Xiaomi Walks a Tightrope: Smartphone Chip Crunch Meets EV Delivery Target Pressure

Xiaomi's modest rally masks a deepening crisis: smartphone sales target slashed 30% to 95M units, EV division posts ¥3.1B loss, and stock remains near 52-week low.

Xiaomi’s shares staged a modest rally on Thursday, climbing 3.26 percent to 2.57 euros, but the bounce does little to mask the deepening crisis at the Chinese tech giant. The stock has now lost 42.78 percent since the start of the year and trades just 10 percent above its 52-week low of 2.34 euros, touched on June 26. With the relative strength index sitting at 32.9, the market is oversold — yet the fundamental picture remains stark.

The company is fighting a two-front battle. Its smartphone division, the traditional cash cow, is being crushed by a global memory-chip shortage that has forced a third cut to sales forecasts. At the same time, the fledgling electric-vehicle unit, once hailed as the growth engine, is struggling to hit its delivery target and is burning through cash faster than expected.

Smartphone targets slashed as chip costs soar

Xiaomi originally planned to sell 170 million handsets this year. That number was first trimmed to 135 million, and now, according to Nikkei Asia, has been slashed again by 30 percent to just 95 million units. The company told suppliers that component shortages and surging prices — driven by AI infrastructure providers bidding up the same memory chips — are to blame.

The pain is industry-wide. Counterpoint Research forecasts a 14 percent drop in global smartphone sales this year, while IDC projects a decline of more than 20 percent for Android devices alone. Gartner sees a somewhat milder 8.4 percent contraction but expects average selling prices to jump 13 percent as costs pass through. The firm’s analysts do not predict regional price relief until the end of 2027.

The structural problem is acute for price-sensitive brands like Xiaomi. Chip makers are prioritizing high-margin server components for AI data centers, leaving handset manufacturers scrambling for supply. The result: margins in the core phone business are being squeezed from both sides — lower volumes and higher input costs.

EV unit: losses widen, deliveries lag

Xiaomi’s auto division delivered roughly 80,000 vehicles in the first quarter, bringing cumulative deliveries to nearly half a million since the SU7 launched in 2024. The company now runs 490 sales outlets across more than 140 Chinese cities. Yet the pace is far from enough. To hit the full-year target of 550,000 vehicles, monthly deliveries in the second half must nearly double from the current run rate.

The numbers are already bleeding red ink. The EV segment posted an operating loss of 3.1 billion yuan in the first quarter, reversing two consecutive quarters of profitability. Gross margins slipped to around 20 percent from 23 percent a year earlier, and management has warned that 2026 margins may not exceed last year’s level. The culprit: the expiry of EV purchase-tax breaks and a lower proportion of high-margin SU7 Ultra deliveries.

Rather than slash prices — a move that would undermine its premium positioning against Tesla and domestic rivals — Xiaomi is rolling out financing incentives. For the YU7 SUV, buyers can choose between an insurance subsidy of 6,000 yuan or a financing plan with monthly payments starting at 2,560 yuan, plus a 3,000 yuan paint voucher. The new SU7 generation gets an “Easy Repayment” scheme requiring a 49,900 yuan down payment, with first-year instalments of just 538 yuan that decline annually to 108 yuan in year five. A larger balloon payment settles the balance. These offers run through July 31.

The average selling price across both models stood at around 235,000 yuan in the first quarter. By avoiding outright discounts, Xiaomi hopes to defend its brand image — but the strategy only works if it can accelerate deliveries fast enough to cover mounting fixed costs.

Technicals and outlook

The stock’s slide has left it 35.55 percent below its 200-day moving average of 3.99 euros, a bearish signal that underscores the persistent downward pressure. Short-term rallies remain possible given the oversold RSI, but the next real catalyst will come with the second-quarter earnings report in the third quarter.

If the EV unit can scale quickly enough to absorb the margin compression from the first half, the shares could find a floor. If smartphone losses continue to mount and the delivery gap remains wide, the 52-week low will almost certainly be tested again. The monthly delivery numbers in the coming weeks will offer the first clue as to whether Xiaomi’s financing gambit is gaining any traction.