Xiaomi Navigates a Cost Crunch as EV Ambitions and Smartphone Squeeze Collide

Xiaomi shares near 52-week low as memory chip price surge squeezes smartphone margins, while strong EV orders for the new SU7 sedan signal future growth potential.

Xiaomi shares are trading near a 52-week low, pressured by a perfect storm of soaring input costs in its core smartphone business even as its electric vehicle division works to convert strong orders into deliveries. The stock has declined approximately 24% since the start of the year, recently trading at 3.41 euros.

The immediate pressure stems from a dramatic surge in memory chip prices. Company President Lu Weibing revealed that procurement costs for a combination of 12GB of RAM and 512GB of storage have risen by about 1,500 yuan compared to the first quarter of 2025, with prices nearly quadrupling year-over-year. This spike, driven by voracious demand from the AI industry, is squeezing hardware margins precisely as Xiaomi launches a major product offensive.

In direct response, the company is raising prices. Effective April 11, the retail price for the Redmi K90 Pro Max smartphone will increase by 200 yuan in China, and existing discount campaigns for older models are being scrapped. This move mirrors similar steps announced by rivals like OPPO and Honor. The financial impact is a central concern for investors; while Xiaomi reported a solid gross margin of 20.9% for 2024, analysts warn that depleted inventories of cheaper components will gradually weigh on profitability starting in the current first quarter of 2026.

This smartphone squeeze coincides with a pivotal moment for Xiaomi's electric vehicle venture. March deliveries of 21,440 units were about 27% lower year-over-year, primarily due to a model transition. The updated SU7 sedan was unveiled on March 19, with first deliveries beginning just four days later—too late to significantly boost the monthly tally.

However, the order book tells a more promising story. CEO Lei Jun announced in early April that the company has already secured over 40,000 firm orders for the new SU7. Priced from 219,900 yuan, undercutting Tesla's Model 3, the vehicle comes standard with LiDAR and 700 TOPS of computing power—features often offered as expensive add-ons by competitors. To hit its ambitious annual delivery target of 550,000 units, Xiaomi is accelerating production by recruiting external expertise, including former Tesla China general manager Kong Yanshuang.

Yet this aggressive push also carries margin pressure. More than a hundred hardware and software upgrades have increased the SU7's material costs by roughly 20,000 yuan, a cost Xiaomi has consciously chosen not to pass on fully to customers.

Amid these crosscurrents, Xiaomi's management has taken a visible step to signal confidence. On April 2, the company repurchased approximately 12.8 million of its own shares for about 395 million Hong Kong dollars. Notably, net inflows from mainland China via Southbound Trading into the stock totaled 1.1 billion HKD on the same day, suggesting sustained institutional interest despite the share price weakness.

The company's product strategy is also evolving. Its April offensive includes the Redmi K90 Max and a new AI notebook, the Redmi Book Pro 2026. The smartphone introduces an active air cooling system designed to lower device temperature by up to ten degrees Celsius under full load within 100 seconds. Concurrently, President Lu is redefining the product hierarchy, elevating the new "Max" classification above the traditional "Ultra" tier to define the absolute premium segment.

All eyes are now on Xiaomi's first-quarter 2026 results, due at the end of May. The report will reveal whether price increases in smartphones and the ramp-up of the SU7 can sufficiently offset skyrocketing procurement costs, or if margin pressure across both segments is more severe than currently anticipated by the market.