Lei Jun described Xiaomi's Q3 2024 financial report as "the strongest performance in history," indicating his satisfaction with Xiaomi's business.

The financial report shows that Xiaomi Group's total revenue for the third quarter of this year was 92.5 billion yuan, a year-on-year increase of 30.5%; the net profit for the third quarter was 5.35 billion yuan, a year-on-year increase of 9.7%; the adjusted net profit was 6.3 billion yuan, a year-on-year increase of 4.4%, including an adjusted net loss of 1.5 billion yuan for innovative businesses such as smart electric vehicles.

For Xiaomi, achieving such excellent results amidst such a challenging market situation is indeed remarkable.

However, if we analyze how Xiaomi achieved such impressive results, the automobile manufacturing business undoubtedly played a significant role.

In a sense, it is precisely because of the outstanding performance of the automobile manufacturing business that Xiaomi's overall results are so impressive.Even so, we still cannot deny the reality that Xiaomi's automobile manufacturing business is still in the investment phase and the pressure on Xiaomi smartphone shipments. We still cannot deny the dilemma Xiaomi is currently facing.

From this perspective, even though Xiaomi has delivered its strongest performance in history, it may only be the beginning for the company.

For Xiaomi, how to establish a foothold in the automobile manufacturing business and make strides in the premiumization of Xiaomi smartphones may be the key to truly taking Xiaomi's development to a new stage.

1

Undoubtedly, the automobile manufacturing business remains the highlight of Xiaomi's financial report.

Whether it's Xiaomi achieving the milestone of producing 100,000 new vehicles on November 13 or the aggressive pricing of the previously announced Xiaomi SU7 ultra, we can see Xiaomi's huge ambition in automobile manufacturing.

In fact, we can also see a glimpse of this ambition through the performance of Xiaomi's automobile manufacturing business in its financial report.

The financial report shows that in the third quarter of 2024, the total revenue of Xiaomi's innovative business segments, including smart electric vehicles, was 9.7 billion yuan. Among them, smart electric vehicle revenue was 9.5 billion yuan, and other related business revenue was 200 million yuan.

The financial report discloses that the gross margin of innovative business segments such as smart electric vehicles in the third quarter was 17.1%.

From Xiaomi's smartphone business, we can see why Xiaomi values and is so ambitious about automobile manufacturing.

In the third quarter, Xiaomi's smartphone business revenue was 47.5 billion yuan, a year-on-year increase of 13.9%, with global smartphone shipments reaching 43.1 million units, a year-on-year increase of 3.1%.

It is worth mentioning that the financial report shows that Xiaomi's smartphone business gross margin was 11.7% in the third quarter, a year-on-year decrease of 4.9%.

By comparing the data of the automobile manufacturing business with that of the traditional smartphone business, we can clearly see that Xiaomi's automobile manufacturing business has significant advantages over its smartphone business, both in terms of business growth rate and gross margin.

From this perspective, it is not difficult to understand why Xiaomi is so ambitious and confident about its automobile manufacturing business.Even so, we still cannot deny the reality that Xiaomi's automobile manufacturing business is still in its infancy.

For Xiaomi, how to continuously increase investment in automobile manufacturing in the future and how to continuously increase Xiaomi's automobile delivery volumes may be the fundamental reasons why Xiaomi's automobile manufacturing can replace smartphones as the new performance driver.

This can be seen from the fact that Xiaomi's automobile manufacturing business is still losing money.

The financial report shows that in the third quarter, Xiaomi delivered 39,790 SU7 series vehicles, achieving the milestone of producing 100,000 new vehicles by November 13.

Data shows that the adjusted net loss of Xiaomi's innovative businesses, including smart electric vehicles, was 1.5 billion yuan in the third quarter.

For Xiaomi, only by continuously increasing delivery volumes and expanding the automobile manufacturing business can it offset the issues of high initial investment, severe cost sharing, and high R&D expenses in the early stages of the business.

Therefore, Xiaomi's excellent performance in the automobile manufacturing business in the third-quarter financial report is only the beginning.

For Xiaomi, how to further narrow the losses in its automobile manufacturing business and how to make the scale effect of its automobile manufacturing business more pronounced are the keys to ensuring that its automobile manufacturing business can truly become a performance driver.If Xiaomi's automobile manufacturing fails to achieve a significant scale, especially if it cannot offset losses in this way, then the halo of Xiaomi's automobile manufacturing business may fade.

The automobile manufacturing business may not only fail to become the starting point for Xiaomi's new journey but may even become its "Waterloo," causing Xiaomi to sink into a quagmire.

2

If Xiaomi's automobile manufacturing business has not yet gained a firm foothold, ultimately causing concerns about Xiaomi's proud automobile manufacturing business, then the bottlenecks and challenges Xiaomi faces in its traditional smartphone business are another manifestation of concerns about Xiaomi's future.

