reaching unprecedented heights. From delivering the first car to achieving a delivery volume of 200,000 units, Xiaomi took less than a year, becoming the fastest brand among domestic new forces to reach this goal.

Xiaomi's market value also rose from around HKD 15 per share before the Xiaomi SU7 to HKD 59.45 per share at the beginning of this year, with a market value increase of over HKD 1.15 trillion within a year. The increase in market value mainly comes from optimistic expectations for the automotive business Morgan Stanley analysts pointed out in their latest research report that in an optimistic scenario, Xiaomi's electric vehicle business will achieve unexpected growth, with its price-to-sales ratio expected to reach 3.5-4 times, and the target price could reach HKD 75-85, corresponding to a target market value of RMB 1.7-2 trillion.

However, in a pessimistic scenario, Xiaomi's electric vehicle business growth may fall short of expectations, with its price-to-sales ratio possibly remaining at 1-1.5 times, and the target price may drop to HKD 25-40, corresponding to a target market value of RMB 62.5-95 billion.

It can be seen that the key variable for Xiaomi's market value change remains its automotive business, which depends on whether the vehicles can continue to sell well.

Recently, a series of controversies have shattered Xiaomi's sales myth and affected the release rhythm of subsequent models.

Last month, Xiaomi's vehicle delivery volume decreased by 3.4% month-on-month to 28,000 units, marking the first negative growth. Of course, the short-term decline in delivery volume is not the most important issue, as Xiaomi had previously accumulated a considerable number of orders and is currently not worried about deliveries.

However, the impact on the rhythm of new car releases seems to be the most pressing issue. After the incident at the end of March, Lei Jun and Xiaomi's next new car, the YU7, were absent from the Shanghai International Auto Show in April. According to Lei Jun's previous disclosures, this car is expected to be launched in June or July this year.

According to industry conventions, new cars released mid-year are typically showcased at the Shanghai International Auto Show in late April.

Lei Jun has recently resumed updating his social media, which is seen as preparation for the upcoming new car release. However, before that, Xiaomi's challenge remains how to regain users' trust.

Moreover, the current trust crisis is different from the previous industry concerns. The trust crisis is a soft power that is more difficult and lengthy to establish, with a wide-ranging impact. After all, once users no longer trust, orders will not flow in, and other challenges will naturally cease to exist.

When starting the car manufacturing venture, Lei Jun stated, "I am willing to bet my entire reputation and achievements to fight for Xiaomi cars." Now, this has become a self-fulfilling prophecy. Lei Jun and Xiaomi's reputation are facing unprecedented scrutiny.

The current crisis and challenges reveal the differences between the automotive and smartphone industries. Although today's smart cars are frequently updated and modified like smartphones once were, car manufacturing remains a slow business compared to smartphones, and it tests the boundaries and limits of this tool even more.

From the shift in the expression of intelligent driving, the crisis Xiaomi is experiencing has also become a turning point in industry marketing. Car manufacturing is no longer about a group of people from the internet crossing over to engage in marketing and storytelling; it must return to the industrial essence and the rationality of tools.

This crisis not only showcases Xiaomi's shortcomings but also prompts the entire industry to think about how to find a balance between aggressive technology and conservative safety, traffic frenzy and trust accumulation, scale expansion and quality control.

Currently, Xiaomi's proposition is no longer about "creating another hit product," but rather about rethinking the close relationship between the tool of the automobile and humanity itself, sincerely facing users without leaving any trust issues. Only then can it move towards high-end markets and go global, realizing the dream of "becoming one of the top five automotive companies in the world through 15-20 years of effort." Author | Wang Xiaojuan

Editor | Zhou Zhiyu

Flow can both carry and capsize a boat. As a disruptor entering the automotive circle, Xiaomi, which has become a top player, is now facing challenges.

Recently, many owners of the Xiaomi SU7 Ultra have jointly requested to return their cars due to the actual performance of the optional "carbon fiber perforated hood" not matching the promotional claims. This incident has repeatedly made it to the trending topics on Weibo. Although Xiaomi previously apologized and stated that they would provide compensation through points, consumers remain unsatisfied.

