Just as the auto industry was grappling with BYD’s rapid rise, Chinese smartphone company Xiaomi entered the market, dwarfing Tesla and promising to become a global player. Even though Apple abandoned development of a self-driving electric car this year, Xiaomi founder and CEO Lei Jun promised that making a car will not just be his latest legacy project, but a product that will transform the company into one of the top five automakers in the world over the next two decades. Hong Kong-listed shares of Xiaomi rose last week to a two-year high after the company introduced its SU7 electric sedan priced around $4,000 less than Tesla’s Model 3 and with similar technological capabilities . Increased attention from analysts In recent days, Xiaomi has gained wider attention from automotive and technology analysts beyond those who previously considered it just a smartphone play. “Add Xiaomi to the list of capable Chinese automotive/technology companies that could represent attractive candidates for collaboration as Western automotive companies seek ways to achieve greater scale, better capital discipline and lower execution risks,” said the Morgan Stanley auto analyst Adam Jonas in a note Thursday. Meanwhile, Tesla last week revealed that its deliveries fell in the first quarter compared to a year ago. Excluding Covid, this is Tesla’s first drop in deliveries since 2012, Jonas pointed out. While he still likes Tesla in the long term, he and his team will hold a webinar for customers on Tuesday on Xiaomi, Tesla and global electric vehicles. “If Xiaomi can continue to outperform its competitors [driver assist] and smart cabin features, we believe it is likely to become a disruptive force with great growth potential,” Andy Meng, Morgan Stanley’s top China tech hardware analyst, said in a note on Monday. Meng reiterated the bank’s overweight rating on Xiaomi and its target price of 17.50 Hong Kong dollars ($2.24). Xiaomi shares nearly reached that price during last week’s rally. The stock has since given back much of those gains and is now changed little on the year. Meanwhile, Tesla shares are down 34% year-over-year. Late Wednesday, Xiaomi said it had received more than 100,000 orders for the SU7, of which more than 40,000 were already blocked and not subject to cancellation. On the same day, it held a ceremony to celebrate its first batch of car deliveries. Waiting times of about a month Most customers face waiting times of nearly six months or more, according to the platform of Xiaomi online sales. Taylor Ogan, CEO of Shenzhen-based Snow Bull Capital, said he is watching to see how consumers actually like driving cars before him. he agrees to buy Xiaomi shares. “I don’t think it’s going to be particularly good for the share price [in] the next two quarters,” he said in an interview Friday. “After that, this could be a cash cow. This is something that every single passionate user of the Xiaomi ecosystem needs.” Months before the car’s launch, Xiaomi announced a new operating system called HyperOS and a strategy to connect consumers with their homes and cars. company derives the majority of its revenue from smartphones, but a significant share also comes from a range of home appliances, many of which are controlled via an app. During the recent launch of the SU7, Lei, CEO of Xiaomi, said that when a driver approaches home, connected lights and appliances could automatically turn on. certain settings. Such an ecosystem offers “an integrated recurring revenue model that every CEO would dream of,” Ogan said. “Plus, you can have subscriptions.” He said he sees low chances of the SU7 failing, but said it would be difficult for Xiaomi to recover if the car falls short of expectations. Although Xiaomi is trying to build its own ecosystem, the company also supports Apple’s Car Play system and iPads. “We believe the end result [of Xiaomi’s EV market entry] would result in faster penetration of BEV/NEV in China, so ICE brands or products would be the main losers,” JPMorgan’s Nick Lai, head of China equity research and head of APAC automotive research, said in a note on Monday. He was referring to internal problems combustion engines, battery electric vehicles and new energy vehicles.Recognition and liquidityXiaomi’s advantages include existing brand recognition in China and 110 billion yuan ($15.7 billion) in cash on its balance sheet which can help the company weather a short-term price war,” the report said. She said Xiaomi is currently producing every car at a loss, but noted that the company has invested in its own factory to increase production. It’s unclear whether the facility is still fully operational, but Lei said last month that the factory could churn out an SU7 every 76 seconds in a nearly fully automated process. “Xiaomi also presented its electric vehicle factory with highly automated production lines for key processes (painting, stamping, die casting, body assembly, etc.), supported by its expertise in smart manufacturing. We believe that a high level of automation should help accelerate the improvement in EV profitability in the medium to long term,” JPMorgan technology analyst Gokul Hariharan said in a separate note. The bank has an overweight investment recommendation on Xiaomi, with a price target of 21 Hong Kong dollars. That’s about 35% higher than the stock’s close on Friday. One risk is that China’s ability to produce electric cars at prices far below foreign competitors has raised fears that trade tensions will increase. Only on Friday, US Treasury Secretary Janet Yellen highlighted concerns about China’s excess manufacturing capacity as she kicked off high-level meetings in the country. But while Xiaomi has hinted at overseas automotive projects, it promised to focus on the Chinese market first. It currently sells smartphones globally, but not in the United States