Xiaomi Sales Grow Fastest Since 2021 After EV Sales Kick Off

(Bloomberg) — Xiaomi Corp. reported its fastest pace of revenue growth since 2021, buoyed by the initial success of its first electric vehicles and a global smartphone market bounceback.

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Sales rose a better-than-projected 32% to 88.9 billion yuan ($12.5 billion) in the June quarter, boosted by roughly 6.2 billion yuan of revenue from its EV division. Net income also beat expectations at 5.1 billion yuan, after a one-time investment gain of almost 550 million yuan. But it booked an adjusted loss of about 1.8 billion yuan from the autos arm.

The better-than-anticipated results may fuel investors’ hope that Xiaomi has lit upon a new source of growth. Founder Lei Jun has pledged to invest $10 billion on carmaking, making a bold bet to replicate the success it enjoyed in smartphones. His company launched its first EV in March, albeit into a space already crowded with far bigger players from Tesla Inc. to BYD Co. The billionaire has said the firm aims to become one of the top five carmakers in 15 to 20 years.

Xiaomi’s shares have risen about 16% since the company started selling EVs in late March. The Beijing-based company raised delivery targets for its SU7 model soon after the vehicle’s debut: In May, Xiaomi raised its target for vehicle deliveries to 120,000 this year, versus a previously announced target of about 100,000. And on Wednesday, President Lu Weibing said he expects shipments to continue accelerating in coming months, and losses gradually diminish.

“Scale is important. As we grow in scale, costs will be better distributed,” Lu told reporters after the results. “We are in a good position in terms of orders as of August. That means we’ll gain scale and costs will continue to come down.”

While Xiaomi is only selling the SU7 in China, it showcased the sedan during the Olympic Games in Paris and set up a pit garage at Germany’s famed Nürburgring race track. Lei said in Paris the company will make the vehicle available globally, without providing a time frame. That fueled speculation that Xiaomi is keen to enter the European market despite the European Union’s move to slap tariffs on imports of made-in-China EVs.

The company is now developing more models in its EV lineup to better compete with industry leaders, with plans to sell a sport utility vehicle similar to Tesla’s Model Y as early as 2025, Bloomberg News has reported. It’s also expanding its capacity, purchasing a site in Beijing recently.

Over the past quarter, Xiaomi saw some recovery in its core smartphone business. The world’s third largest smartphone supplier shipped 28% more handsets compared to the year-ago period, the company said in its statement. But in the June quarter, component costs rose, squeezing margins.

–With assistance from Vlad Savov.

(Updates with executive’s comments from the fifth paragraph)