Three years ago, Lei Jun suddenly dropped a bombshell at a press conference, announcing that Xiaomi would venture into the automotive industry.

At that time, Lei Jun passionately declared, 'This is my last entrepreneurial venture. I am willing to bet my entire reputation on Xiaomi's automotive efforts!' At that time, the new energy vehicle market was in a fierce battle, with more and more new forces being eliminated. Xiaomi's decision to enter the market during the height of competition sparked considerable controversy and doubt.

With the huge success of Xiaomi's automotive venture, all doubts have been dispelled. On March 28, Xiaomi Automobile was officially launched, with over 10,000 pre-orders within 4 minutes and over 50,000 within 27 minutes. As of November 18, Xiaomi had surpassed its goal of delivering 100,000 new vehicles ahead of schedule, achieving this milestone in just 230 days since the first delivery on April 3.

Concurrent with Xiaomi's achievement of delivering 100,000 new vehicles, the company also released what Lei Jun termed as its 'strongest financial report ever.' The report revealed that Xiaomi generated revenue of 92.5 billion yuan in the third quarter, a year-on-year increase of 30.5% and a quarter-on-quarter increase of 4.1%, setting a new record. Adjusted net profit was 6.252 billion yuan, up 4.4% year-on-year and 1.2% quarter-on-quarter.

Xiaomi's main businesses are divided into three main areas: new energy vehicles, smartphones, IOT, and internet services.

Excluding the automotive business, the combined revenue from smartphones, IOT, and internet services in the third quarter was 82.809 billion yuan, a year-on-year increase of 16.94%.

Without the automotive business, Xiaomi's revenue growth rate would be much more modest, which may explain why Lei Jun chose to venture into the automotive industry.

Apart from serving as a 'second growth curve' and driving new growth momentum for Xiaomi's performance, another important role of the automotive business is enhancing Xiaomi's image and facilitating its premium transformation.

Taking Xiaomi's smartphone business as an example, the company generated revenue of 47.5 billion yuan in the third quarter, a year-on-year increase of 13.9%, which is not high compared to the overall growth rate of 30.5%. However, according to Canalys data, Xiaomi ranked third in global smartphone shipments in the third quarter of 2024 with a market share of 13.8%. With such a high market share, it is indeed challenging for the smartphone business to achieve further growth.

Despite the modest revenue growth, the average selling price of Xiaomi smartphones has increased significantly. According to media statistics, the average selling price of Xiaomi smartphones increased from 997.0 yuan in the third quarter of 2023 to 1,102.2 yuan in the third quarter of 2024, a year-on-year increase of 10.6%. Xiaomi's flagship model, the Xiaomi 15, increased in price by 200-300 yuan, with the starting price rising by a full 500 yuan this year.

Additionally, according to third-party data, Xiaomi's high-end smartphone shipments (above 3,000 yuan) in China accounted for 20.1% of its overall smartphone shipments, a significant year-on-year increase of 7.9%.

Apart from premiumization, another key role of the automotive business is helping Xiaomi tap into the female user base, promoting user base diversification. According to information revealed by Lei Jun during a live stream, nearly half of Xiaomi SU7 owners are female, including many who also use iPhones. iPhone users account for 56% of Xiaomi SU7 owners. Furthermore, according to supply chain sources, Xiaomi has increased its order volume for its first foldable smartphone, the MIX Flip, by about 42%, reaching approximately 500,000 units. According to Xiaomi executives, the foldable smartphone has been in short supply since its launch, with 55% of buyers being female and 32% coming from iPhone users switching to Xiaomi.

Judging from Xiaomi's current strongest financial report, the automotive business has undoubtedly played a crucial role, far beyond simply driving revenue growth or serving as a 'facade.' From a stock price perspective, as of the close on November 22, Xiaomi Group's share price was 28.55 Hong Kong dollars per share, with a total market capitalization of 712.7 billion Hong Kong dollars. Since the launch of Xiaomi Automobile in March, Xiaomi's share price has increased by over 115%.

For Xiaomi, the automotive business determines its 'upper limit.'

In the third quarter, Xiaomi's automotive business generated revenue of 9.7 billion yuan, exceeding market expectations (8.9 billion yuan). The automotive business's gross margin reached 17.1% this quarter, with the average vehicle price increasing to 239,000 yuan. Compared to other emerging automotive players with multiple models but gross margins still below 10%, Xiaomi's gross margin has already exceeded 15% with its first new vehicle launch, a remarkable achievement.

Moreover, despite only launching one new vehicle, Xiaomi has already gained economies of scale due to increasing sales. After a gradual increase in shipments, Xiaomi Automobile's monthly sales have stabilized at over 20,000 units, with annual shipments reaching over 100,000. Currently, Xiaomi has increased its annual target to 130,000 units. As of October 31, 2024, Xiaomi had opened 139 sales outlets in 38 cities, accelerating its channel expansion.

Notably, 2024 is just the beginning of Xiaomi's automotive sales explosion, as the company plans to introduce more new models in the future. According to earlier media reports, Xiaomi Automobile plans to launch three new models within three years: the first model, the pure electric sedan Xiaomi SU7, in 2024, followed by a pure electric SUV in 2025, and a range-extended SUV in 2026, gradually enriching its product line.

It is foreseeable that with the launch of more new models, Xiaomi's automotive sales will continue to rise, and the impact of the automotive business on smartphones, IOT, and internet services will intensify.

Apart from influencing Xiaomi's existing three main businesses, if sales continue to rise in the future, Xiaomi's automotive business will generate significant cash flow for the company, which is even more promising. Previously, when analyzing Li Auto's third-quarter financial report, Kanjian Caijing mentioned that it is crucial for large automakers to manage their finances well, as it can even determine their profits. Large automakers tend to have substantial cash flows; Li Auto's net operating cash flow in the third quarter reached 11 billion yuan, with cash on hand totaling 106.5 billion yuan. Even after deducting short-term and long-term loans, net cash was still 97.7 billion yuan. If invested wisely, this substantial cash can generate considerable profits for Li Auto.

Judging from the third-quarter report, Xiaomi's cash flow has reached 151.6 billion yuan due to the strong sales of the Xiaomi SU7. Currently, Xiaomi is not investing its cash in financial products as the automotive business is still in its investment phase. The company invested over 6 billion yuan in research and development this quarter, a year-on-year increase of nearly 20%, with a total of 20,436 R&D personnel. However, once the automotive business stabilizes in the future and Xiaomi invests significant cash in financial products, its profits will further increase. In other words, although this financial report is considered the 'strongest third-quarter report ever,' Xiaomi is poised to become even stronger in the future.