On the first day of its launch, the SU7, the first Xiaomi car model, set an impressive record of surpassing 50,000 units within 27 minutes, and within the next 24 hours, the number reached 88,898 units. Recently, it is rumored that the production capacity of 120,000 vehicles has been sold out in 2024. So what does such an amazing subscription report mean for Xiaomi cars?
1. Crossing the “line of life and death” of operations
First, one of the key indicators of the “life and death line of car building” is that gross margin must reach at least 12%. This is because in the past three years, the operating rates of listed car companies have generally been in the 12-14% range. Bicycles have high enough gross profit to cover sales and management expenses to guarantee the operation of car companies.
And gross margin and sales volume are like a pair of good friends who influence each other. The automobile industry is inherently an industry characterized by economies of scale. As more cars are sold, the average cost per vehicle will decrease, and gross margin may increase at the same time. Conversely, if the gross margin of each car is too low, the company doesn't have much money to do R&D, advertising, and upgrade production equipment, and of course the car won't sell.
As a result, companies with gross margins above a certain safe bottom line can survive by expanding their market share even if they temporarily sacrifice some profit; while those with gross margins hovering in a dangerous zone can only struggle in a brutal price war and risk falling into a vicious cycle of low sales, high costs, and weak competition, it is likely that they will eventually be eliminated from the market.
Take “Wei Xiaoli”, China's top three energy companies, as an example. The past two years have been ideal...