XIAOMI(HK:01810) Jin Rong Jie·2025-05-29 10:17Core Viewpoint - Xiaomi's automotive business shows promising growth with significant revenue and improving profitability, indicating a potential shift in the competitive landscape of the automotive industry [1][3]. Group 1: Financial Performance - In Q1, Xiaomi's automotive revenue reached 18.6 billion yuan, with a gross margin of 23.2%, and operating losses narrowed to 500 million yuan [1]. - Compared to Q4 of the previous year, automotive revenue increased from 16.3 billion yuan, gross margin improved from 20.4%, and operating losses decreased from 700 million yuan [1]. - Xiaomi's automotive business is on track to potentially achieve profitability within the next two to three quarters if the current trend continues [1]. Group 2: Competitive Positioning - Xiaomi's President, Lu Weibing, expressed confidence in the SU7 model, claiming no competitors match its product [3]. - The gross margin of 23.2% for Xiaomi's automotive division is notably higher than competitors such as Li Auto (20.5%), NIO (12.3%), Xpeng (15.6%), Geely (19.1%), and BYD (20.07%) [3][4]. - Xiaomi's strategy avoids price wars, which is a significant advantage in a market where many competitors are struggling with profitability [6]. Group 3: Operational Efficiency - Lu Weibing attributed the high gross margin to strong product capability, the success of a flagship model leading to cost advantages, and operational efficiency that is 2-3 times higher than traditional automakers [4]. - The increasing delivery volumes have led to reduced fixed costs and improved efficiency for Xiaomi's automotive operations [4]. - The upcoming YU7 model is expected to drive further sales growth, with a target sales ratio similar to that of Tesla's Model Y and Model 3 [4]. Group 4: Industry Context - The automotive industry in China has seen a decline in profit margins, with the industry average dropping from 4.3% to 3.9% in Q1 [6]. - NIO has faced significant cumulative losses, amounting to 86.961 billion yuan from 2019 to 2024, raising questions about its long-term viability if Xiaomi achieves profitability [6]. - Xpeng has also seen a reduction in losses, indicating a potential path to profitability, while Zeekr, part of Geely's strategy, faces pressure to become profitable despite substantial losses [6].