Produced by Leida Finance, Written by Meng Shuai, Edited by Shen Hai

"Making cars is tough, but success will definitely be cool!" Facing Xiaomi's first report card in the automotive industry, Lei Jun wrote these words on his Weibo account on August 21st evening.

With the title of the new top star in the automotive industry and experiencing a surge in popularity, Xiaomi finally unveiled the mysterious veil of its first full delivery quarter since its announcement. According to Xiaomi's latest financial report, in the second quarter of this year, Xiaomi delivered a total of 27,307 Xiaomi SU7 series new cars, and the innovative business segment, including Xiaomi's smart electric vehicles, earned 6.4 billion yuan.

As a key indicator to measure the operational efficiency of automakers, the gross margin of Xiaomi's innovative business segment, including smart electric vehicles, reached 15.4% in this quarter.

However, despite this impressive debut, Xiaomi's automotive business still could not escape the fate of being unprofitable in the initial stages of new energy vehicle companies. In the second quarter of this year, the adjusted net loss of Xiaomi's innovative business, including smart electric vehicles, was 1.8 billion yuan. Based on a delivery volume of 27,307 vehicles, Xiaomi's average loss per vehicle sold in the second quarter exceeded 60,000 yuan.

After the aforementioned topic sparked heated discussions on the internet, it was rumored that Xu Jiye, the PR head of Jiyue Automobile, lambasted Xiaomi and Lei Jun for selling cars at a loss in his WeChat Moments, directly calling their practice dumping in the past, "the worst essence of a businessman."

Regarding Xiaomi's loss of over 60,000 yuan per vehicle sold, Lei Jun said, "When we reach a certain scale, I believe it will be easy to break even, so everyone doesn't need to worry about us."

Lei Jun's confidence in devoting himself wholeheartedly to the automotive industry may stem from Xiaomi's solid foundation and ample cash reserves. In the second quarter of this year, Xiaomi's revenue from smartphones, IoT and consumer products, and internet services all increased to varying degrees. By the end of the second quarter, Xiaomi's cash reserves reached 141 billion yuan, an increase of more than 30 billion yuan compared to when the announcement of its automotive venture was made.

Regarding this financial report, Lei Jun said, "This is Xiaomi's most outstanding quarterly report in history!"

However, Xiaomi's average selling price (ASP) for smartphones in this quarter experienced a slight decline both year-on-year and quarter-on-quarter. Xiaomi attributed this to increased competition in mainland China, increased sales in emerging markets with lower ASPs, and the impact of promotions.

Xiaomi Automotive's single-quarter revenue exceeds 6 billion yuan, and its gross margin has surpassed some "veteran automakers"

Since the launch of the Xiaomi SU7 in March, Xiaomi Automotive has created an unprecedented surge in popularity in the automotive industry. With the announcement of Xiaomi Group's latest financial report, the specific operating conditions of Xiaomi Automotive have become clear to the public.

In the second quarter of this year, Xiaomi Group achieved revenue of 88.9 billion yuan, representing a 32% increase from the 67.4 billion yuan in revenue from the previous year, demonstrating robust growth momentum. Notably, starting from the second quarter of this year, Xiaomi Group updated its business segments into two main segments: Mobile × AIoT and innovative businesses, including smart electric vehicles.

Among them, the Mobile × AIoT segment includes smartphones, IoT and consumer products, internet services, and other related businesses, while the innovative business segment, including smart electric vehicles, primarily comprises smart electric vehicles and other related businesses.

Specifically, regarding the segment related to Xiaomi Automotive, the innovative business segment contributed 6.4 billion yuan in revenue to Xiaomi in the second quarter. Further breaking down this segment's revenue, the direct revenue from smart electric vehicles reached 6.2 billion yuan in this quarter, with the remaining 200 million yuan coming from other related businesses.

For a company that has just entered the automotive industry, earning over 6 billion yuan in revenue in its first quarter of delivery is commendable. However, compared to Xiaomi Group's total quarterly revenue, the innovative business segment, which is still in its infancy, contributes less than 10% to the group's total revenue, accounting for 7.2%.

The main contributor to the over 6 billion yuan in revenue generated by the innovative business segment, including smart electric vehicles, is Xiaomi Automotive's respectable delivery volume since its launch. In the second quarter of this year, Xiaomi delivered 27,307 Xiaomi SU7 series new cars, averaging over 9,102 new cars delivered per month.

As early as April this year, Citibank released a report stating that Xiaomi would deliver 55,000 to 70,000 vehicles this year, with an average loss of 6,800 yuan per SU7. At that time, relevant personnel from Xiaomi Group promptly responded on social media that this information might be quite inaccurate. The Citibank auto analyst's report, dated April 2nd, may have underestimated the popularity of Xiaomi SU7 sales.

