Xiaomi's Dual Challenge: Soaring Costs and a High-Stakes EV Bet

Xiaomi spends millions to halt stock slide as memory chip costs soar, while its electric vehicle unit gains momentum with strong orders for the new SU7 sedan.

Xiaomi is deploying millions of dollars to buy back its own shares, a dramatic intervention aimed at halting a stock slide that has pushed its equity to a 52-week low of €3.41. The company spent approximately 185.7 million Hong Kong dollars on Friday to acquire six million shares, following a 248 million HKD outlay for 7.8 million shares the day before. This aggressive repurchase program underscores a critical juncture for the Chinese tech giant, caught between a booming electric vehicle division and a core smartphone business under severe margin pressure.

The root of the problem lies in the hardware segment. President Lu Weibing recently quantified the squeeze: the cost for a combination of 12 GB RAM and 512 GB storage has risen by about 1,500 yuan for the company compared to Q1 2025, with memory chip prices nearly quadrupling. This surge, driven by voracious demand from the AI industry, is particularly painful for Xiaomi, which is heavily exposed to the price-sensitive mid-range smartphone market. Industry analyst TrendForce forecasts further drastic increases of up to 63% for DRAM and 75% for NAND Flash in Q2 2026. Xiaomi has begun to react, raising the price of the Redmi K90 Pro Max in China from April 11 and halting discounts on its Turbo-5 series.

In stark contrast, the nascent electric vehicle unit is showing powerful momentum. Deliveries for last month exceeded 21,400 vehicles, with the SUV model YU7 contributing over 13,500 units. Despite this strong volume, March deliveries were about 27% lower year-over-year, a dip attributed to a model transition. The revamped SU7 sedan was only unveiled on March 19, with deliveries starting four days later. The order book, however, is robust. CEO Lei Jun announced in early April that the company had secured over 40,000 firm orders for the SU7, which starts at 219,900 yuan—undercutting Tesla's Model 3—and comes standard with features like LiDAR and high computing power.

To fuel its ambitious target of 550,000 deliveries this year and support a planned European expansion, Xiaomi is actively recruiting talent from rival Tesla. Former Tesla China general manager Kong Yanshuang has already joined, with another manager from the Giga Shanghai production facility expected to follow. This talent raid highlights the strategic priority placed on the EV venture.

The company's substantial share buybacks, including a 12.8-million-share purchase for roughly 395 million HKD on April 2, act as a counterweight to these operational headwinds. They coincided with net inflows of 1.1 billion HKD from mainland China via Southbound Trading on the same day, signaling sustained institutional interest even as the stock has shed nearly a quarter of its value since the start of the year.

All eyes are now on May 27, when Xiaomi will release its official first-quarter 2026 results. This report will precisely quantify the financial damage from soaring component costs and reveal how much the fledgling EV sales can contribute to group profit. The central question remains whether price adjustments in smartphones and the ramp-up of the SU7 can sufficiently offset the inflated procurement expenses, or if margin pressure across both segments runs deeper than the market has priced in.