Xiaomi Automobile YU7 makes a stunning debut, will it kick Tesla off the "pedestal"?

Xiaomi's recent press conference launched a bunch of hardware products including AI glasses, but the market's main focus is on YU7. Although the company disclosed the main parameters of YU7's configuration last month, the specific price remains "undisclosed."

For this press conference, the market mainly expects the specific price of Xiaomi YU7 and the market performance of locked orders.

a) Final price of YU7: 253,500 yuan (standard version) / 279,900 yuan (Pro version) / 329,900 yuan (Max version). The previous mainstream market expectation was between 250,000 and 320,000 yuan. From the final published price, the starting price of the standard version meets market expectations, while the price of the Max version is slightly higher than market expectations.

Tesla's Model Y will undergo a facelift in January 2025, with the current prices being 263,500 yuan (standard version) / 313,500 yuan (long-range version). The pricing of Xiaomi YU7 is closely aligned with Model Y, creating direct competition. Additionally, the Max version of Xiaomi's high-performance dual-motor all-wheel drive is priced at 329,900 yuan, which is higher than the long-range version of Model Y, reflecting $Xiaomi Corporation (ADR)(XIACY.US) 's confidence in its own products.

Comparing Xiaomi YU7 with major competitors: ① The battery capacity of Xiaomi YU7 is higher than that of competing products, providing a significant endurance advantage; ② All products of Xiaomi YU7 are equipped with panoramic display P-HUD; ③ In terms of intelligent driving, Xiaomi YU7 uses NVIDIA Thor chips, with computing power close to the new version of Model Y, leading other competitors. Xiaomi YU7 is equipped with one more LiDAR than Model Y.

In other words, at a similar price, purchasing Xiaomi YU7 will offer better configurations than Model Y. Previously, domestic brands struggled to shake Model Y's market position, but the launch of Xiaomi YU7 is expected to pose a real challenge to Tesla's SUV in the Chinese market.

b) Performance of locked orders: This time, YU7's pre-orders exceeded 200,000 units in 3 minutes and surpassed 289,000 units in 1 hour, which is quite astonishing and far exceeds market expectations.

Previously, the pre-order performance of SU7 was: exceeding 10,000 units in 4 minutes, 20,000 units in 7 minutes, 50,000 units in 27 minutes, and 88,000 units in one day. SU7 is Xiaomi's first car, and after gaining market recognition, YU7 delivered such an "explosive" performance. The nearly 290,000 orders in 1 hour have already surpassed the total delivery volume of all Xiaomi SU7 since its launch last year. The problem facing Xiaomi Auto is not a demand issue, but rather a supply-side shortfall. Currently, the company's first-phase factory is working overtime to maximize monthly production capacity to 28,000 units, while the second-phase factory only began formal mass production in July.

Regarding the estimated orders on hand for Xiaomi Auto:

SU7: If ordered now, the delivery cycle still requires about 10 months. Considering the first-phase factory's nearly 28,000 units monthly full-load capacity, it is estimated that the company has around 280,000 SU7 orders on hand;

YU7: The company announced that the number of large orders exceeded 289,000 units within 1 hour. If we assume that the large orders for YU7 reach 400,000 units in one day;

Although Lei Jun announced that SU7 orders not delivered by June 29 at 24:00 can be converted to YU7, this can only affect a portion of customers switching their orders. Due to the extended production cycle of YU7, some consumers will continue to hold SU7 orders due to their vehicle needs (as they can receive their cars earlier than YU7). Therefore, the total number of Xiaomi Auto orders (SU7 + YU7) is expected to exceed 600,000 units. With the first-phase factory continuously at full capacity and the second-phase factory ramping up production, the current orders on hand will take a full year to digest.

c) Investment Perspective: The explosive performance of YU7 will drive up the valuation of the automotive business.

