Xiaomi CEO, Lei Jun, expects the company’s EV division to become profitable in the second half of 2025, according to a company spokesperson.

In Q1 2025, Xiaomi reported a loss of 500 million yuan (US$69.5 million) from its smart EVs, AI, and other new ventures.

Despite the loss, revenue from the EV segment reached 18.1 billion yuan (US$2.5 billion) during the same period.

The company plans to launch its second EV model, the YU7, in July 2025.

.source-ref{font-size:0.85em;color:#666;display:block;margin-top:1em;}a.ask-tia-citation-link:hover{color:#11628d !important;background:#e9f6f5 !important;border-color:#11628d !important;text-decoration:none !important;}@media only screen and (min-width:768px){a.ask-tia-citation-link{font-size:11px !important;}}

🔗 Source: Reuters

🧠 Food for thought

1️⃣ Xiaomi’s profit projection stands out in a brutal EV market

Lei Jun’s statement about EV profitability comes amid an intensely competitive Chinese market where most manufacturers are struggling to maintain margins.

China’s EV landscape features over 94 brands and 300 models competing for market share, creating significant pricing pressure across the industry 1.

Recent aggressive price cuts, particularly from market leader BYD, have squeezed profit margins sector-wide, with analysts noting that only a few companies including BYD, Tesla, and Li Auto have managed to maintain profitability 2.

Against this challenging backdrop, Xiaomi has reported a 15.4% gross profit margin for its EVs, which is competitive compared to established players 3.

The company’s SU7 sedan has gained traction with 27,307 units delivered by August 2024, positioning the company to potentially reach its target of 100,000 units by November 3.

2️⃣ Strategic diversification from phones to cars represents a classic tech expansion play

Xiaomi’s move into electric vehicles follows a pattern seen with other tech giants seeking growth beyond saturated core markets, but with distinctly aggressive investment.

The company committed $10 billion over a decade to its EV business—a substantial bet representing a significant portion of its resources compared to its $9.8 billion quarterly revenue in late 2022 4, 5.

This diversification strategy was bolstered by the 2021 acquisition of autonomous driving startup Deepmotion for approximately $77.37 million, demonstrating Xiaomi’s commitment to building proprietary technology rather than merely assembling vehicles 4.

Unlike many EV startups that struggle with manufacturing, Xiaomi brings substantial experience in mass production and supply chain management from its smartphone business, potentially giving it advantages in scaling efficiently 6.

The SU7’s competitive pricing at approximately $29,900—about $4,000 less than Tesla’s Model 3 despite offering greater range—demonstrates how Xiaomi is applying its “high specs, low price” smartphone strategy to disrupt the automotive market 7.

3️⃣ China’s shifting EV policies are forcing companies toward operational efficiency

The profitability Xiaomi projects comes as government subsidies that fueled China’s EV boom are being systematically reduced, forcing manufacturers to focus on operational excellence.

Chinese government support for EVs has been massive, with cumulative spending estimated at $230.9 billion from 2009 to 2023, creating artificial market conditions that are now normalizing 8.

Direct subsidies per vehicle have fallen dramatically from $13,860 in 2018 to just $4,800 in 2023, compelling manufacturers to find efficiencies rather than rely on government support 8.

Market growth is expected to slow significantly from 42% in 2024 to 20% in 2025 as the sector matures, likely triggering further consolidation among the hundreds of EV-related enterprises 9, 10.

Xiaomi’s focus on manufacturing efficiency and integration with its existing ecosystem of smart devices appears strategically timed as the market transitions toward a phase where operational excellence will determine survivors 11.

Recent Xiaomi developments

……