Eliza Wong
Xiaomi Group has delivered a stunning financial performance for the second quarter, shattering records with unprecedented revenue and profit growth. The driving force behind this remarkable achievement is the explosive expansion of its Smart Electric Vehicle (EV) division, which has rapidly evolved from an ambitious project into a formidable revenue pillar. In a media conference call following the earnings release, Xiaomi President Lu Weibing (卢伟冰) struck a confident tone, outlining a clear strategic path forward that emphatically rejects industry price wars and internal competition. The company is not just celebrating past success but is boldly projecting substantial future growth, underpinned by its commitment to sustainable, value-driven expansion rather than engaging in destructive market practices. This performance and outlook signal a significant shift in Xiaomi’s global positioning and competitive strategy.
Historic Financial Performance Driven by EV Breakthrough
Tuesday’s earnings report revealed that Xiaomi’s revenue and net profit for the second quarter both reached historic highs. This surge was overwhelmingly fueled by the company’s burgeoning electric vehicle business, which has transitioned from a speculative venture to a core growth engine in a remarkably short time frame.
The figures speak for themselves. Xiaomi’s automotive division delivered 81,300 vehicles in Q2, a staggering 197.7% increase from the 27,300 units delivered in the same period last year. This delivery volume translated into explosive revenue growth of 233.9% year-over-year, generating 21.3 billion yuan in income that significantly exceeded market expectations.
The SU7 Success Story and YU7 Momentum
President Lu Weibing (卢伟冰) highlighted that the YU7 series has continued the spectacular market performance established by the SU7 model, stating it has “once again created a miracle hit product for Xiaomi.” The successful launch and consumer adoption of these models demonstrate that Xiaomi has effectively translated its expertise in consumer electronics and user experience design into the automotive sector.
This successful foray into electric vehicles represents a strategic masterstroke. While many tech companies have struggled to bridge the gap between digital products and physical automobiles, Xiaomi has managed to create a cohesive ecosystem where its smartphones, smart home devices, and now vehicles work seamlessly together, creating compelling reasons for brand loyalty across product categories.
Strategic Global Expansion: Europe 2027
Building on its domestic success, Xiaomi has made the strategic decision to formally enter the European electric vehicle market in 2027. This expansion represents a significant milestone in the company’s globalization strategy and positions Xiaomi to compete directly with established European and global automakers on their home turf.
The European EV market presents both substantial opportunities and challenges. While consumer adoption of electric vehicles is accelerating across Europe, the market is already crowded with both traditional automakers transitioning to electric and new entrants specializing in EVs. Xiaomi’s approach will likely leverage its established brand presence in Europe through its smartphone and consumer electronics business, providing a built-in customer base and brand recognition that most new automotive entrants lack.
Learning from Smartphone Globalization
Xiaomi’s expansion into European automotive markets will benefit from lessons learned during its smartphone global expansion. The company understands European consumer preferences, regulatory requirements, and distribution channels, knowledge that can be adapted to its automotive division. This existing infrastructure and market intelligence provide Xiaomi with significant advantages over companies entering both new product categories and new geographic markets simultaneously.
Ambitious Growth Targets and Confident Outlook
Xiaomi’s leadership has expressed robust confidence in the company’s future trajectory. President Lu Weibing (卢伟冰) revealed that Xiaomi Group expects overall revenue growth of more than 30% for full-year 2025, a ambitious target that reflects the company’s bullish outlook on its diversified business segments.
This confidence is rooted in both current performance and anticipated market developments. The explosive growth of the EV business shows no immediate signs of slowing, while the company’s core smartphone business continues to perform solidly in a challenging global market. Additionally, Xiaomi’s ecosystem of Internet of Things (IoT) and lifestyle products continues to expand, creating multiple revenue streams that support overall growth.
Smartphone Ambitions: Targeting the “200 Million Club”
For its foundational smartphone business, Xiaomi has set a clear long-term goal: joining the “200 million club” by achieving global annual shipment volumes of 200 million units within the next three to five years. This target would place Xiaomi among the elite group of smartphone manufacturers that have reached this shipment milestone, representing a significant market share increase from its current position.
Achieving this goal will require strategic execution across multiple fronts:
– Strengthening position in existing markets, particularly in Asia and Europe
– Potential expansion into underserved markets where smartphone adoption is growing
– Continued innovation in handset technology and design to differentiate from competitors
– Leveraging the synergy between smartphone and EV businesses to create cross-selling opportunities
The Xiaomi Philosophy: No Price Wars, No Internal Competition
Perhaps the most distinctive aspect of Xiaomi’s current strategy is its firm stance against engaging in price wars and what President Lu Weibing (卢伟冰) termed “internal competition” or neijuan (内卷). This Chinese business concept refers to destructive competition within an industry where companies undermine each other through excessive price cutting and other tactics that ultimately degrade value for all participants.
