(Yicai) April 15 -- Citigroup's prediction that Xiaomi will sell 55,000 to 70,000 cars this year is a little too conservative, as it does not count the most recent surge in sales of Xiaomi’s first model, said Xu Jiyun, special assistant to the chairman of the Chinese tech company.

The US investment bank may have underestimated the popularity of the SU7, as its research report was dated April 2 while orders have continued to grow in the past few weeks and Xiaomi is making every effort to improve its ability to deliver, Xu said on Weibo today.

Xu did not comment on Citigroup's forecast for Xiaomi Automobile Technology's loss for this year. Based on projected annual sales of 60,000, it estimated the SU7 could generate a net loss of CNY4.1 billion (USD567 million), or CNY68,000 (USD9,401) per unit.

Beijing-based Xiaomi can absorb losses in the early production stages. It had cash reserves of CNY136.3 billion (USD18.8 billion) as of Dec. 31, the firm’s annual earnings report showed on March 19. Founder Lei Jun has said that it has enough cash to cope with any fierce competition in the next five years and will, if possible, build up more.

Xiaomi’s adjusted net profit for the year ended Dec. 31 more than doubled to CNY19.3 billion (USD2.7 billion), though revenue fell 3.2 percent to CNY271 billion (USD37.4 billion).

Xiaomi planned its auto production capacity cautiously because it needs to undergo a process of capacity ramp-up, said Li Jianli, a managing director at private equity firm Kunwu Jiuding Investment Holdings.

The gross profit margin on its first model is not as important as garnering market reputation when compared with the huge research and development costs of the early stages, Li said. New market entrants such as Xiaomi just need to provide customers with a good user experience and after-sales services, he added.

The SU7, a battery electric sedan, is proving to be very popular as current production capacity is limiting sales, China Post Securities said in a recent research report. Xiaomi Auto has the capacity to turn out about 150,000 units a year, but it may start building the second phase of its plant in 2024 to boost output next year.

Editors: Tang Shihua, Emmi Laine