By Justina Lee and Fabiana Negrin Ochoa
Shares of Xiaomi Corp rose in Hong Kong after the circulation of designs for what could become the company’s first electric car, something analysts say looks like a risky but potentially lucrative venture.
Shares of the Chinese technology company, which traded on Thursday for the first time this week after the Lunar New Year holiday, rose to HK$13.32, their highest level since of July 2022. The stock is on track for its best close in nearly seven months. and was last up 11% to HK$13.22.
In recent days, leaked photos of car moldings related to Xiaomi’s electric vehicle plans have been circulated by users of the Chinese social media website Weibo. A Xiaomi spokesperson on Thursday told The Wall Street Journal that the leaked photos came from a supplier, adding that they reflect early designs of a car rather than a final prototype.
Xiaomi, best known for its smartphones, TVs and other electronics, announced in 2021 that it was looking to enter the EV space. It said it plans to release its first vehicle in the first half of 2024.
China’s biggest smartphone maker has been increasing investment in its bid to enter the EV market, but analysts are unsure whether its bet will pay off.
Xiaomi’s aim to replicate its success in the smartphone market in the automotive industry seems rational given that it can use its existing technology, software and customer base – -core power – and build an EV ecosystem, said Sonija Li, head of retail research. on MIB Titles.
However, the large amount of capital expenditure required to succeed poses a challenge, she said.
Xiaomi reported in its third-quarter results that its EV investments contributed to a big jump in research and development spending, which weighed on earnings. Ms. Li said the market expects the company to increase its EV spending even more in the next year or two.
The company will also face stiff competition in the Chinese market, where more established EV makers such as Nio Inc. and XPeng Inc. they struggled to make a profit.
“We believe that Xiaomi will experience the same situation, with a long payback period,” said Ms. Li.
If Xiaomi gives its entry-level model a premium price tag, it will be in direct competition with the likes of Tesla Inc., which has already had to cut its car prices in China, she noted.
In such a competitive field, it remains to be seen whether Xiaomi can stand out from the crowd, she said.
Write to Justina Lee at justina.lee@wsj.com and Fabiana Negrin Ochoa at fabiana.negrinochoa@wsj.com
(END) Dow Jones Newswires
01-26-23 0253ET
