Xiaomi's Share Buyback Fails to Offset Investor Concerns Over Auto Margins

Despite strong SU7 pre-orders, Xiaomi's stock falls as investors worry about unsustainable EV pricing and rising costs, even as the company launches a buyback and major AI investment.

A substantial share repurchase program worth hundreds of millions of dollars is typically a signal of corporate confidence. For Chinese technology giant Xiaomi, however, this move has been overshadowed by mounting worries about profitability within its aggressive automotive venture. Despite record-breaking pre-orders for its new SU7 electric sedan, the company's stock has faced significant selling pressure, driven by what investors perceive as an unsustainable pricing strategy.

Aggressive Pricing Squeezes Automotive Profitability

The core of recent investor skepticism centers on the updated SU7 model. With a starting price of 219,900 yuan, the vehicle is only 4,000 yuan more expensive than its first-generation predecessor. Market analysts point to a critical issue: production costs for the new sedan are reportedly approximately 20,000 yuan higher. This growing gap between cost and price is fueling serious concerns about the unit economics of Xiaomi's auto business in China's fiercely competitive electric vehicle (EV) landscape.

The market's reaction was swift and severe. Shares plummeted 8.35% this past Friday, closing at 3.61 euros. This decline occurred even as the company announced an impressive 15,000 registered orders within just 34 minutes of the SU7's market launch. The minimal price increase, coupled with rising material expenses, is being interpreted by the investment community as a direct threat to the future earnings potential of Xiaomi's entire automotive division.

Strategic Investments in AI and Equity

In an effort to counter the downward pressure on its stock and suggest the shares are undervalued, Xiaomi's management recently authorized a buyback. On March 20, the corporation purchased 3 million of its own Type-B shares for about 100 million Hong Kong dollars.

Concurrently, the company is making massive strategic bets on future technology. CEO Lei Jun is spearheading a plan to invest at least 60 billion yuan over the next three years into artificial intelligence (AI) research and development. A dedicated 16 billion yuan is allocated for the current fiscal year 2026 alone. This capital is intended to deepen the integration of Xiaomi's ecosystem, which spans software, semiconductors, and vehicles, through new flagship products like the MiMo-V2-Pro. The overarching goal is to lay a foundation for long-term growth.

This ambitious dual-track strategy is proving costly in the near term. Xiaomi's equity has declined 19.60% since the start of the year, reflecting pronounced investor caution. For a sustained reversal in sentiment to take hold, the company must now demonstrate that the high sales volumes for the SU7 can compensate for its razor-thin margins. Furthermore, Xiaomi needs to show that its multi-billion-yuan commitment to AI will translate into tangible financial returns within a reasonable timeframe.