Xiaomi's EV Ambitions Clash with Smartphone Margin Woes

Xiaomi delivered 20k EVs in March 2026, but its stock is near a 52-week low due to contracting smartphone margins, prompting share buybacks.

Xiaomi's strategic pivot into the automotive sector is gaining tangible momentum, yet this progress is being overshadowed by significant pressures in its core business. The Chinese technology conglomerate delivered a record 20,000 electric vehicles in March 2026, signaling rapid scaling in a fiercely competitive market. Despite this operational milestone, investor sentiment remains subdued, primarily due to contracting profitability in the smartphone division, prompting the company to initiate share buybacks for support.

Share Buybacks Amidst Market Weakness

The company's management has set an ambitious target of 550,000 vehicle deliveries for the full year, building on its recent production achievement. However, this expansion in the automotive segment coincides with a notable decline in the company's market valuation. In a move to bolster its stock price, Xiaomi purchased 7.9 million of its own B-shares on Tuesday.

This defensive action follows a period of sustained weakness for the equity. Since the start of the year, the share price has declined by 20.82 percent. Closing at 3.56 euros on Wednesday, the stock is trading just above its 52-week low, reflecting market concerns that extend beyond its electric vehicle (EV) successes.

Diverging Fortunes: High EV Margins vs. Smartphone Squeeze

The root of investor caution lies in the traditional electronics business. During the fourth quarter of 2025, the gross margin for Xiaomi's smartphone segment contracted sharply, falling from 12 percent to 8.3 percent. Rising costs for key components like memory chips have proven difficult to pass on to consumers fully.

In stark contrast, the nascent automotive division is already operationally profitable, reporting a robust gross margin of 24.3 percent. This segment made a substantial contribution to the company's adjusted net profit last year. The divergent performance highlights a central challenge: the capital-intensive dual-strategy of maintaining electronics dominance while building an automotive arm.

Research and development expenditures surged by 38 percent in 2025, reaching 33 billion Chinese Yuan (CNY). These investments are primarily channeled into autonomous driving technology and the planned European expansion for the SU7 and YU7 models, slated for 2027.

The Path Forward: Stabilizing Core Profitability

For Xiaomi to bridge the gap between its accelerating EV operations and its languishing stock performance, stabilizing profitability in its electronics division is critical. The company's ability to implement announced smartphone price increases in the current second quarter without significant market share losses will be a key test. Success on this front would secure the necessary financial latitude to fund the costly international rollout of its electric vehicles.

The coming quarters will reveal whether Xiaomi can successfully manage the tension between its high-growth, capital-intensive future in mobility and the margin pressures of its established, cash-generating present in consumer electronics.