A Chinese car maker Xiaomi has launched a luxury sport utility vehicle, the YU7. It has stirred the market by indicating what future holds for the Western automakers. YU7 is a stylish tech-laden SUV with a driving range of 835 km. Its affordable price starts from $35000 for its entry-level version. YU7 competes with Tesla’s Model Y in China. It is not yet available in the US or Europe. It poses a risk to Western car makers with higher sticker prices for their luxury cars. China is making sophisticated EVs now. Investors feel that Ferrari should hold its fort, while Xiaomi continues to make a cheap Ferrari EV. Germany’s Porche and other car makers should be more resilient.
Luxury cars could become commoditized. First of all, initial pickups have become commonplace in EVs. There is faster innovation in EV space. The product development cycles are cut short. Consumer perceptions are changing. Chinese manufacturers have introduced voice recognition, advanced software and AI in their vehicles. Customers are not ready to pay a premium for such features.
Western automakers products are not price competitive. Mercedes $160,000 electric version SUV is costly. It is heavy, has limited range and towing capacity. There are many EV flops. Luxury EVs such as Porsche depreciate too fast. Some Western automakers do not see the models from China to be competitors in next five years and are relaxed about their achievements on the racetrack. They are ready to cut prices. The US is off limit to China at present. Chinese brands have made limited inroads in Europe. The way the European luxury car makers can depend on their costly models in the era of electric software-defined models is by developing models that surpass the Chinese models. And it is a tall order.
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