Xiaomi Automotive Is Losing Money Again — Is Lei Jun (雷军) Worried?

The numbers and the swing

Xiaomi (小米) reported that its "intelligent electric vehicle and AI" arm posted revenue of RMB 19.9 billion in Q1 2026 and delivered 80,856 vehicles, a modest 6.6% year‑on‑year rise. But profitability flipped: the division logged an operating loss of RMB 3.1 billion after two quarters of profit, and gross margin fell to 20.1% from 22.7% in the prior quarter. At the same time Xiaomi announced a HKD 20 billion (200亿港元) share buyback; the company framed this as confidence in future value, but it has been reported that some market observers read the buyback as a defensive move amid sliding group profits.

Narrow product mix, magnified risk

What explains the volatility? Simple: product concentration. Xiaomi Automotive’s sales are almost entirely two series — SU7 and YU7 — and when one stutters the whole business swings. YU7’s monthly sales fell from a near‑peak of ~37,000 to roughly 10,000 within a quarter; new SU7 volumes have ramped quickly, but the mix effect and rising core‑component costs pushed margins down. Rising parts prices and broader global supply‑chain pressures — partly linked to geopolitical tensions over semiconductors and trade — have also weighed on costs. For context, peers such as Leapmotor (零跑), Li Auto (理想) and NIO (蔚来) ran multi‑model portfolios in Q1 (each fielding several product lines), giving them natural hedges that Xiaomi lacks.

Can Xiaomi scale fast enough?

Xiaomi has laid out a product roadmap — reportedly four new models in 2026 including a YU7 GT, an entry YU7, a range‑extended SUV under sub‑brand "XunTian" (寻天) and a long‑wheelbase SU7 — which would broaden its matrix beyond the current two pillars. But most of those launches will only meaningfully ramp production in H2 2026 or later, meaning Xiaomi must carry the first half of the year on two “big” models while rivals run five or six lines. CEO Lei Jun (雷军) set an ambitious full‑year delivery target of 550,000 vehicles; Q1’s result covers less than 15% of that goal. So, is Lei Jun worried? The numbers suggest the path to scale is now both operational and strategic — and time is the scarce resource.