Xiaomi shares dropped 5.7% in Hong Kong after over 300 customers sought to cancel their SU7 Ultra EV orders due to alleged false advertising.

Buyers claim the carbon fiber hood, promoted by CEO Lei Jun for its sporty design and ventilation, appears to be largely plastic and similar to the standard model.

Xiaomi apologized, citing miscommunication, and offered either a conventional hood swap or 20,000 loyalty points to affected customers.

Lei Jun recently called this period the company’s “most difficult time”, reportedly reducing public activity to reflect on Xiaomi’s ongoing challenges.

🔗 Source:  Bloomberg

🧠 Food for thought

1️⃣ Automotive deceptive advertising complaints reflect broader consumer protection challenges

The Xiaomi incident reflects a common pattern of consumer dissatisfaction in the automotive industry, where vehicle features often don’t match advertising claims.

Auto complaints consistently rank as the top consumer complaint category according to the Consumer Federation of America, with misleading advertising being a primary concern 1.

Federal and state regulations specifically target these practices, with laws like the Unfair, Deceptive, or Abusive Acts or Practices (UDAP) protecting consumers from misleading advertising about vehicle features 2.

In cases similar to Xiaomi’s situation, consumers are advised to maintain detailed records of advertisements and communications with manufacturers to support claims of misrepresentation 2.

This incident is reminiscent of high-profile cases like Volkswagen’s “Clean Diesel” campaign, where marketing claims didn’t match actual product performance, resulting in significant financial and reputational damage.

2️⃣ EV market growth brings heightened consumer expectations and scrutiny

The Xiaomi SU7 controversy happens against a backdrop of rapidly accelerating EV adoption, with global sales exceeding 10 million units in 2022 (a 50% increase from 2021) and projected to reach approximately 40 million by 2030 3.

As the market matures, EV buyers are demonstrating particularly high expectations for transparency and accuracy in product claims, with J.D. Power’s Customer Service Index showing that EV owners rate dealer trust lower (5.62 on a 7-point scale) than gasoline vehicle owners (6.0) 4.

Premium features command significant price premiums in the EV market, making precise communication about these features critical to maintaining customer trust.

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