Xiaomi’s Deliberate Smartphone Squeeze: 40 Billion RMB Fuels an AI-and-EV Reboot

Xiaomi cuts smartphone shipments 19% while betting big on EVs and AI. Stock down 27% ahead of Q1 earnings; EV division reaches breakeven.

Xiaomi is actively dismantling the low?end phone business that once defined it. The Chinese tech giant slashed smartphone shipments by 19% in the latest quarter, shipping just 33.8 million units, while pushing the average selling price toward 1,300 RMB. It is a calculated move: sacrifice market share to boost margins and pour resources into a far costlier bet on artificial intelligence and electric vehicles. The stock, however, has yet to reward the strategy. Trading at around 3.30 euro, Xiaomi shares have shed nearly 27% since the start of the year and sit just above their 52?week low of 3.17 euro.

The earnings release on May 26 will lay bare the trade?off. Analysts expect first?quarter revenue to fall to roughly 100 billion RMB, with earnings per share plunging more than 58%. Higher component costs — especially for memory chips — are squeezing margins even as Xiaomi tries to move up the price ladder. But management is betting that the pain is temporary. The real prize lies in the electric?vehicle business, where the company is charging ahead with a direct assault on Tesla. The standard version of the new YU7 SUV starts at 233,500 RMB, undercutting the Model Y, and Xiaomi targets 550,000 deliveries this year.

To back that ambition, Xiaomi has earmarked over 40 billion RMB for research and development this year, with more than 16 billion ring?fenced for artificial intelligence alone. The outlay is enormous — and risky, given that the smartphone cash cow is wilting. Yet early returns are visible: revenue from the auto and AI segments more than tripled last year. The secondary article notes that the EV division has already reached breakeven, a milestone many established automakers still chase. But capital intensity remains brutal, and the stock market is watching cash burn as closely as order intake.

Meanwhile, Xiaomi is not abandoning its hardware ecosystem. The recent launch of the Xiaomi 17 Max — boasting a 200?megapixel camera and a massive battery — aims to keep users locked into the brand, alongside new wearables like the Band 10 Pro. These products are meant to sustain stickiness while the company pivots to a higher?margin, software? and service?driven model. The stock’s technical picture reflects the strain: it trades roughly 25% below its 200?day moving average, and a break below the 3.17 euro support could trigger further selling.

When the quarterly numbers land, investors will zero in on three areas: the trajectory of EV margins, the pace of new?model orders, and whether Xiaomi can finance its automobile expansion without diluting shareholders. A strong showing on delivery volumes might halt the slide. For now, though, the market is pricing in a long wait before the radical restructuring pays off.