We all know that one of the important reasons Xiaomi ventured into the automobile manufacturing race is the difficulties and challenges it encountered in its smartphone business.In fact, it's not just Xiaomi; even leading smartphone manufacturers like Apple are also facing risks of pressure on their smartphone businesses.

That's why we see many smartphone players either continuously expanding their ecosystems or starting to venture into new businesses represented by automobile manufacturing.

It is for this reason that Xiaomi embarked on its automobile manufacturing journey.

Through Xiaomi's third-quarter financial report, we can also clearly feel the reality that Xiaomi's traditional smartphone business is starting to come under pressure.

The financial report shows that in the core smartphone business, Xiaomi's third-quarter smartphone business revenue was 47.5 billion yuan, a year-on-year increase of 13.9%, with global smartphone shipments reaching 43.1 million units, a year-on-year increase of 3.1%.

Although Xiaomi's smartphone business still achieved growth, in terms of growth rate, Xiaomi's smartphone business is obviously not as robust as its automobile manufacturing business.Ultimately, this is largely related to the increasing smartphone penetration rate. Another reason is that the content and services carried by current smartphones have reached a bottleneck.

Against this backdrop, if Xiaomi smartphones want to break through the current development bottleneck, they need to resist the ceiling faced by shipment volumes through premiumization on the one hand and endow smartphones with more functions and meanings that match current consumers on the other.

However, although Xiaomi has launched premium models and increased investment in smartphone R&D, it may still take a long time for premiumization and technologization to be accepted by users and offset the dilemma of declining smartphone shipment volumes.For Xiaomi, if it fails to make achievements in the premiumization of its smartphone business or in increasing the AI and technological value-added of its smartphone business, its smartphone business may no longer just face the embarrassment of shipment volume pressure. It may even miss out on the new dividends of the smartphone business as it transitions from the Internet era to the AI era.

For Xiaomi, how to resist the reality of shipment volume pressure through premiumization and increasing technological value-added may be another challenge it must face.

If this issue cannot be properly resolved, Xiaomi's foundation may also face the risk of collapse.3

Amidst the difficulties faced by Xiaomi's automobile manufacturing and smartphone businesses, the construction and integration of Xiaomi's ecosystem also face new problems and challenges.

For Xiaomi, how to truly create a complete ecosystem encompassing people, cars, and homes, as advertised, and make such an ecosystem provide momentum for its own development may be the key to ensuring its healthy development.

Currently, ecological integration represented by vehicle-machine integration and machine-home integration is becoming a trump card for players to enhance their competitiveness.

Whether in the automobile manufacturing or smartphone sector, how to achieve deep integration across the entire ecosystem and the entire chain and how to achieve coordination among various processes and links within the ecosystem to enhance competitiveness has become the key for players to improve their competitiveness.

Although Xiaomi has achieved the scenario construction of creating an ecosystem encompassing people, cars, and homes by venturing into the automobile manufacturing sector, how to achieve coordination and connectivity among these three scenarios to optimize user experience and enhance its growth potential is the key to ensuring Xiaomi can achieve new development.However, through Xiaomi's third-quarter financial report, we did not see Xiaomi's performance in ecosystem integration and coordination. We only saw its excessive emphasis on branch businesses such as automobile manufacturing, smartphones, and Mijia.

If Xiaomi merely divides different branch businesses into different spheres of influence without achieving coordinated development among them, then Xiaomi's so-called ecosystem encompassing people, cars, and homes is merely a way and method to increase its scale but cannot become a path for achieving ecosystem coordination and mutual empowerment.

If Xiaomi's ecosystem remains merely at the scale level without reflecting coordination among its various components, then Xiaomi is still stuck in a scaled operation mode.If this issue cannot be properly resolved, Xiaomi's so-called ecosystem encompassing people, cars, and homes may still face the risk of an "ecological counterreaction."

Conclusion

As Xiaomi's automobile manufacturing business gradually improves, especially as the scale effect of its automobile manufacturing business gradually becomes apparent, flaws in Xiaomi's business are obscured by these halos.Although Xiaomi has delivered its strongest performance in history, we still need to see the reality that Xiaomi's automobile manufacturing business is still in its infancy and the current pressure on Xiaomi's smartphone business. We still need to see the embarrassment of Xiaomi's ecosystem not being fully integrated.

For Xiaomi, the challenge may have just begun.

How to achieve a scale effect through rapid delivery in the automobile manufacturing business, how to break through the shackles of premiumization in the smartphone business, and how to make Xiaomi's ecosystem more than just a concept may be new issues Lei Jun needs to address.Not being obscured by the halo of automobile manufacturing and not being misled by the reality of losses may be the correct way to view Xiaomi's third-quarter financial report and truly see what lies behind it.