The battle for the smartphone crown is currently hotting up. While Apple was able to topple Korean manufacturer Samsung from the throne in 2023, the latter reclaimed it in the first quarter. However, this is only due to the fact that the sales curve for the Asians fell less steeply than for the Americans. Meanwhile, the number three in the world is catching up. Unlike the leading duo, Xiaomi sold more cell phones. Compared to the previous year, sales increased by a whopping 34% to 40.8 million units. But the Chinese are not only stepping on the gas when it comes to smartphones, demand for their brand new e-car is also so high that the electronics manufacturer raised its sales forecast for this year a few days ago.
There has been speculation about smartphone manufacturers building cars for years, most of it centered around Apple. However, the management now seems to have pulled the plug on the project, which according to media reports bears the code name "Titan". In February, Bloomberg and the Wall Street Journal both reported the end of the Apple car. Even though many skeptics gave the iCar little chance due to the logistical challenges, long development cycles and lower margins, Xiaomi has proven that a smartphone manufacturer can also build motor vehicles. Company founder Lei Jun presented his first electric car, the SU7, at the motor show in China at the end of April. In the first month, 10,000 units were produced and just over half have already been delivered to customers - a record for the launch of a newly introduced brand.
Demand has recently increased to such an extent that the Group has just had to raise its delivery forecast. This year, 120,000 vehicles are now to be handed over to customers instead of the previously targeted 100,000. In order to achieve this, the industry newcomer will introduce a double shift in production from June. When fully expanded, the highly automated factory in Beijing should be able to produce an SU7 every 76 seconds. Speed is also important to CEO Lei Jun for the sports sedan: the most powerful model accelerates from 0 to 100 km/h in just 2.78 seconds. Xiaomi also promises that it can be recharged for 390 kilometers in just 10 minutes.
Even though 54-year-old Jun is still at the very beginning with his electric car, he has big plans. The aim is to achieve 100% automated processes in production, which in turn will reduce manufacturing costs. In addition, the factory in China's capital should later be able to build up to 300,000 vehicles a year. In the long term, the entrepreneur has even set himself the goal of becoming one of the top 5 car manufacturers in the world. New models such as an SUV, which is expected to be launched next year, will contribute to this.
While there is a lot of promise for the future in the car business, the market is initially continuing to focus on smartphone sales, which still account for the majority of revenue. In the first three months of this year, these increased by 27% to CNY 75.5 billion (USD 10.4 billion) thanks to strong sales, whereas analysts had only expected CNY 73.3 billion. Xiaomi also performed better than expected on the earnings side. At CNY 6.49 billion, adjusted net profit exceeded average estimates by just over 30%. According to market researcher IDC, Xiaomi's global market share increased to 14.1%. There was also growth in China, the largest market for the Chinese smartphone business. According to market researcher Counterpoint, deliveries there increased by 8.6%. Xiaomi also recorded dynamic growth in IoT and lifestyle products, its second-largest business segment to date. The segment grew by a good fifth in the first quarter. The gross profit margin soared by 4.1 percentage points to a new record of 19.9%. From the current financial period, Xiaomi will now also report its car business separately.
The latest developments and news from Xiaomi have been well received on the capital market. Market capitalization has increased by 75% in the past 12 months, reaching a new 3-year high. Analysts even see further potential and have given the stock a "buy" rating. However, the share recently corrected significantly after the rally. The share has lost around 10% since its interim high in mid-May.
Such a breather is not surprising after the strong price rally. With the two new soft-callable barrier reverse convertibles on Xiaomi, investors can take advantage of this phase to achieve attractive returns even when prices are stagnating. The details at a glance: Both securities, which are offered in CHF and USD, come with a comfortable risk buffer of 41%. This means that as long as the underlying does not touch the barrier at 59% of the starting value, the BRC achieves the maximum return. This amounts to 8.00% p.a. for the CHF variant, while the USD counterpart even offers the prospect of a quarterly coupon payment of 12.00% p.a.. Due to the soft callable function, the maximum term of the two products can be reduced from one and a half years to a maximum of six months.
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