Unveiling the Impact of BYD’s Price Reduction and the Implications for Xiaomi’s SU7

On December 28th last year, Xiaomi held a tech event where, for the first time, they officially disclosed more details about their venture into the automobile industry. Though the specifics of their new car, SU7, were not revealed during the event, there was still widespread anticipation that by the start of the new year, a series of information including pricing would be unveiled. However, as events unfolded, they took an unexpected turn. On February 19th, shortly after the lunar new year, BYD made a move that changed the game entirely.

BYD Takes the Lead, Others Follow Suit with Price Cuts Setting the Tone for the New Year

On February 19th, BYD launched the “Electric Beats Oil in Price” campaign, introducing the Honor Edition models Qin PLUS Honor Edition and the Destroyer 05 Honor Edition, with a starting price of 79,800 yuan, igniting a surge of New Year price reductions.

BYD’s price reduction quickly triggered a chain reaction, with Wuling, Changan Automobile, and NIO subsequently announcing price cuts for multiple models. For instance, the Wuling Xingguang 150 KM Advanced Edition saw a price drop from 105,800 yuan to 99,800 yuan; Changan Qiyuan Q05 and Changan Qiyuan A05 starting prices both reduced to 73,900 yuan.

Additionally, Geely announced the start of the 2024 Spring Car Buying Festival, offering limited-time promotions starting at 29,900 yuan and up to 47,000 yuan in cash discounts. XPeng, on the other hand, announced a 20,000 yuan reduction for all models of XPeng G6 until the end of March. NIO also revealed reductions of 22,000 yuan for all models of NIO X, 8,000 yuan for NIO AYA, and 5,000 yuan for NIO S series. AION S MAX Xinghan Edition from GAC Aion saw a price reduction of 23,000 yuan.

Furthermore, brands like Shanghai Volkswagen, FAW Volkswagen, Changan, and Chery all joined the price war. BYD, in particular, launched a series of honor edition models almost encompassing all of its models.

Behind the Price War Lies the Confidence of New Energy Vehicle Manufacturers

While a few traditional fuel vehicle brands participated in the price cuts, this collective price reduction effort predominantly focused on the new energy vehicle sector. This wave of price reductions reflects the rapid progress and large scale of domestic new energy vehicles in China. It’s noteworthy that not long ago, price reductions were typically associated with brands like Tesla, with local brands following suit.

Moreover, this simultaneous price reduction by domestic brands, while influenced by various factors, also indicates the increasing competitiveness of Chinese new energy vehicles in pricing and competition with traditional fuel cars. After years of development, the new energy industry now demonstrates scale and advantages in the industrial chain, empowering manufacturers to tout “electric beats oil in price.” While it may lower profit margins for companies, offering consumer-friendly prices can accelerate the penetration rate of new energy vehicles.

Apart from showcasing advantages in the industrial chain, there are also other objective reasons behind this trend, such as the continuous decline in battery raw material prices. Currently, lithium carbonate prices have dropped from nearly 600,000 yuan per ton at its peak to less than 100,000 yuan per ton, providing room for manufacturers to adjust prices for volume. Nonetheless, this intense pricing competition has indeed introduced several uncertainties in the market.

The Unrevealed Price Tag Presents a Challenge for Xiaomi’s SU7

The current trend of price reductions among car manufacturers remains to be seen, as most established brands, despite experiencing some profit pressure, possess sufficient foundations and robust industrial chain control capabilities to withstand this wave of pricing pressures. However, for Xiaomi as a newcomer in the automotive industry, the situation is quite different.

Since the unveiling of Xiaomi’s automotive venture, the speculated price of their offering has been a hot topic. # Xiaomi’s Strategic Pricing Decisions in the Car Market

Xiaomi remains highly confident in its first car, the SU7, hinting multiple times that its pricing may surpass expectations. For instance, during an interview with CCTV, Lei Jun clearly stated that the jokingly suggested price of 199,000 yuan by netizens would not be 99,000, 149,000, or even 199,000 yuan. Therefore, it is almost certain that the new car’s price will be above 200,000 yuan.

One could say that Xiaomi has played its marketing cards right in terms of pricing. Perhaps learning from the difficulties faced during the transition from “low-end” to “high-end” in the era of smartphones, Xiaomi seems intent on avoiding this process when it comes to making cars, establishing a clear positioning for Xiaomi vehicles from the start. It is evident that Xiaomi also seems to use pricing as a strategic entry point for marketing, thereby controlling the entire exposure and release rhythm of the new car.

However, with BYD leading a New Year promotion, disrupting Xiaomi’s rhythm, Xiaomi’s experiences in smartphone marketing seem to be less effective this time. The initial anticipation of gradually building suspense with pricing and then raising the value did not result in a probationary period for newcomers, but rather a challenging obstacle. Now, the pricing of Xiaomi’s SU7 resembles an airborne boot, with everyone eagerly awaiting its landing.

