Xiaomi's Electric Vehicle Department Has Made a Profit for the First Time

Xiaomi Corp. reported its first quarterly profit from its electric vehicle (EV) business division. The smartphone manufacturer's bold entry into crowded markets marks an important milestone.

The company’s electric vehicle division, which launched its first vehicle for sale last year, achieved a profit of 700 million yuan (98 million dollars) in the September quarter. This helped reverse a 300 million yuan loss experienced in the previous three months and doubled the Beijing-based company's net income.

Xiaomi is now among the few Chinese electric vehicle manufacturers that are genuinely profitable. In pursuit of becoming one of the world's top five car manufacturers, it plans to ramp up production to compete with the likes of Tesla Inc. and BYD Co.. The company aims to start selling electric vehicles in Europe by 2027.

Although still in an early stage, these results serve as a form of validation for co-founder Lei Jun. The billionaire is optimistic following the interest shown in Xiaomi’s first sports utility vehicle. In a statement made on Tuesday, it was announced that the company would achieve its target of 350,000 electric vehicle deliveries by 2025 this week, accomplishing this over a month ahead of schedule. They are accelerating efforts to address rising deliveries and reduce waiting times.

Some investors are questioning Xiaomi's long-term outlook, raising concerns over intense competition, safety issues, and ongoing factory delays. Increased demand and production difficulties have resulted in some buyers waiting up to nine months after placing orders for certain models. In October, they announced the shipment of 40,000 electric vehicles, consistent with the previous month. Additionally, during a board meeting, it was noted that the gross margins for the business are expected to decline next year.

A shrinkage in the gross margins of the electric vehicle division is anticipated for Xiaomi in 2026. Despite having models like the SU7 and YU7, the outlook in the sector remains challenging; a high purchase tax is set to come into effect next year. Increased domestic competition and slowing demand growth are expected. Electric vehicle manufacturers will increasingly rely on exports for volume and revenue growth, with BYD, Geely, Xpeng, and Leapmotor continuing to lead in this area.

The competition with Apple Inc. in Xiaomi's core smartphone business has also impacted its stock prices. After launching a $630 alternative to the iPhone 17 last September, the company has been fighting for control in China's high-end smartphone market. However, according to Counterpoint Research, one out of every four smartphones sold nationwide last month was an iPhone, and Xiaomi's growth has lagged behind local rival Oppo.

Rising memory chip prices continue to be a source of uncertainty. On Tuesday, Xiaomi announced that it expects mobile device prices to rise next year; this coincides with a growing number of warnings regarding potential supply shortages for critical components in 2026. All of this has led Xiaomi to be one of the worst performers among Chinese technology stocks in recent months. The company's share price has fallen by about 20% since May.