Xiaomi Auto Reports a Net Loss of 1.8 Billion Yuan in Q2, But Surpasses Tesla in Gross Margin

According to Chinese media Jiemian, on August 21, 2024, Xiaomi Group saw a record-breaking total revenue of 88.9 billion yuan in its Q2 financial performance. This figure, marking a 32% year-on-year increase, surpassed the anticipated 85.8 billion yuan predicted by analysts. Furthermore, the company’s net profit hit 6.18 billion yuan, exceeding the forecasted 4.8 billion yuan.

Xiaomi Group’s Chairman, Lei Jun, attributes this historic success to the burgeoning success of their innovative ventures, particularly in the smart electric vehicle sector. Since the launch of their inaugural car model, the SU7, on March 28 of this year, the company has seen a steady increase in orders. In Q2 alone, they delivered 27,000 units of the SU7, generating a revenue of 6.2 billion yuan. This accounts for approximately 6.97% of the total revenue, with the average transaction price per vehicle being around 228,600 yuan.

Despite a slight dip in the company’s gross margin from Q1, down 1.6 percentage points to 20.7% in Q2, the electric vehicle business has shown promising signs with a gross margin of 15.4%. This outperforms Tesla’s 14.6% and is significantly better than other electric vehicle start-ups like Xpeng Motors and Leapmotor.

President of Xiaomi Group, Lu Weibing, expressed optimism about the future of Xiaomi‘s car business at a performance meeting. He noted that while the business is in its early stages, with the highest Bill of Materials (BOM) costs being incurred now, these costs are expected to decrease moving forward.

However, due to initial R&D, sales network establishment, and production preparation, Xiaomi‘s car business is currently operating at a loss. After adjustments, the innovative business departments, including smart electric vehicles, reported a net loss of 1.8 billion yuan.

Despite the current scale of Xiaomi‘s car business being relatively small, Lu Weibing expressed confidence in its growth potential. He acknowledged that the first car from Xiaomi, a pure electric sedan, had high initial costs that would take some time to absorb.

In Q2, Xiaomi Group’s R&D expenses and sales and promotion costs rose to 5.5 billion yuan and 5.9 billion yuan, respectively, primarily due to the electric vehicle business. The sales cost for Xiaomi cars was 5.389 billion yuan, making up about 6.1% of the total sales cost.

In light of the intensifying competition in the field of intelligent driving, Xiaomi is planning to bolster its investment in R&D. In June, the company rolled out the City Navigator (City NOA) feature in 10 Chinese cities, with a nationwide launch planned for later this year.

As of June 30, 2024, Xiaomi Auto had established 87 sales stores across 30 cities in China, with plans to expand to over 220 stores in 59 cities by the end of the year.

The company is currently ramping up production and has initiated a double-shift production system. They aim to achieve their sales target of 100,000 vehicles by November 2024 and anticipate a total delivery volume of 120,000 vehicles for the year.

A research report by Goldman Sachs predicts that the SU7 will become one of China’s top three high-end sedans, with average monthly sales exceeding 10,000 units. The report also forecasts that Xiaomi Auto will turn profitable by 2028.

Xiaomi is also reportedly planning to expand its electric vehicle lineup. According to Chinese media outlet 36Kr, the company’s second vehicle, a pure electric SUV, is expected to launch in the first half of next year. They also reported that a third vehicle, preliminarily priced at 150,000 yuan, is in the works.

Despite the EU’s import tariffs on Chinese-made electric cars, Xiaomi is keen on penetrating the European market. In a recent live broadcast, Lei Jun stated that Xiaomi cars will go global when the timing is right.

Since the commencement of electric vehicle sales at the end of March, Xiaomi Group’s stock price in Hong Kong has risen by approximately 16%.

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