Xiaomi's EV Sales Plunge 55% Amid Safety Concerns, False Advertising Claims

Xiaomi Corp.'s electric vehicle (EV) sales in China have experienced a significant downturn since March, following a fatal highway accident and subsequent consumer dissatisfaction with the company's marketing practices. The incident has sparked widespread safety concerns and allegations of false advertising, leading to a decline in consumer confidence and a surge in refund demands.

The controversy began with a fatal accident involving Xiaomi's SU7 electric sedan, which prompted public discussions about the safety of the vehicle's smart driving features. This incident, coupled with regulatory tightening on the marketing of such features, has cast a shadow over Xiaomi's EV ambitions. The company has since faced a wave of consumer backlash, with over 30 prospective SU7 Ultra owners protesting at a Beijing delivery center, holding banners that read "false advertising." More than 300 owners have formed rights protection groups, demanding refunds and clarity on the misleading claims.

The situation escalated further when Xiaomi apologized for what it termed "unclear communication" following customer complaints. SU7 Ultra owners discovered that the dual-vent carbon fiber hood, advertised as an additional feature for 42,000 yuan, did not have air ducts inside, contradicting previous claims by the company and its CEO, Lei Jun. Nearly 400 owners have requested refunds, citing false advertising and a breach of trust.

The crisis has not only exposed Xiaomi's credibility issues but also highlighted the broader challenges facing the new energy vehicle industry. Lei Jun, a social media star with a significant following, described the past month as the most difficult period since founding the electronics maker a decade ago. The controversy has also raised questions about Xiaomi's delivery time estimates, with some analysts suggesting that the company may be creating an artificial sense of scarcity as a marketing tactic.

Xiaomi's marketing tactics, which have been highly successful in selling electronic products like smartphones, may not translate as effectively to the automotive sector. The longer purchase decision-making process and higher investment required for automobiles mean that consumers have higher expectations for brand credibility and promise fulfillment. This crisis underscores the need for transparency and reliability in the EV market, where consumer trust is paramount.

The decline in new orders for the SU7, which fell 55% in April from March, reflects the growing consumer uproar. The trend continued into May, with a significant drop in orders compared to the previous months. This downturn threatens Xiaomi's runaway sales success and highlights the challenges the company faces in regaining consumer confidence. The situation serves as a cautionary tale for other EV manufacturers, emphasizing the importance of transparent communication and reliable product features in building a sustainable market presence.