In response to questions about competitive pressures in the home appliance sector, Lu Weibing (卢伟冰) was unequivocal: “Xiaomi resolutely will not fight price wars and will not participate in internal competition.” This position represents a significant departure from Xiaomi’s earlier market approach, which often emphasized aggressive pricing to gain market share.
Focusing on Long-Term Value Over Short-Term Rankings
President Lu Weibing (卢伟冰) elaborated on this philosophical shift by explaining that short-term market rankings are not Xiaomi’s primary concern: “I’m not that concerned about Xiaomi’s short-term ranking—one month, two months, one quarter, these are not the most important. What’s most important to me is whether the long-term structure is truly changing, whether ultimate victory will stand on Xiaomi’s side.”
This long-term perspective reflects maturation in Xiaomi’s strategic thinking. Rather than chasing momentary market share gains through potentially destructive pricing strategies, the company is focusing on building sustainable competitive advantages through innovation, quality, and ecosystem development that will deliver lasting value to shareholders and customers.
Building Sustainable Competitive Advantages
Xiaomi’s rejection of price wars and internal competition is not merely philosophical—it’s backed by a concrete strategy to build durable competitive advantages that don’t rely on competing solely on price. The company is investing in areas that create real differentiation and value for customers.
These strategic investments include:
– Research and development focused on integrating AI across its product ecosystem
– Vertical integration in manufacturing to control costs without sacrificing quality
– Development of its proprietary operating system and software ecosystem
– Expansion of its retail and service network to enhance customer experience
– Strategic partnerships in technology development and supply chain management
The Ecosystem Advantage
Xiaomi’s most significant competitive advantage may be its diverse product ecosystem. Unlike companies focused exclusively on smartphones or automobiles, Xiaomi offers customers an integrated experience across multiple device categories. A customer using Xiaomi smartphones, smart home devices, and now electric vehicles enjoys seamless connectivity and interoperability that creates switching costs and enhances brand loyalty.
This ecosystem approach represents a formidable barrier to competition that cannot be easily replicated through price cutting alone. While competitors might match Xiaomi on individual product pricing, replicating the entire integrated experience requires substantial investment and time, giving Xiaomi a sustainable edge that protects against pure price-based competition.
Market Implications and Industry Impact
Xiaomi’s successful diversification into electric vehicles and its firm stance against destructive competition have significant implications for multiple industries. The company’s rapid ascent in the EV market demonstrates that technology companies can successfully enter and disrupt traditional automotive manufacturing, potentially paving the way for other tech giants to follow similar paths.
In the smartphone and consumer electronics sectors, Xiaomi’s rejection of price wars could influence broader industry dynamics. If a company known for value pricing takes a stand against destructive competition, it may encourage other players to focus more on innovation and differentiation rather than engaging in margin-destroying price battles.
Challenges and Risks Ahead
Despite its strong position and confident outlook, Xiaomi faces significant challenges in executing its strategy:
– The automotive industry requires substantial capital investment with long payback periods
– Global expansion, particularly into competitive markets like Europe, presents regulatory and competitive hurdles
– Maintaining innovation across multiple product categories simultaneously strains R&D resources
– Economic uncertainties could impact consumer spending on big-ticket items like vehicles
The company’s ability to navigate these challenges while maintaining its commitment to avoiding destructive competition will be critical to achieving its ambitious growth targets.
The Path Forward: Confidence Backed by Strategy
Xiaomi’s record-breaking quarterly performance and ambitious growth targets reflect more than just favorable market conditions—they demonstrate a company that has successfully navigated a strategic transformation from a smartphone-focused business to a diversified technology ecosystem player. The explosive growth of its electric vehicle business validates its expansion strategy and provides a powerful new growth engine.
The company’s firm stance against price wars and internal competition signals a maturation in its approach to market competition. Rather than pursuing market share through potentially destructive means, Xiaomi is building sustainable advantages through innovation, ecosystem development, and customer experience enhancement that should deliver lasting value.
President Lu Weibing’s (卢伟冰) confidence in achieving 30%+ revenue growth for 2025 appears well-founded given current momentum across business segments. The company’s clear strategic direction, combined with its successful execution to date, positions Xiaomi for continued success as it expands globally and deepens its ecosystem offerings.
For investors, industry observers, and consumers, Xiaomi’s journey offers compelling insights into how technology companies can successfully expand into new categories while maintaining philosophical principles that prioritize long-term value creation over short-term tactical gains. The company’s performance deserves close attention as it continues to execute against its ambitious vision.
