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Xiaomi Group CFO Lin Shiwei

Phoenix.com Technology News, August 22, Beijing time, according to Bloomberg, Xiaomi Group CFO Lin Shiwei said in an interview that at this stage, the company is willing to sacrifice profits to develop its nascent electric vehicle business. Xiaomi's goal is to become one of the world's largest automakers in the next 10 to 20 years, on par with Tesla, BYD and other companies.

Lin, a trained engineer and former Credit Suisse banker who has masterminded some of Xiaomi’s biggest investments, told Bloomberg TV that Xiaomi is prioritizing its electric car business over profit margins. He said Xiaomi Auto has only been on the market for five months and it will take some time to stem losses.

"Right now, we are more focused on growth than profitability. We are convinced that scale will bring profits in the future. Right now I only have one car, which is still a long way from what we would call profitability, and we need to continue to invest in this business."Lin Shiwei said. He added that Xiaomi once ranked among the top in the global mobile phone industry with its cost-effective concept, and this concept will also apply to the company's electric vehicles.

Xiaomi reported second-quarter earnings on Wednesday, posting its fastest quarterly revenue growth since 2021. Xiaomi shares rose as much as 8.5% on Thursday, pushing their gains since the electric car went on sale in March to about 25%. The results are likely to give investors more hope that Xiaomi has found a new source of growth. It also provides early proof for Xiaomi's billionaire founder Lei Jun that he is taking the company into new areas after carving out a niche in smartphones and consumer electronics.

Loss

Lei Jun has pledged to invest $10 billion in car manufacturing, a bold bet to replicate Xiaomi's success in smartphones. Xiaomi has already launched its first electric car, the Mi SU7, in a field crowded with established carmakers. Lei Jun has said the company aims to be among the world's top five automakers in 15 to 20 years.

However, this requires a lot of capital. In the second quarter alone,Xiaomi suffered an adjusted net loss of 1.8 billion yuan in innovative businesses such as smart cars and only delivered 27,307 vehicles.According to Bloomberg calculations, this means that Xiaomi loses about 60,000 yuan (after adjustments) for each car it sells.

Xiaomi SU7

Lei Jun said on Weibo on Wednesday that making cars is hard, but success must be cool! Xiaomi Auto is still in the investment period, and I hope everyone understands.

"Xiaomi's EV gross margins were unexpectedly strong last quarter, and the company may have more room to grow as deliveries continue to increase," said Steven Tseng and Sean Chen, analysts at Bloomberg Intelligence. "We estimate the company's EV sales in the third quarter may have increased 40% quarter-on-quarter to about 9 billion yuan."

Expansion plans

Lin would not reveal Xiaomi’s plans beyond 2024. This year, Xiaomi plans to deliver 120,000 Mi SU7s. In May, Xiaomi raised its delivery target from about 100,000 to 120,000. Xiaomi President Lu Weibing told analysts on Wednesday,He expects Xiaomi SU7 shipments to continue to accelerate in the coming months and losses to gradually decrease.

Xiaomi is developing more electric vehicle models to better compete with industry leaders, with plans to sell an SUV similar to Tesla's Model Y as early as 2025, Bloomberg News previously reported. The company is also expanding its production capacity and recently bought a piece of land in Beijing to build Xiaomi's second phase factory.

Although Xiaomi currently only sells the Mi SU7 in China, it demonstrated the sedan in Paris during the Olympics and set up a pit stop at Germany's famous Nürburgring racetrack. Lei Jun said in Paris that the company will launch the Mi SU7 globally, but did not disclose a specific time. Xiaomi President Lu Weibing said in a live broadcast on August 17, according to domestic media reports,Even as the European Commission moves toward imposing import tariffs on Chinese-made electric vehicles, Xiaomi is still working on how to bring its cars to Europe.

"We have indeed considered global expansion, but now we are working hard to meet all the needs of Chinese customers." Lin Shiwei said. (Author/Xiao Yu)

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