Morgan Stanley has noted the unfolding disruptive impact of Xiaomi’s entry into the electric vehicle (EV) market, particularly with its SU7 model, which has seen remarkably strong sales early on. The investment firm elaborates on how this could affect other local EV startups.
In an April 11 research note, analyst Andy Meng’s team raised Xiaomi’s price target, citing upbeat EV sales performance. However, they also emphasized the need for further delivery from Xiaomi to win over investors.
Xiaomi officially launched the SU7 on March 28, reporting 88,898 firm orders within the first 24 hours. The model, offered in three variants, has starting prices ranging from RMB 215,900 to RMB 299,900.
Morgan Stanley views the reasonably priced SU7 positively, with orders nearing their bullish expectations. They attribute the model’s popularity to end-users’ satisfaction with Xiaomi’s vehicle design and the ‘Smartphone + EV + AIoT’ concept.
Despite arriving later than competitors, Xiaomi’s EV has received positive market feedback, driven by customer-oriented innovations. Production, delivery, and service will be crucial in the short term, while ongoing innovation in Advanced Driver Assistance Systems (ADAS) and smart cockpit features will drive long-term value, according to Morgan Stanley.
The investment firm expects Xiaomi EV to reach an intrinsic value of RMB 89 billion with an average selling price of RMB 250,000 by 2024-2025. They see a higher probability of a bullish scenario, valuing Xiaomi EV at RMB 110 billion.
Morgan Stanley raised its price target on Xiaomi’s Hong Kong-traded shares, anticipating a 25 percent upside.
Regarding the impact on other EV startups, Morgan Stanley believes Xiaomi EV’s influence on share prices will be limited initially, but these startups will face inevitable competition. While Xiaomi’s peers have observed increased store traffic recently, competing with tech veterans poses challenges. Nonetheless, the report expresses confidence in startups’ adaptability to the competitive landscape.