Looking back, Citibank's forecast for Xiaomi Automotive was indeed inaccurate. In Xiaomi's latest financial report for this quarter, it was mentioned that in June, Xiaomi Automotive's factory started double-shift production and underwent production line optimization and maintenance in July. Xiaomi not only advanced its goal of delivering 100,000 new vehicles annually to November this year but also set a new target of delivering 120,000 vehicles annually.

According to data disclosed by Xiaomi, the ASP of its smart electric vehicles was 228,644 yuan per vehicle in the second quarter. Over the same period, the gross margin of Xiaomi's innovative business segment, including smart electric vehicles, was 15.4%, making it competitive in the new energy vehicle sector, rivaling some industry veterans in terms of gross margin performance.

For example, in the first quarter of this year, NIO's gross margin and automotive gross margin were 4.9% and 9.2%, respectively. In the second quarter of this year, XPeng's gross margin and automotive gross margin were 14% and 6.4%, respectively. However, compared to Lixiang Auto, which has already achieved profitability, Xiaomi Automotive still has some way to go. In the first quarter of this year, Lixiang Auto's gross margin and automotive gross margin were 20.6% and 19.3%, respectively.

Regarding Xiaomi Automotive's gross margin, which has attracted much attention from the outside world, Lu Weibing, Xiaomi Group's partner and president, said, "When we released the quarterly report, we also released our car's gross margin, which is around 15.4%. This gross margin has made many investors, analysts, and media friends feel that it is a decent level. Compared to many peers' gross margin levels, they may have maintained a very low gross margin for a long time."

Lu Weibing also emphasized that for the company's first car, the team believes it is quite satisfactory. Behind this gross margin lies several important capabilities of Xiaomi. The first is Xiaomi's supply chain management capability. The second is smart manufacturing. After building its own factory, the company has effectively tapped into the factory's potential. The third is the confidence of the supply chain in Xiaomi. Although it is the first car, suppliers and partners have great confidence in Xiaomi's future and have given significant cost reductions in advance. These aspects have contributed to Xiaomi Automotive achieving a very good gross margin level.

Xiaomi loses over 60,000 yuan per car sold, Lei Jun: "Don't worry about us"

Lei Jun is serious and fully committed to his investment in the automotive industry. When he first announced Xiaomi's entry into the automotive industry, he declared that it would be "the last major startup project of my life," and he was willing to "bet all the achievements and reputation accumulated throughout my life to fight for Xiaomi Automotive."

Lei Jun also has high expectations for Xiaomi Automotive's performance. He has repeatedly disclosed Xiaomi Automotive's "ambition" in public, aiming to enter the global top five within 15 to 20 years.

Carrying the expectations and hopes of the outside world and determined to fight a battle with no retreat, Lei Jun's mood was undoubtedly very anxious during the preparation and launch of Xiaomi Automotive. Fortunately, with the official launch of Xiaomi Automotive and the enthusiastic market response, Lei Jun and his team's efforts have been rewarded. A few months after Xiaomi Automotive officially met its users, Lei Jun's mind was mostly at ease.

However, even with an impressive start, Xiaomi Automotive still needs to face the common profitability challenges faced by new energy vehicle companies in their initial stages. In the second quarter of this year, the adjusted net loss of Xiaomi's innovative businesses, including smart electric vehicles, was 1.8 billion yuan, which somewhat dragged down Xiaomi Group's overall profitability performance.

Compared to the conservative delivery volume estimate, Citibank's previous forecast of an average loss of 6,800 yuan per SU7 for Xiaomi Automotive also appeared conservative. Based on an adjusted net loss of 1.8 billion yuan and a quarterly delivery volume of 27,307 vehicles, Xiaomi Automotive would have lost an average of 65,900 yuan per vehicle sold in this quarter.

Based on the aforementioned situation, on August 22nd, the topic "Xiaomi loses over 60,000 yuan per car sold" trended on Weibo's hot search list. By the time of publishing, this topic had attracted over 85 million views on Weibo. As the topic "Xiaomi loses over 60,000 yuan per car sold" sparked heated discussions, a screenshot circulated online, allegedly from Xu Jiye, the PR head of Jiyue Automotive, lambasting Xiaomi and Lei Jun for selling cars at a loss in his WeChat Moments.