Due to the differences between the automotive business and traditional businesses, Xiaomi's valuation is often divided into two parts: traditional business and automotive business. The strong response to YU7 at this press conference will directly boost the valuation of the automotive business.

As Xiaomi's shipment scale expands and YU7 raises the overall average price, the company's gross margin is expected to continue improving (23.2% in Q1 25), achieving profitability in the automotive business. Currently, many automotive companies reference PS valuation, mainly because they have not yet achieved stable profitability. When Xiaomi Auto achieves stable profitability, it can shift from a PS perspective to a PE perspective.

As mentioned above, due to Xiaomi Auto being in a "supply-demand imbalance" situation, the performance in the automotive sector is mainly driven by the release of supply-side capacity, and the market's valuation of Xiaomi Auto is more based on order performance rather than current performance.

With the mass production and delivery of YU7, Xiaomi Auto's gross margin is expected to reach over 25%, with the potential for early profitability in the second half of 2025. Based on the current order situation for SU7 and YU7, the company's production capacity will remain saturated for the next year. As the second-phase and subsequent third-phase factories (Xiaomi recently acquired another piece of land adjacent to the second-phase factory) gradually ramp up production, Dolphin Research expects Xiaomi Auto's monthly production capacity to exceed 80,000 units by 2027. At that time, the "supply-demand imbalance" situation will be alleviated.

Specific valuation considerations are as follows:

① For the specific valuation of the automotive segment: Shift from PS to PE. Assuming that the third-phase factory will start mass production ramp-up in 2026, Xiaomi's automotive deliveries for the year are expected to exceed 710,000 units, likely surpassing Tesla. Since 2026 will still be affected by "supply shortages," more reference will be made to the situation in 2027 during performance calculations.

After the third-phase factory successfully ramps up, Xiaomi's monthly delivery volume is expected to increase to over 80,000 units, with an anticipated total shipment of 1 million units in 2027 (referencing the annual sales of 700,000-800,000 units for BBA in China in 2020, and Tesla's annual sales of 660,000 units in China in 2024). With an average price per vehicle of 255,000 yuan and a gross margin increasing to 25.7%, Xiaomi's automotive business is projected to achieve a post-tax core operating profit of 22.1 billion yuan in 2027, a year-on-year increase of 43% (core operating expense ratio of 15.7%, tax rate of 15%).

If Xiaomi's automotive pricing remains in the 200,000-350,000 yuan range, then after achieving annual sales of 1 million units, the growth rate of the automotive business is expected to show a significant slowdown.

② As for the valuation of the traditional segment, Dolphin Research continues to use the previous DCF valuation method (combined with the better-than-expected performance of the IoT business).

This conference's impressive performance of the YU7 mainly involves adjusting the corresponding valuation for the automotive business, while maintaining the original expectations for the traditional business. As long as the new YU7 orders issued by the company remain robust, the logic of Xiaomi's automotive business will be difficult to disprove, and it can also inject confidence back into the market.

Appendix: Detailed content of this YU7 launch conference

(1) Product positioning: High-performance luxury SUV, designed to "withstand the test of time," emphasizing proportional aesthetics and a low, elegant stance.

(2) Design highlights

a) Exterior: Three times the wheelbase ratio, 2.1 wheel height ratio, 1.2 five times width-to-height ratio, long hood design enhances safety and luxury feel.

b) Colors: A total of 9 color options, with 5 new additions (Pearl White, Deep Blue, Danxia Purple, Shadow Green, Gold Pink), and 4 continuations (Planet Gray, Lava Orange, Titanium Metal, Gem Green).

c) Interior: New Iris Purple color option, Nappa leather wrapping, baby-contact-grade materials, rear sleep headrest supports electric adjustment (maximum 135°)

(3) Wheels and Comfort

a) Standard 19-inch diamond wheels, optional 20/21 inches (including forged sports wheels and floating logo).

b) All models come standard with soundproof laminated glass, Max version upgrades to ultra-silent glass + sound insulation film, NVH performance comparable to million-level luxury cars.

c) The panoramic sunroof has a sun protection factor of SPF100+/PA++++, Max version supports EC dimming sunroof (light-blocking physical sunshade level).

d) Family-friendly design: rear drawer, HEPA filter, child mode, onboard refrigerator, rear screen entertainment.

e) Apple ecosystem compatibility: UWB control, Dynamic Island vehicle status display, CarPlay desktop stitching.

f) Peripheral products: custom small folding phone, camping set, alloy car models (1:18/1:43/1:64), sunglasses, direct drinking cup.

