For years, Xiaomi’s narrative was one of relentless expansion, morphing from a 'copycat' smartphone maker into a diversified IoT titan and, most recently, a formidable player in the electric vehicle (EV) arena. However, the luster of that story is beginning to fade in the eyes of investors. Despite a record-breaking 2025 fiscal year, the company’s market valuation has plummeted, losing over HK$760 billion—roughly half its peak value—as the reality of the hyper-competitive automotive market sets in.
The initial euphoria surrounding Xiaomi’s automotive debut, marked by the SU7 and the subsequent YU7, provided a temporary lifeline for the stock. While early delivery numbers were impressive, the 'beginner’s luck' phase appears to be over. With a daunting 2026 delivery target of 550,000 vehicles, the company is facing a significant cooling of consumer demand. Recent data shows that the initial surge of 'Mi Fan' loyalty has been exhausted, leaving the company to fight for market share against entrenched giants like Tesla and BYD.
To bridge the gap between ambition and execution, founder Lei Jun has pivoted toward a 'wartime' management structure. This includes the departure of co-founders Li Wanqiang and Hong Feng, effectively consolidating Lei’s control to over 97% of the core entity. More tellingly, Xiaomi has begun poaching heavyweights from Tesla’s China operations, including former sales and manufacturing heads, to professionalize its scaling efforts. These moves suggest a realization that the grit required to sustain an automotive business is vastly different from the agility of the smartphone world.
Compounding these pressures is a visible decay in Xiaomi's primary cash cow: the smartphone business. Global market stagnation and rising component costs have squeezed margins to a perilous 8.35% in the most recent quarter. As the handset business struggles to fund the capital-intensive EV and AI divisions, Xiaomi has quietly shifted its retail strategy. Offline stores are being ordered to prioritize high-margin home appliances over smartphones, a tactical retreat that signals the flagship product is no longer the company’s economic engine.
While Xiaomi sits on a formidable cash reserve of 232 billion yuan, 'blood volume' alone cannot satisfy a skeptical market. The transition from a lean hardware company to a complex technology platform is the most perilous chapter in Lei Jun’s career. Without a new catalyst to prove that the EV division can achieve sustainable profitability without cannibalizing the core business, the stock remains trapped in a downward spiral that buybacks alone cannot fix.