Disrupting the EV Market: Morgan Stanley’s Take on Xiaomi’s Upcoming Vehicle


Xiaomi’s EV business could have an intrinsic value of RMB 90 billion yuan if it scales up rapidly, Morgan Stanley said. Xiaomi EV is likely to be a disruptor, Morgan Stanley said, citing its leading innovation in ADAS (Advanced Driver Assistance System) and integration of “smartphone + EV + IoT”.

“There has been a significant increase in the number of electronic components replacing traditional mechanical parts, making the EV industry more like consumer electronics than the traditional automotive industry, the team said.

In addition, key components such as batteries and motors have evolved rapidly over the past few years and have become mature, so there is unlikely to be a significant gap between different EV manufacturers in terms of battery life and speed, according to the team.

The future winners in the EV industry will be those with greater competitiveness in technology innovation, the team said.

In terms of ADAS, Xiaomi has been able to provide Level-2 assisted driving features for its own EVs for complex scenarios such as automatic island circumnavigation, the team noted.

Regarding in-vehicle user experience, Xiaomi’s unique “smartphone + EV + IoT” model should make it more competitive than its industry peers, Morgan Stanley said.

“With the HyperOS rollout, we believe more creative ideas can be converted into attractive user cases in the future,” the team said.
Meanwhile, Xiaomi’s unique IoT technology could help it develop smart cockpit products for EVs, which is likely to be its key competitive advantage, the team noted.

In addition to innovation, cost leadership and scale are also key factors, according to the team.

Although Xiaomi is a latecomer to the EV space, it is likely to become a cost leader by leveraging its success in the smartphone space, Morgan Stanley said.
Xiaomi can deliver products at attractive prices through tight cost control and proactive engineering optimization across the value chain, according to the team.
“We believe the EV business will inherit those merits while enjoying more benefits via sharing Xiaomi’s corporate infrastructure (brand, administration, supply chain and distribution, etc.) For the EV business, scale is also critical,” the team said.

Xiaomi EV gave its first EV model, the SU7, its debut at a technical launch event on December 28, but did not reveal any pricing information.
Xiaomi wants to become one of the top five global car makers in 15-20 years and is aiming to be one of the tier 1 players in the smart driving space in 2024, Lei Jun, the smartphone giant’s founder, chairman and CEO, said at the launch event.
Xiaomi EV’s ultimate goal is to have its cars driving on every street in the world, it said earlier this month.

An official launch date for the Xiaomi SU7 has not been set, which Lei said on December 26 is still months away.
If Xiaomi EV’s first EV delivers high satisfaction levels in terms of product quality, vehicle design, price range and system stability, Xiaomi could achieve more rapid sales growth, Morgan Stanley said in that research note.
“Combined with its strong cost edge, our prop analysis suggests the EV intrinsic value could reach Rmb90 bn ($12.5 billion) if the scale up is rapid,” the team said.