Xiaomi generates its first profit from electric vehicle production

The Chinese corporation Xiaomi has generated its first profit from electric vehicle production but warned of reduced profitability next year due to rising chip prices and the reduction of tax incentives for electric vehicles. As a result, shares plummeted to a six-month low.

What is known

In the quarter ending in September, Xiaomi's electric vehicle division reached profitability for the first time, earning 700 million yuan (98 million dollars). This allowed the company to more than double its net profit and offset a 300 million yuan loss from the previous three months. However, Xiaomi's management expects a decline in margin next year due to increased competition and reduced Chinese tax incentives for purchasing electric vehicles.

Xiaomi's stock price in Hong Kong fell by 6.3%, reaching a low since April. The company also notes a memory chip shortage, which will lead to increased costs for mobile devices next year.

Despite successes — this year Xiaomi became a profitable car manufacturer for the first time and plans to complete the delivery of 350,000 electric vehicles a month earlier than planned — the company's long-term prospects raise concerns among some investors. Concerns include high competition, product safety issues, and production delays.

Xiaomi's management aims to enter the top five global automakers, increasing production volumes and preparing to start delivering electric vehicles to Europe by 2027. However, as Bloomberg Intelligence experts note, the tightening of tax policies and increasing competition make the industry's future less certain.

Source: Bloomberg