A court in Haikou, the south island province of China, has ordered Xiaomi-related companies to refund double the deposit, totalling 10,000 yuan (1,400 USD), to a consumer in what is believed to be the nation’s first ruling concerning Xiaomi Auto’s demand for final payment before vehicle delivery. The decision by the Haikou Meilan District People’s Court highlights concerns over “unfair and unreasonable” clauses in automotive purchase agreements.
The ruling, received by the plaintiff’s legal team recently after the case was heard in early November, mandates that Haikou Xiaomi Jingming Technology Co., Ltd. and Xiaomi Jingming Technology Co., Ltd. jointly return the funds to Ms Li (a pseudonym) within 10 days of the judgment’s effective date. Liu Wei, a lawyer from Beijing Strategy (Haikou) Law Firm representing Ms Li, confirmed the verdict to Chinese media outlet Red Star on November 22, 2024, adding that it remains unclear if Xiaomi will appeal. Xiaomi has not yet provided an official response to inquiries.
The dispute arose after Ms Li placed a 5,000 yuan (700 USD) deposit for an Aurora Purple SU7 Max, priced at 318,900 yuan (44,600 USD), via the Xiaomi Auto APP on July 19, 2024, following a test drive. She was later informed by staff from Haikou Xiaomi Jingming Technology Co., Ltd. on October 16 that her vehicle was expected to arrive at the dealership on October 24. However, due to financial constraints, Ms Li requested a delay in pickup.
On October 22, Xiaomi staff informed Ms Li that delaying pickup would require rescheduling production. Ms Li agreed to this arrangement and was told her order would remain valid for 360 days from the deposit payment date, allowing her to request production anytime within this period. Crucially, she was also informed that exceeding the 360-day validity would be considered a unilateral breach of contract, leading to automatic termination and forfeiture of her deposit.
Despite the agreement for delayed production, on December 4, 2024, Xiaomi staff demanded Ms Li pay the remaining 313,900 yuan (43,900 USD) within seven calendar days, threatening order cancellation and deposit forfeiture if she failed to comply. Ms Li objected, but on December 10, staff reiterated that the final payment was not affected by the delayed production, citing a clause in the purchase agreement. By December 16, Xiaomi declared Ms Li in breach of contract for non-payment, cancelling her order and retaining the deposit. On February 21, 2025, Ms Li was informed that her vehicle had been produced in October 2024, but the order was cancelled due to non-payment.
Ms Li’s attempts to recover her deposit through various channels, including consumer hotlines and the market supervision bureau, proved unsuccessful, leading her to pursue legal action.
A key point in the court’s findings was Xiaomi Auto’s official public statement from May 1, 2024, in its “Q&A Episode 34,” which explicitly stated: “Xiaomi supports paying the final balance after vehicle inspection.” The court deemed this official response a significant basis for consumer trust in entering the contract.
The Haikou Meilan District People’s Court ruled that the purchase agreement between Ms Li and Xiaomi Haikou Company constituted a valid sales contract. However, the court found Xiaomi Haikou Company’s demand for full payment within seven days before vehicle inspection and delivery, with the penalty of order cancellation and deposit forfeiture, to be an “unfair and unreasonable” standard clause. This clause, the court stated, substantially increased the consumer’s payment obligation and effectively restricted her fundamental right to inspect the vehicle’s quality.
Furthermore, the court concluded that Xiaomi Haikou Company’s insistence on immediate payment, despite agreeing to Ms Li’s request for delayed production and without her notification to proceed with production, contradicted Xiaomi Auto’s public commitment and violated the principle of good faith. The court determined that Ms Li’s request for delayed production would not have adversely affected Xiaomi’s manufacturing schedule. By actively producing the vehicle and demanding full payment under these circumstances, Xiaomi Haikou Company breached the supplementary agreement reached with Ms Li.
Therefore, the court declared the relevant clauses in the “Xiaomi Auto Purchase Agreement” invalid and ordered the double refund of the deposit.
Editor’s comment
The drop in second-hand market prices has led many customers who pre-ordered Xiaomi vehicles to forfeit their deposits and instead purchase more affordable used cars. This situation is putting pressure on Xiaomi, prompting the company to consider requesting some customers to pay their outstanding balances earlier to mitigate potential losses from order cancellations.
This predicament stems from Xiaomi’s relatively low deposit requirements: 5,000 yuan (700 USD) for the SU7 and 20,000 yuan (2,800 USD) for the SU7 Ultra. While these modest deposits initially generated a massive volume of orders, creating an impression of high demand and long waiting lists, the subsequent downturn in the used car market now poses a significant risk of widespread order cancellations.
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