Constructing a fascinating automobile from scratch needs to be the quickest manner on earth to incinerate a mountain of money. Doing it when your background is stamping out pocket-sized glass rectangles and good rice cookers makes it appear to be pure insanity. And but, right here we’re, watching Xiaomi shift modern EVs at a tempo that ought to preserve legacy boardroom executives awake at night time. The one catch? Rushing up manufacturing strains doesn’t magically pace up earnings.
Xiaomi’s second-quarter earnings laid naked the fact of the fashionable EV race. The model’s electrical car, AI, and new initiatives arm posted an working lack of RMB 2.6 billion (round £279 million). Certain, that’s an enchancment over the primary quarter’s painful RMB 3.1 billion shortfall, however it’s the division’s second straight quarter swimming in purple ink. It’s a stunning temper swing from 2025, when the brand-new automobile division briefly tasted working revenue and made everybody surprise if the tech big had discovered a cheat code for the automotive business.
There may be some excellent news – no less than the highest line seems like a runaway freight prepare. Whole phase income shot as much as RMB 24.9 billion (£2.69 billion) – a wholesome 17.1% bump year-on-year – with pure EV gross sales accounting for RMB 23.9 billion (£2.55 billion) of that haul. One other RMB 1 billion trickled in from associated tech ventures, together with the in-house MiMo massive language fashions. However income is vainness, and revenue is sanity. Gross margins for the car arm withered from a comfortable 26.4% twelve months in the past all the way down to 19.2%. When margins take a dive like that, you understand the bean counters are sweating behind their displays.
Why the margin squeeze? It’s all all the way down to a traditional case of product combine and ruthless manufacturing realities. Earlier on, patrons had been snapping up the flagship SU7 Ultra – a wild, carbon-clad missile that despatched 1,500 electrical ponies straight to the black stuff along with juicy producer earnings.
Sadly, buyer urge for food has now settled into extra smart, lower-margin variations, dragging Xiaomi’s common promoting worth down 9.6% year-on-year to RMB 229,312 (£24,760) per automobile. Add to it pricier provide chain elements and an RMB 9.2 billion (£0.99 billion) group-wide R&D finances feeding AI infrastructure, and the spreadsheets begin bleeding.
But out on the road, you’ll by no means guess the accountants had been panicking. Xiaomi managed to ship 104,199 automobiles within the second quarter alone – that’s a 28.2% leap over final yr when passenger automobile gross sales throughout China slumped by 22%. Cracking previous 500,000 cumulative SU7 deliveries whereas crowning the gross sales charts for premium electrical sedans priced above RMB 200,000 isn’t any small feat.
A giant cause for that success is pure swagger. Stroll as much as an SU7, and also you shortly understand it’s a severe piece of equipment. At 196.7 inches in size, 77.3 inches width, and using on a beneficiant 118 inches wheelbase with a 4,365 lb curb weight, it presents executive-class proportions. Park it subsequent to a Tesla Model 3 – which measures a a lot tighter 185.8 inches lengthy on a 113.2 inches wheelbase and ideas the scales at 3,891 lb – and the American stalwart instantly feels half a measurement down. Even towards modern home rivals just like the Zeekr 007, which lands at 191.5 inches lengthy with a 115.3 inches wheelbase, the Xiaomi wins in street presence and cabin actual property.
However coasting on the gross sales of a good-looking saloon solely will get you up to now earlier than the market catches its breath. July served a chilly splash of actuality: deliveries slowed to 31,267 models, creeping up 2.68% year-on-year and sliding almost 10% from June. With 216,322 automobiles delivered by way of the primary seven months of 2026, Xiaomi has a mountain to climb. To hit their formidable full-year goal of 550,000 vehicles, the manufacturing facility flooring must ship a median of 66,700 automobiles each single month till New 12 months’s Eve.
To make that leap, Xiaomi is embracing the combustion engine as a generator with the brand new Kunlun Technical Structure and the SkyNomad SUV series. By dropping in a 1.5-liter petrol vary extender alongside large battery packs, the five-seat SkyNomad N70 Max and the colossal seven-seat N90 Max promise 1,059 miles of mixed CLTC vary.
We’ve seen loads of tech titans stumble to know that hype solely buys you a ticket to the beginning grid. Changing into a automobile maker means enduring the bruising, placing up with capital-intensive retooling and ever-shifting product mixes, after which surviving pricing wars. Xiaomi is studying that going quick on monitor is nice enjoyable – holding your funds balanced is the way you win the championship.