The text in the alleged screenshot stated, "Entrepreneurs like Lei Jun, can you have some sense of morality and shame? Each car loses 60,000 yuan, and you're still selling so many. Some companies lose money because they can't sell without discounts. What do Xiaomi and Lei Jun call this? In the past, this was called dumping, the worst essence of a businessman."

In response, Hongxing Capital reached out to Xu Jiye for confirmation, and he replied, "The WeChat Moments are mainly for friends, to express some personal opinions, limited to the Moments, and I won't confirm or deny specifics."

According to Tianyancha data, Jiyue Automotive belongs to Hangzhou Jiyue Automobile Technology Co., Ltd., which was established in August 2023 and is jointly held by Geely and Baidu.

In fact, for the automotive industry, which relies on economies of scale to achieve profitability, Xiaomi Automotive's initial losses were expected by the outside world. Upon seeing the topic "Xiaomi loses over 60,000 yuan per car sold," Lei Jun, the soul of Xiaomi Automotive, responded on Weibo, "Making cars is tough, but success will definitely be cool! Xiaomi Automotive is still in the investment stage, and I hope everyone understands."

At the "Lei Jun's Co-Pilot" Pearl River Delta Cruise Live Event held on August 22nd, Lei Jun responded again to the topic of "Xiaomi SU7 loses over 60,000 yuan per car sold." Lei Jun said, "I think this calculation is both right and wrong because Xiaomi Automotive is still in the investment stage and has just started. I think our financial performance is still quite good. Indeed, in the second quarter, we lost 1.8 billion yuan in our innovative businesses, including smart cars, or in other words, we invested 1.8 billion yuan. But when we reach a certain scale, I believe it will be easy to break even, so everyone doesn't need to worry about us."

Regarding the loss in Xiaomi's automotive business, Lu Weibing provided a more specific explanation during the financial report conference call. Lu Weibing said that there are two main reasons for Xiaomi Automotive's losses. First, Xiaomi Automotive's current scale is still relatively small, and the automotive industry typically requires economies of scale. Second, Xiaomi's first car involved significant investments, and it will take some time to absorb the costs.

Lu Weibing also noted that the Xiaomi SU7 is a pure electric sedan, which has the highest cost among all vehicle types because batteries are very expensive. He believes that as production scales continue to increase, production capacity is further tapped, and delivery capabilities improve, Xiaomi Automotive's losses will narrow further.

Some analysts point out that initial losses in Xiaomi Automotive's business are actually a common phenomenon in the industry and a necessary stage in the growth of most new energy vehicle companies. The difficulty in profitability for new energy vehicle companies in their initial stages can largely be attributed to the lack of sufficient production scale. In the initial stages of new energy vehicle companies, due to factors such as unrealized market demand, imperfect production lines, and limited supply chain integration capabilities, companies often struggle to achieve optimal production scales quickly.

Under these circumstances, new energy vehicle companies often face high cost pressures, such as factory construction, equipment procurement, and technology research and development. Additionally, they need to invest heavily in marketing and brand building, which may not translate into direct economic benefits in the short term. Therefore, new energy vehicle companies generally have weak profitability in their initial stages. However, with continuous market expansion and technological innovation, Xiaomi Automotive is expected to turn around and become profitable in the future.

Stable foundation, abundant cash reserves, and a slight decline in smartphone ASP

Lei Jun's firm step into the automotive industry stems from the solid foundation and support provided by Xiaomi's stable foundation. Meanwhile, abundant cash reserves are also an essential basis for Xiaomi's core business and new businesses to continue to develop.

As early as the launch of Xiaomi's Civi 4 Pro smartphone in March, Lu Weibing, Xiaomi Group's partner and president, also stated that Xiaomi's cash reserves had increased by approximately 30 billion yuan since the announcement of its automotive venture three years ago. "Today, Xiaomi's comprehensive strength is even stronger than it was three years ago," he said.

Radar Finance notes that by the end of the second quarter, Xiaomi's cash reserves reached 141 billion yuan. Compared to the 108 billion yuan when the announcement of its automotive venture was made, Xiaomi's cash reserves have now increased by 33 billion yuan. Compared to the previous quarter's 127.3 billion yuan, Xiaomi's cash reserves also increased by 13.7 billion yuan in this quarter.

In the second quarter of this year, not only did Xiaomi achieve record-high revenue, but its profitability also improved significantly. In this quarter, Xiaomi's adjusted net profit reached 6.2 billion yuan, representing a year-on-year increase of 20.1%. Excluding the adjusted net loss of 1.8 billion yuan in Xiaomi's innovative business segment, including smart electric vehicles, Xiaomi's adjusted net profit for this quarter would have reached approximately 8 billion yuan.

