Moonfox Analysis | Xiaomi Cars Were Finally Released, And How About The Group's Confidence?

CHENGDU, China
, April 8, 2024 /PRNewswire/ -- On March 28,
Xiaomi cars were officially launched on the market and announced with its selling price, which quickly ignited hot discussions. Within just half an hour of its listing, more than 50,000 sets were pre-ordered, indicating a worth-expecting market performance of Xiaomi cars. As a crucial action of Xiaomi Group to move into the high-end market, Xiaomi cars have initiatively invested substantial costs. In the continuously competitive automotive market environment in the future, what is the confidence of Xiaomi Group to continuously support the development of Xiaomi cars?
MoonFox believes that the confidence of Xiaomi Group comes from three aspects: Firstly, the main business of Xiaomi Group has achieved stability, with obvious effect in quality improvement and efficiency enhancement in the group; Secondly, Xiaomi's high-end strategies have made gradual breakthroughs, gathering groups of high-potential users and responding to the questioning voice from the market; Thirdly, the life experience provided by intelligent ecology has become a necessary demand for many users, highlighting the unique advantages of Xiaomi cars. In the future, Xiaomi Group is being driven by a longtermism for development, and Xiaomi can pay attention to the high-end marketing publicity focusing on the foundation of young and high-potential user groups, to promote Xiaomi to continuously advance along the high-end way.

I.
Confidence I: In 2023, the core business of the Group recovered as a whole, and its operational efficiency reached a record high.

Founded in 2010, Xiaomi rapidly rose to prominence in the market with its advantages of "affection to the people" and "cost performance". After sustainable development, Xiaomi Group had entered a mature stage by 2019, developing into a well-known brand in China, with its market performance continuously improved. From 2019 to 2021, Xiaomi Group experienced substantial overall growth, and achieved record high in revenues and net profits in 2021. However, subject to the macro-environment changes, the intensified competition in the mobile phone market and the continuous influence of COVID-19, its overall performance declined in 2022 accordingly, showing that combined with the cost performance and brand image, Xiaomi is difficult to achieve significant development in this traditional main business of mobile phones. Therefore, it is an inevitable option for development for Xiaomi Group to move towards high-end products, explore new automobile businesses, reduce costs and increase efficiency.

In 2023, Xiaomi adjusted its business, proposed the "scale and profit" strategy in management and significantly optimized the operation efficiency to improve the profitability. According to the 2023 financial report of Xiaomi, in 2023, Xiaomi Group achieved comprehensive revenue of RMB 271 billion, a gross profit of RMB 57.476 billion, and an adjusted net profit of RMB 19.3 billion with a year-on-year growth of 126.3%. Through the analysis of various main indicators, the reduction in sales costs made a significant contribution to the increase in operating profit. Compared to 2022, the sales costs decreased by RMB 18.973 billion year on year, with the sales cost of the smartphone business segment decreased by 11.3% year on year, driving Xiaomi Group's gross profit to reach RMB 57.5 billion in 2023. The overall gross profit margin reached 21.2%, reaching a record high. Xiaomi Group's strategy of improving quality and increasing efficiency has achieved its initial results.

Xiaomi cars are the second growth curve that Xiaomi Group expected to achieve, and Xiaomi Group has invested more than RMB 10 billion into its R&D. The stable income from the Group's main business serves is an important support for Xiaomi to enter the intensely competitive automobile industry.

II.
Confidence II: The high-end strategy has finally achieved results, and the Xiaomi brand has the possibility to move on a high-end way

As a key battle in which Xiaomi expected to achieve leapfrog development, Xiaomi cars still faced constraints of the brand impression of "cost performance" before its launch. As early as 2020, Xiaomi Group had put forward the high-end strategy, however, the successive releases of Xiaomi 11 and 12 series did not make significant breakthroughs, and the market questioned "whether Xiaomi brand could move on a high-end way". However, in 2023, Xiaomi's high-end strategy made a strong back fight in the intelligent business segment. Xiaomi brand already has a considerable base of high-potential users, which will also provide an important support for Xiaomi cars to achieve significant sales volumes in the future.

From the end of 2022 to 2023, Xiaomi successively launched high-end smartphone products such as the Xiaomi 13, Xiaomi 13 Pro and Xiaomi 14 series, which were developed in deep cooperation with Leica. Matched with Leica professional lenses and one-inch large sensors, etc., these two versions of series products focused on professional imaging experience as a selling point to drive the high-end brand image of Xiaomi smartphone series. According to the data of Xiaomi's financial reports, in 2023, Xiaomi's market share of smartphones in the price range of RMB 4,000-6,000 in Chinese mainland reached 16.9%, with a year-on-year increase of 9.2%, and in the fourth quarter of 2023, Xiaomi ranked the first in the sales volume in this price segment, so that Xiaomi could achieve a year-on-year increase of 19% in ASP (Average Selling Price) for smartphones in Chinese mainland in 2023.

