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Xiaomi shares the rally after EV plans leak

Xiaomi Corp. shares rose. in Hong Kong after trading designs for what could become the company’s first electric car, something analysts say looks risky but profitable.

Chinese technology company shares 1810,
+12.82%

XIACY,
+0.23%And
Trading on Thursday for the first time this week after the Lunar New Year holiday, it rose to HK$13.32, its highest level since late July 2022. The stock is on track for its best close in nearly seven months and was last up 11%. at 13.22 Hong Kong dollars.

In recent days, leaked images of car molds related to Xiaomi’s plans for electric cars have been published by users of the Chinese social networking site Weibo. A Xiaomi spokesperson on Thursday told the Wall Street Journal that the leaked images come from a supplier, adding that they reflect early designs for a vehicle rather than a final prototype.

Xiaomi, famous for its smartphones, TVs and other electronics, announced in 2021 that it is looking to venture into the field of electric vehicles. It said it plans to launch its first vehicles in the first half of 2024.

China’s largest smartphone maker is ramping up investment in its bid to enter the electric vehicle market, but analysts aren’t sure if its bet will pay off.

Sonija Li, Head of Retail Research at MIB, said Xiaomi’s goal of replicating its success in the smartphone market in the automotive industry makes sense given that it can use existing technology, software and consumer base – a major strength – and build an EV ecosystem. Guarantees.

However, the sheer amount of capital expenditure required to succeed presents a challenge, she says.

Xiaomi mentioned in its third-quarter results that its investment in electric vehicles contributed to a big jump in research and development spending, which affected earnings. Ms. Lee said the market expects the company to spend more on electric vehicles in the next year or two.

The company will also have to grapple with stiff competition in the Chinese market, where better-known EV makers such as Nio Inc. and XPeng Inc. to turn a profit.

“We believe that Xiaomi will face the same situation, with a long payment period,” Ms. Li said.

She noted that 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 lower the prices of its cars in China.

In such a competitive field, she said, it remains to be seen if Xiaomi can stand out from the crowd.

Write to Justina Lee at justina.lee@wsj.com and Fabiana Negrin Ochoa at fabiana.negrinochoa@wsj.com