Looking at this latest financial report, Lei Jun couldn't hide his excitement and wrote on Weibo, "This is Xiaomi's most outstanding quarterly report in history! Thank you for your support!"

Apart from the much-anticipated new automotive business, Xiaomi's traditional businesses also performed well in this quarter. In the second quarter of this year, Xiaomi's Mobile × AIoT segment generated revenue of 82.5 billion yuan, an increase of 22.5% year-on-year, accounting for 92.8% of total revenue.

In the second quarter, Xiaomi shipped 42.2 million smartphones globally, a year-on-year increase of 28.1%, exceeding the global smartphone shipment growth rate of 11.9% over the same period (based on Canalys data). Thanks to this robust shipment growth, Xiaomi's smartphone business revenue increased by 27.1% year-on-year to 46.5 billion yuan in this quarter.

According to Canalys data, Xiaomi ranked among the top three global smartphone shipments in the second quarter, with a market share of 14.6%, making it the fastest-growing brand among the top five in terms of year-on-year shipment growth. This also marks the 16th consecutive quarter that Xiaomi has ranked among the top three global smartphone shipments.

As for Xiaomi's high-end strategy, which it has worked hard to achieve, it also made some progress in this quarter. According to third-party data, in the second quarter, Xiaomi's shipments of high-end smartphones in mainland China accounted for 22.1% of its total smartphone shipments, an increase of 2 percentage points year-on-year.

According to third-party data, in the second quarter, Xiaomi's market share in the 3,000-4,000 yuan, 4,000-5,000 yuan, and 5,000-6,000 yuan price ranges in mainland China all increased year-on-year, by 5.4, 3.5, and 2.3 percentage points, respectively, reaching 16.8%, 20.1%, and 8.9%, respectively.

However, Xiaomi's smartphone ASP still experienced a slight decline, falling from 1,112.2 yuan per unit in the second quarter of last year to 1,103.5 yuan per unit in the second quarter of this year, a year-on-year decrease of 0.8%. Xiaomi attributed this decline in ASP to increased competition in mainland China and increased sales in emerging markets with lower ASPs.

Compared with RMB 1,144.7 per unit in the first quarter, Xiaomi's ASP for smart phones in this quarter decreased by 3.6%, due to increased promotional efforts during the 618 online shopping festival in mainland China and increased shipments to emerging markets with lower ASPs.

As for the IoT and consumer products segment, it achieved revenue of RMB 26.8 billion in the second quarter, an increase of 20.3% year-on-year, setting a new record high. This was mainly driven by increased revenue from smart major appliances in mainland China, tablets in overseas markets, and wearable products in the global market. The gross margin of this segment also increased by 2.2 percentage points year-on-year to 19.7%.

Specifically, Xiaomi's revenue from tablets and wearable products increased by 67.6% and 31% year-on-year, respectively, in this quarter. However, compared to these products, Xiaomi's revenue from smart TVs and laptops increased by only 1.1% year-on-year. By the end of the second quarter, the number of IoT devices connected to Xiaomi's AIoT platform (excluding smartphones, tablets, and laptops) reached 822 million, an increase of 25.6% year-on-year.

Despite this, Xiaomi's major appliance business experienced rapid growth, with a year-on-year increase of 38.7% in this quarter. Among them, Xiaomi shipped over 3.3 million air conditioners in this quarter, an increase of more than 40% year-on-year; shipments of refrigerators exceeded 600,000 units, an increase of more than 25% year-on-year; and shipments of washing machines exceeded 400,000 units, an increase of more than 30% year-on-year.

In addition to the above, Xiaomi's internet business revenue reached RMB 8.3 billion in this quarter, also setting a new record high, with a year-on-year increase of 11% and a gross margin of 78.3%, an increase of 4.2 percentage points year-on-year. Among them, the advertising business contributed RMB 6 billion in revenue, and the gaming business contributed RMB 1 billion in revenue.

Perhaps influenced by this latest financial report, Xiaomi's share price surged on August 22. By the close of trading that day, Xiaomi Group's share price closed at HK$19.1 per share, up 9.02% from the previous trading day. However, on August 23, Xiaomi Group's share price fell slightly by 1.47%.

In the live broadcast on August 22, Lei Jun also shared his views on the company's share price performance. Lei Jun believes that making good cars, products, and performance is the duty of a listed company. However, Lei Jun also expressed helplessness, saying, "Sometimes when the stock falls, people curse me every day in the comment section, and I feel a lot of pressure. I try to ensure that I work hard to make money for everyone. But I really can't control whether the stock goes up or down. If we seriously make cars, it will definitely be good in the long run."