Xiaomi's Auto Unit Nears Profitability Two Years After Market Entry
Xiaomi's automotive division may achieve profitability in the third quarter of 2025, just two years after launching its first vehicle, according to a research note from China International Capital Corp. The projection underscores the rapid financial turnaround of the smartphone maker's ambitious expansion into electric vehicles, supported by strong delivery volumes and industry-leading gross margins.
The forecast comes months after Xiaomi founder Lei Jun told investors in June that the auto business would likely turn profitable in the third or fourth quarter. CICC estimates the unit could post a quarterly profit of 707 million yuan ($98 million) in the third quarter, marking a milestone that took established rivals years longer to reach.
Xiaomi's automotive gross margin reached 26.4% in the second quarter, exceeding Tesla Inc.'s 18% and Li Auto Inc.'s 20.1% during the same period. Only Seres, which produces Aito-branded vehicles, posted a higher margin at 28.9% among Chinese electric vehicle startups.
The company's operating loss in its automotive segment, including related businesses, narrowed to 300 million yuan in the second quarter from 1.5 billion yuan in the third quarter of 2024, according to Xiaomi's earnings report.
Strong Delivery Momentum
Xiaomi delivered 81,302 vehicles in the second quarter and achieved a record 41,948 units in September, its first month exceeding 40,000 deliveries. The SU7 sedan alone recorded 19,579 sales in September, while the recently launched YU7 SUV sold 22,369 units that month, bringing its cumulative sales to 47,193 vehicles.
The average selling price per vehicle rose to 253,662 yuan from 228,644 yuan, driven by the introduction of premium models including the SU7 Ultra and YU7, both priced above 210,000 yuan. Delivery wait times remain extended at 28 to 39 weeks for both models, according to Xiaomi's mobile application.
Per-vehicle losses shrank to approximately 3,690 yuan in the second quarter from 37,000 yuan a year earlier, reflecting improved economies of scale and supply chain management.
Product Pipeline and Capacity Expansion
Xiaomi is developing its next model, an extended-range large SUV codenamed "Kunlun," which has been spotted in camouflaged road tests. The vehicle, designed to emphasize spaciousness and luxury comfort, may debut at the Guangzhou Auto Show in late November.
The company targets deliveries of 350,000 units in 2025. Its Beijing plant is operating two shifts, with the first and second phases working to optimize output and release additional capacity. Xiaomi acquired a 485,000-square-meter land parcel in June for 635 million yuan, reportedly for a third factory phase.
Lei has stated that international expansion will not commence before 2027, prioritizing resolution of domestic order backlogs. He has set a 15-to-20-year goal for Xiaomi to become one of the world's five surviving automakers in the electric and intelligent vehicle era.
Industry Implications
If Xiaomi achieves profitability as projected, it would become the fastest Chinese EV startup to turn profitable from independent operations, surpassing Voyah Auto, which took approximately three years, and Li Auto, which required eight years to post its first annual profit in 2023.
The achievement would provide a new operational benchmark for China's competitive EV sector, particularly in marketing strategies, product positioning, and pricing approaches post-profitability. The expansion of China's profitable EV startup group may intensify pressure on loss-making competitors to accelerate their own paths to positive earnings.
Even if the third-quarter profitability target is missed, current trends suggest Xiaomi's automotive unit is approaching breakeven in the near term.