Xiaomi made waves in March when its debut electric vehicle, the Speed Ultra 7, sold out with nearly 90,000 preorders within just one day. Now, as the company navigates its inaugural full delivery quarter, its EV division faces significant financial challenges.
In its first full quarter of delivering electric vehicles, Xiaomi reported an adjusted loss of $252 million for the second quarter ending June 30. Despite this financial setback, Xiaomi remains optimistic about surpassing its target of 100,000 deliveries of the Speed Ultra 7 by November.
During the second quarter, Xiaomi delivered 27,307 units of the SU7, resulting in an average loss of $9,200 per vehicle, given the base price of 215,900 yuan (approximately $30,000). However, this does not imply escalating losses with increased deliveries. The company achieved a gross profit margin of 15.4%, higher than expected.
Xiaomi’s CEO, Lei Jun, acknowledged in April that the company was selling the car at a loss but did not specify the amount. Citibank analysts projected that Xiaomi would only start seeing profits after reaching annual sales of 300,000 to 400,000 vehicles, with forecasts of 260,000 units sold by 2026.
Currently, Xiaomi operates a self-built EV factory, which has been running double shifts since June to boost monthly deliveries to over 10,000 units. A company spokesperson explained that Xiaomi is working to increase the scale of its EV operations to reduce per-car costs. “The scale of Xiaomi’s EV business is relatively small at the moment, while the auto industry is a typical industry with economies of scale,” the spokesperson said.
In contrast, rival Chinese EV manufacturer BYD sold 426,039 cars in the same period. Xiaomi’s spokesperson added that the high investment cost of its pure electric sedan contributes to the initial financial strain and that it will take time to offset these expenses.
Xiaomi’s billionaire cofounder, Lei Jun, has committed to investing “tens of billions” into the EV division and its technology over the coming years. The company’s goal with the SU7 is to produce a smart car comparable to Tesla’s offerings but at a more affordable price for the average Chinese consumer.
Despite the challenges, Xiaomi’s EV sector is showing promise with continued customer interest, including 13,000 additional vehicles sold in the second quarter and July. The company’s EV ambitions also include advanced features like self-driving, self-parking, and an AI-powered audio assistant, set to launch this month.
Overall, Xiaomi reported results for the second quarter, with sales across all sectors up 32% to 88.7 billion yuan, and net income rising 38% to 5 billion yuan. The company plans to expand its EV lineup beyond the SU7 but has yet to reveal specifics about future models.