In reality, for Xiaomi, the challenges go beyond the surging price wars; there are also rumors of a rivalry with Geely. Speculations abound, but whether they hold true or not remains unknown, for now, let’s just consider them as stories. However, the formidable threat posed by Geely towards Xiaomi is quite apparent.

Even before Xiaomi’s technical presentation on December 28 last year, Geely preempted with the launch of Jingke 007, a model with the exact same positioning as Xiaomi’s SU7, indicating Geely’s intentions clearly.

Following Xiaomi’s hint that the SU7 price would be above 200,000 yuan, Geely introduced the Galaxy E8 starting at a guided price of 175,800 yuan. Moreover, post the New Year, we witnessed the comprehensive upgrade of the new Jingke 001, priced between 269,000 and 329,000 yuan, seemingly fitting perfectly into the price range of Xiaomi’s SU7. According to sources, Geely also has the Lynk 07 unreleased at the 200,000 yuan price point. Notably, these five cars by Geely are generally similar in positioning to Xiaomi’s SU7, all being medium to large-sized electric sedans with a focus on sportiness and handling, bearing a striking resemblance to the selling points of the SU7, creating a sense of intense competition. In such a scenario, how Xiaomi’s entry into the car market will unfold captures attention.

Has Xiaomi “Botched” Its Pricing Strategy for Cars this time?

The external circumstances give the impression that competitors are deliberately targeting Xiaomi. However, from a different perspective, it seems more like Xiaomi willingly stepping into the most brutal battleground, the 200,000-300,000 yuan range for electric sedans.

In the car manufacturing sector, it’s noticeable that many new players usually start with SUVs, especially with electric vehicles. The reason is simple: SUVs provide ample space, making it easier for newcomers to design various interior layouts. Additionally, SUVs are more popular among young people, making them more receptive to the current trends towards pure electric and smart vehicles.

Looking at the market chosen by Xiaomi SU7, many established models already have a significant market share, such as the Tesla Model 3, BYD Han, and Xiaopeng P7, while newcomers like Zhijie S7 and Xingjizhou ES are also highly competitive. Even without the current intense price reduction, the challenges faced by Xiaomi’s SU7 are formidable, making one tense for its success.

In fact, from the moment Xiaomi’s car was unveiled, every step of its marketing strategy, including the delayed pricing, was a tactic to cope with this fierce competition.

With the increasing competition in the car market, apart from BYD’s growing sales, we also witness exits occurring from time to time. Even new entrants like Wuling Xiali have not entirely established their presence. Therefore, for Xiaomi, entering from a different industry and starting from scratch, managing the public opinion rhythm indeed holds paramount significance.

Questions Arise Over Xiaomi’s Path to the Automotive Industry

Until now, whether this rhythm of marketing has spiraled out of control due to the sudden price wars remains unknown. Nevertheless, the repetitive cycle of leaks and debunked rumors has undeniably generated a sense of fatigue among onlookers. Initially, people may have been genuinely interested in the pricing of the SU7. But as time passed, the spectacle itself may have become the focus for many.

Car Manufacturing Differs from Smartphone Production; Xiaomi’s Road Ahead May Not Be Smooth

For a smartphone manufacturer to venture into car production is no easy feat. Even in a country like China with a mature supply chain, Xiaomi still needs to navigate through the extensive array of components, systems, numerous suppliers, and partners involved in this process. Furthermore, they need to establish a sustainable business model during the creation and launch of their first vehicle.

Even a giant like Apple eventually gave up on car manufacturing after a decade of perseverance, casting a shadow over Xiaomi’s endeavor. While Lei Jun previously stated in a tech event that he aims to elevate Xiaomi into one of the top five global car manufacturers within 15 to 20 years, the road to achieving this vision is long. Despite the success stories of Kings and Xiaomi, the decision-making process still remains pivotal. Over the past decade, many believed that Apple would eventually succeed in launching a car. Ultimately, the outcome holds paramount importance.

According to the latest updates, Xiaomi’s SU7 is expected to be officially unveiled by the end of March. Simultaneously, online sources reveal that the new vehicle has already begun shipping nationwide, indicating that the process of launching and delivering is gradually unfolding. At the time of writing this article, news has emerged confirming that the Xiaomi store in Dongfang Xintiandi at Wangfujing, Beijing, will be transformed into Xiaomi’s first flagship store for cars. It is set to open in April, with reports suggesting that the store’s renovation is nearing completion, further substantiating the rumors of the March launch. Notably, the Beijing Auto Show will take place in April, marking a significant milestone for automakers. It is anticipated that Xiaomi will have completed the SU7’s launch and price announcement by then. As a member of China’s automotive and brand market, we eagerly anticipate Xiaomi’s ability to deliver an outstanding performance.