Xiaomi's Legal Battle Intensifies as Indian Court Weighs $72 Million Tax Dispute

Xiaomi faces a $150M+ India legal threat and falling smartphone share. Its EV unit turns profitable as a crucial phone launch aims to revive premium segment momentum.

Xiaomi faces mounting pressure from multiple directions as it seeks to restore investor confidence. A significant legal escalation in India now threatens the company with substantial financial exposure, even as its management attempts to shore up its stock price through buybacks. All eyes are now on an upcoming product launch in Barcelona to potentially reverse the negative momentum.

Supreme Court Showdown and Frozen Assets

The technology giant's dispute with Indian authorities has reached the nation's highest judicial body. Xiaomi is contesting allegations that it evaded customs duties totaling $72 million on royalty payments. A ruling against the firm could more than double its liabilities, with penalties pushing the total demand beyond $150 million.

This sum represents a substantial risk for Xiaomi's local subsidiary, as it dwarfs the unit's annual profit many times over. Compounding the challenge, Indian enforcement agencies have held approximately $610 million of Xiaomi's bank balances frozen since 2022. These legal uncertainties strike as the company is losing ground in a once-dominant market: its share of the Indian smartphone sector has dwindled to just 12%, a sharp decline from previous highs.

Share Buybacks and a Profitable EV Division

In response to market skepticism, corporate leadership has taken direct action. The company recently deployed HK$200 million to repurchase its own shares. This support appears warranted given the equity's performance; currently trading at €3.79, the stock lingers just above its 52-week low of €3.62. Since the start of the year, the decline has exceeded 15%.

Operationally, however, there is a bright spot emerging outside the troubled smartphone business. Xiaomi's electric vehicle (EV) segment reached an important milestone in Q3 2025, reporting its first operating profit of 700 million yuan. The division delivered over 410,000 vehicles for the full year 2025, surpassing internal targets, and aims to increase that figure to 550,000 units in 2026.

Barcelona Launch as a Potential Catalyst

Immediate market attention is focused on the Mobile World Congress in Barcelona. On February 28, Xiaomi will unveil its new Series 17 devices, which are expected to feature enhanced battery performance and a new chip architecture. Market experts view this launch as a critical test of the company's ability to regain traction in the premium device segment. The definitive assessment of its current position will come on March 24, 2026, when Xiaomi releases its complete financial results. These figures must demonstrate whether profits from the automotive division can offset continued weakness in its core business.