The Q2 financial report shows impressive data: The automotive business has rewritten Xiaomi's growth logic.
In the second quarter of 2025, Xiaomi Group presented a performance report that exceeded market expectations: revenue reached 116 billion yuan, a year - on - year increase of 30.5%; adjusted net profit was 10.8 billion yuan, with a year - on - year increase of 75.4%. Behind these impressive figures, the contribution of the automotive business was particularly prominent - 81,300 new vehicles were delivered in a single quarter, achieving revenue of 20.6 billion yuan, a year - on - year increase of as high as 234%, and its proportion in the group's total revenue rose to 17.8%.
More importantly, the gross profit margin of the automotive business increased from 23.2% in Q1 to 26.4%, the operating loss narrowed from 500 million yuan to 300 million yuan, and the gross profit per vehicle reached 67,000 yuan, just one step away from profitability. This performance not only refreshed the growth rate of new - force car manufacturers but also indicated that Xiaomi is changing the competitive landscape of the new energy vehicle industry with its unique "ecosystem - based vehicle manufacturing" model.
Dual Drives of Scale Effect and Product Structure
The explosive growth of Xiaomi cars in Q2 was first attributed to the accelerated release of the scale effect. Although the single - quarter delivery volume of 81,300 vehicles was not top - notch in the industry, the product strategy highly concentrated on the SU7 series demonstrated synergy efficiency in parts procurement and manufacturing cost allocation. Taking the battery as an example, as the procurement volume increased, the cost of the Kirin II battery pack provided by CATL was 18% lower than that of imported battery cells, and the cost of the self - developed V8s motor was only 50% of that of Bosch's similar products, yet it achieved an output of 1,548 horsepower. This model of "transparent hardware parameters + vertical integration of the supply chain" reduced the parts cost of the SU7 by about 25% compared with traditional car manufacturers, laying the foundation for the improvement of the gross profit margin.
The optimization of the product structure was another major driving force. The SU7 Ultra model, which began delivery in the second quarter, directly raised the overall average price with its price of 529,900 yuan and higher configuration. The carbon - ceramic brake discs and lightweight carbon - fiber components standard on this model brought the configurations originally belonging to ultra - luxury brands and supercars to the 500,000 - yuan market, enhancing the product premium while controlling costs. This "technological equality" strategy enabled Xiaomi to maintain an average tax - included price of 280,000 yuan in the highly competitive price - war market, in sharp contrast to its cost - effective competitors.
The rhythm of production capacity release was also crucial. The first - phase factory in Beijing Yizhuang has achieved a monthly production capacity of 32,000 vehicles through double - shift production. The second - phase factory is expected to be put into operation in Q3, and the total production capacity will exceed 500,000 vehicles per year. More notably, the manufacturing efficiency of Xiaomi cars has approached the top level in the industry - one SU7 rolls off the production line every 76 seconds. This efficiency advantage provides a solid guarantee for the order delivery of the YU7 series in the second half of the year (currently, there are more than 200,000 backlogged orders).
Breaking Through the Profitability Threshold
Despite the impressive performance, Xiaomi cars still face the common industry problem of "the larger the scale, the higher the costs".
The operating expenses of the automotive business in Q2 reached 5.9 billion yuan, including R & D, sales, management, and other expenditures, resulting in an average cost of 73,000 yuan per vehicle. This cost structure reflects the reality of the heavy - asset industry:
Since 2022, Xiaomi has cumulatively invested more than 30 billion yuan in innovative businesses such as cars, with a single - quarter R & D investment of 7.8 billion yuan, a year - on - year increase of 41.2%. Although this high - intensity investment lays the foundation for building technological barriers, it also means that the profit pressure will persist before the sales volume reaches the critical point.
The complexity of market competition cannot be ignored. Although Xiaomi is determined not to participate in the price war, the 250,000 - 350,000 - yuan market where its main models are sold has become a hotly contested area. Competitors such as BYD Han and XPeng P7+ have seized market share through price - cutting strategies, and Tesla has also launched a facelifted version of the Model Y. More alarmingly, the counterattacks of competitors are intensifying - car manufacturers such as NIO, Wenjie, Li Auto, and Tesla are starting to divert Xiaomi's potential customers through different channels, putting certain pressure on it.
The depth and breadth of ecological synergy may be the key to breaking the deadlock. Xiaomi cars' unique advantage lies in its large IoT user base (the IoT business revenue in Q2 was 38.7 billion yuan, a year - on - year increase of 44.7%) and its Internet service ecosystem (gross profit margin of 75.4%). For example, users can remotely control the vehicle's air - conditioning and make charging appointments through their Xiaomi mobile phones, and there are 32 linkage scenarios between the in - car system and Mi Home smart devices. This closed - loop of "hardware + software + service" not only enhances user stickiness but also creates a differentiated profit space - the Internet service contributed a gross profit of 6.9 billion yuan in a single quarter, providing stable cash - flow support for the automotive business. However, it remains to be seen how to transform this ecological advantage into a direct driving force for car purchases.
Xiaomi cars' performance in Q2 indicates that it has passed the "survival hurdle" and entered a new stage of "balancing scale and profitability". According to the financial report data, if Xiaomi cars can maintain a monthly delivery of 30,000 - 35,000 vehicles and a quarterly delivery of more than 90,000 vehicles, it can cover the costs with the gross profit per vehicle and achieve full profitability. The YU7 received 289,000 large - scale orders in just one hour, and there are currently more than 200,000 backlogged orders in the market. The probability of achieving the goal is extremely high after the production capacity is released.
The success of the YU7 is not only reflected in sales but also significantly changes the user structure of Xiaomi cars. The YU7 further increased the proportion of female users. Among the locked - in users at the beginning of sales, the proportion of female users was 4.5% higher than that of the SU7, reaching 30%. In addition, the proportion of Apple users reached 52.4%, 4.4 percentage points higher than that of the SU7. The change in the user structure not only enhances the brand's attractiveness but also brings a broader market space for Xiaomi's ecological business. Some analysts said that Xiaomi may enter the quarterly - profit stage by the end of 2025, even earlier than XPeng and NIO.
However, whether the delivery of the YU7 series in the second half of the year can continue to exceed expectations and whether the production capacity of the second - phase factory can ramp up smoothly will determine whether Xiaomi cars can achieve the goal of single - quarter profitability by the end of 2025. More importantly, how to reduce the dependence on hardware profits through ecological synergy while maintaining a high - intensity R & D investment will be Xiaomi's core competitiveness that differentiates it from traditional car manufacturers.
From an industry perspective, the rise of Xiaomi cars is rewriting the rules of the game: while Tesla defines cars with software and BYD reduces costs through vertical integration, Xiaomi has chosen a third path of "ecosystem empowerment + supply - chain revolution". If this model can continue to succeed, it will open up greater growth space for Xiaomi. At the end of June, Morgan Stanley and Goldman Sachs successively released research reports - by 2030, Xiaomi's overall revenue is expected to reach 1 trillion yuan, the net profit may reach 100 billion yuan, the reasonable market value will reach HK$2.5 trillion (about US$220 billion), and the stock price will aim at HK$100, directly competing with Apple and Tesla.
This article is from the WeChat official account "Auto Market Insights". Author: Yang Shuo. Republished by 36Kr with permission.