From the traffic accident in Anhui at the end of March, to locking horsepower without communicating with car owners, and now the "carbon fiber perforated hood" rights protection, Xiaomi is undergoing an unprecedented trust test.

With the launch of the Xiaomi YU 7 imminent, whether it can overcome the current difficulties and reshape its image in the minds of consumers is a pressing challenge for this newcomer in the automotive circle.

Xiaomi Group's founder, chairman, and CEO Lei Jun, who has been silent for a long time, has recently resumed updating his Weibo, which is seen as preparation for the launch of the Xiaomi YU 7. However, he still needs to face the aforementioned controversies and provide an explanation to users.

Xiaomi's current challenges also offer some insights for the industry, as marketing has entered a new turning point. In the fierce market competition, the automotive industry must return to the essence of safety; beyond marketing, car companies need to focus more on rational evolution. This is an inevitable path for the Chinese new energy vehicle market after years of rapid growth.

Continuous Controversies

In the past two months, Xiaomi's automotive division has faced a series of controversies.

It is important to note that during the selection process, this was touted as a "black technology" feature that would only be equipped on top sports cars, capable of achieving "dual airflow efficient diversion," meaning it could serve both cooling and downforce functions.

Lei Jun had previously stated in a live broadcast: "The carbon fiber front hood not only changes the appearance but also modifies the internal structure, with dual airflow directly guiding to the wheel hub, supporting wheel hub cooling." Xiaomi's official website had also described it as a "track-level cooling design," even claiming that this device could improve brake cooling efficiency by 15%.

A series of tests have left both current and prospective car owners greatly disappointed. As of now, over 300 people have joined the rights protection group shared by prospective owners.

For car buyers, Xiaomi's earlier proposed solution was: for undelivered orders, a limited-time modification service would be offered to switch back to an aluminum front hood; for those who have already taken delivery and selected the option before the end of this limited-time modification, they would receive 20,000 points (approximately 2,000 yuan) as a gesture of goodwill, but it was not mentioned whether a return of the vehicle was possible Morgan Stanley analysts pointed out in their latest research report that in an optimistic scenario, Xiaomi's electric vehicle business will achieve unexpected growth, with its price-to-sales ratio expected to reach 3.5-4 times, and the target price could reach HKD 75-85, corresponding to a target market value of RMB 1.7-2 trillion.

However, in a pessimistic scenario, Xiaomi's electric vehicle business growth will fall short of expectations, with its price-to-sales ratio likely to remain at 1-1.5 times, and the target price may drop to HKD 25-40, corresponding to a target market value of RMB 62.5-95 billion.

It can be seen that the key variable affecting Xiaomi's market value changes remains its automotive business, which depends on whether the vehicles can continue to sell well.

Recently, a series of controversies have shattered Xiaomi's sales myth and affected the release rhythm of subsequent models.

Last month, Xiaomi's vehicle delivery volume decreased by 3.4% month-on-month to 28,000 units, marking the first negative growth. Of course, the short-term decline in delivery volume is not the most important issue, as Xiaomi has previously accumulated a considerable number of orders and is not currently worried about deliveries.

However, the impact on the rhythm of new car releases seems to be the most pressing matter. After the incident at the end of March, Lei Jun and Xiaomi's next new car, the YU7, were absent from the Shanghai International Auto Show in April. According to previous disclosures by Lei Jun, this car is expected to be launched in June or July this year.

According to industry conventions, new cars released mid-year are typically showcased at the Shanghai International Auto Show in late April.

Lei Jun has recently resumed updating his social media, which is seen as preparation for the upcoming new car release. However, before that, Xiaomi's challenge remains how to regain users' trust.

From the shift in the expression of intelligent driving, the crisis Xiaomi is experiencing has also become a turning point in industry marketing. Car manufacturing is no longer just a group of people from the internet crossing over to engage in marketing and storytelling; it must return to the industrial essence and the rationality of tools.

Currently, Xiaomi's proposition is no longer to "create another blockbuster," but to rethink the close relationship between the tool of the automobile and humanity itself, sincerely face users, and leave no trust issues; only then can it move towards high-end markets and global reach, realizing the dream of "becoming one of the top five automotive companies in the world through 15-20 years of effort."