Piper Sandler starts Chinese EV coverage, names Xiaomi its favorite pick

Investing.com -- Piper Sandler initiated coverage on four Chinese electric vehicle (EV) makers, calling Xiaomi its favorite pick as it begins a renewed focus on the world’s largest passenger car market.

In addition to Xiaomi , the brokerage also rated Leapmotor at Overweight, while assigning Neutral ratings to BYD and Li Auto.

Analyst Alexander Potter said China’s automakers are best positioned globally to mimic Tesla’s vertically integrated model. “Among these, our favorite is Overweight-rated Xiaomi, followed by Leapmotor. We prefer Neutral ratings for BYD and Li Auto,” Potter said in a note.

He added that “no one is better positioned than Xiaomi” to replicate Tesla’s “make vs. buy” approach, which centers on in-house electronics and software.

The analyst expects Xiaomi’s EV business to benefit from the firm’s established electronics ecosystem.

“Like Tesla, Xiaomi has broad ambitions. The company’s profitable smartphone and consumer electronics businesses, alongside EVs, should give Xiaomi a shot at deploying ‘embodied’ A.I. in the real world,” Potter wrote.

Piper Sandler set a price target of HK$55, implying 25 times estimated fiscal 2026 (FY26) earnings. It forecasts Xiaomi’s sales to rise 34% in 2025 and 15% in 2026, with an EBIT margin near 10%.

Leapmotor also received an Overweight rating and HK$69 price target, reflecting its rapid expansion.

Potter cited the company’s “ruthless” growth and its joint venture with Stellantis as a route to global scale. The analyst cautioned, however, that such speed could pose quality or cash flow risks if not managed carefully.

BYD, China’s largest carmaker, was rated Neutral with a HK$90 target. Potter highlighted said BYD “has in-house batteries and more EV sales than anyone; but re: A.I., we think BYD trails Xiaomi (not to mention Tesla).”

Li Auto was also initiated at Neutral with a $19 target, with Piper expressing uncertainty over its international expansion strategy.

Speaking more broadly, the analyst warned that China’s auto market could stagnate as subsidies taper in 2026, but argued that scale, software, and data will determine who emerges as the “next Tesla.”

In that race, Potter said, Xiaomi “is best-positioned to lead.”