(4) Power System

a) All models are equipped with V6s Plus super motor (22,000 RPM, 528N·m torque, 288kW power), maximum horsepower of 690, 0-100km/h acceleration in 3.23 seconds (actual measurement excluding start time 2.98 seconds).

b) Maximum speed of 253km/h, braking distance of 33.9 meters, turning radius of 5.7 meters.

(5) Range and Charging

a) Standard version: Standard version CLTC range of 835km (four-wheel drive version 770km), industry first; 620km recharge in 15 minutes (800V high-voltage platform).

b) Intelligent chassis: standard variable steering ratio (VGR), active suspension adjustment, road prediction function.

(6) Hardware Configuration

a) Four-in-one domain controller (assisted driving, cockpit, vehicle control, communication module), 4nm chip + NVIDIA Orin chip, 700TOPS computing power.

b) All models come standard with lidar, 4D millimeter-wave radar, end-to-end assisted driving (HAD).

c) Sky screen: 1.1-meter triple screen projection display, supports blind spot imaging, AR navigation.

d) Xiao Ai: 5G voice interaction, multi-person simultaneous speaking, edge-side large model (selective follow-up questions, cross-screen interaction) e) Ecological expansion: magnetic accessories (tissue box, physical buttons), threaded interface power supply (27W), rear flat panel expansion.

(7) Assisted driving:

a) 10 million clips training data, intersection understanding, obstacle avoidance anthropomorphism; upgrade to Shu Qi Pro/Ultra version in July 2024.

b) XLA large model to be launched in the second half of 2024, in collaboration with universities for medium to long-term technology research.

(7) Safety and quality

a) Passive safety

2200MPa hot-formed steel used for A/B pillars/rollover protection frame, body high-strength steel + aluminum alloy accounts for 90.2%, torsional rigidity 47610N·m/°.

Exceeding C-NCAP/China Insurance Research Institute standards, female dummy full-condition development.

b) Battery protection

Ultra same bulletproof coating +1500MPa scratch-resistant bottom beam, thermal diffusion/wading test exceeds 2025 new national standards.

c) Testing and verification

653 test vehicles accumulated 10.62 million kilometers, covering 53 cities, 539 days, completed 30,000 kilometers of border line actual measurement.

24-hour endurance challenge: continuous high-speed driving of 3944 kilometers (average speed 210km/h), certified by China Automotive Center.

(8) Models and prices

a) Standard version: 253,500 yuan (initial rights 55,000, including leather seats, HUD lifetime usage rights).

b) Pro version: 279,900 yuan (3,360 yuan cheaper than Model Y long-range, rights same as above).

c) Max version: 329,900 yuan (top performance beast, 0-100km/h in 3.23 seconds, rights 66,000).

(9) Optional and rights

a) Track package: add 100,000 yuan (including coilover suspension, carbon fiber components, etc.).

b) Colors: gemstone green/lava orange/pearl white free, Danxia purple add 9,000 yuan.

c) Worry-free service package: 1,299 yuan/year (free glass replacement, painting, annual basic maintenance)

(10) Model Y Comparison

(11) Extra Surprise: Xiaomi SU7 Lock Orders for Undelivered Users Can Be Temporarily Modified

Risk Warning and Disclaimer

The market has risks, and investment requires caution. This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial conditions, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Investment based on this is at one's own risk