According to the user data of Xiaomi high-end series models, Xiaomi has captured a group of young, highly-educated and high-potential users. According to the MoonFox data, among the users of Xiaomi 14 model, more than 80% users are aged below 35, more than 80% users have obtained an education background of college education and above, and in terms of gender, male users account nearly 70%. It can be observed that the current consumers purchasing Xiaomi high-end models are highly educated young people of the post-80s and post-90s generations. From the perspective of the source and flow direction of model changes, in addition to the upgrading and updating of existing Xiaomi users, such model also attracts a considerable portion of users from the brands such as iPhone, Huawei and Honor, showing the user attraction of Xiaomi 14 in high-end price segments.

III. Confidence III: Intelligent ecological experience has become a necessary demand for many users, highlighting the unique advantages of Xiaomi cars

Another major selling point of Xiaomi cars is the ecological cooperation of "people, automobile and family". For example, in terms of ecological cooperation concepts put forward at the press conference of Xiaomi cars, such as "voice preparation of automobile at home" and "automatic activation of home scenes upon the automobile's arrival in the community", whether can Xiaomi make it attractive as a selling point? From the perspective of Xiaomi IoT and consumer goods business, it can be believed that the current market has already exhibited a high level of acceptance for the intelligent living experience, and the intelligent life has become a necessary demand for many users, which is also a unique advantage of Xiaomi compared to other manufacturers.

Specifically, at present, Xiaomi Group's IoT and consumer goods business is still growing. In 2023, Xiaomi's revenue in this sector reached RMB 80.1 billion, the number of IoT equipment connected to Xiaomi AIoT platform reached 739 million, with a year-on-year increase of 25.5%, and the number of users with more than 5 sets of connected equipment reached 14.5 million, with a year-on-year increase of 25.3%.

In terms of Mi Home App, an intelligent control terminal of Xiaomi IoT, MoonFox data show that the market penetration rate of Mi Home App continued to rise in 2023, rising from 19.4% in March 2023 to a level close to 30% in March 2024, with the average number of launches per person up to 3.57 times, higher than the average level for smart home industry. In December 2023, heavy users accounted for more than 50% of the Mi Home App users, indicating the strong user attraction and stickiness towards the intelligent living experience.

IV. Looking forward to the future: Capturing the young and high-potential groups, building a high-end brand, and establishing a new Xiaomi of technology for the next decade

Xiaomi Group has set goals for a new decade, aiming to become a world-class hardcore technology enterprise with continuous R&D investment. At present, Xiaomi Group has made solid steps in its automobile business, but there is still a long way to go in the next decade to achieve high-end positioning and shape a hardcore technology image. The recent launch of Xiaomi cars is a testament to this point, and under the impression of the market's inherent view, Xiaomi products should be "affordable", which made Xiaomi cars face significant public sentiment challenges before its launch, exerting a certain impact on the pricing of Xiaomi cars to some extent.

However, in the long run, we believe that Xiaomi still has the foundation to become a high-end brand in the market, and the user assets owned by Xiaomi brand is a key factor. Compared to other brands, Xiaomi brand has gathered a group of young, dynamic and quality-conscious youths, with the age concentrated between 20 and 35. This group contains both young and strong users with high consumption power and users who focus on quality but have yet to fully unleash their purchasing potential. Their common characteristics focus on trendy fashion, personalized and quality experience. For example, Xiaomi cars are designed with human-vehicle collaborative functions, which is the best way to attract this type of users. If Xiaomi can maintain the loyalty of this group, with the growth of these users, they will contribute higher revenue to Xiaomi brand in the next 10 years.

On the other hand, in addition to the continuous increase of R&D investment and the focus on product quality and details, strengthening the high-end brand publicity is also a key factor. Although Xiaomi brand invests a lot in the quality design and parameters, the brand's tonality is still difficult to initiate more users' sense of identity. Xiaomi brand needs to try to break the circle-type high-end image marketing, continuously change the market's image perception towards Xiaomi brand. We believe that Xiaomi brand's approach of inviting the renowned actor Zhang Songwen to participate in the promotion of Xiaomi 13 smartphones in 2023 is worth persisting in, injecting effective vitality into the brand's high-end elements. For example, Xiaomi could try to propagandize through mainstream media (such as official media) and by inviting different celebrities professional driver experience and other means focusing on the current high popularity of Xiaomi cars, and carry out publicity focusing on the dimensions of Xiaomi cars such as design philosophy and performance, and human-vehicle collaboration experience to arouse the market users' thinking and imagination on the innovative experience of Xiaomi automobile and the innovative ability of Xiaomi brand, and guide users to further form a sense of substitution and a sense of identity for brands, gradually promoting the shaping of Xiaomi's high-end brand sense.

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