In June 2026, shares of Xiaomi Group (01810.HK) were hovering near HKD 22, briefly touching a 52-week low of HKD 21.86. Compared to the all-time high of USD 61.45 set in June 2025, the stock had fallen approximately 65% in one year, erasing over one trillion Hong Kong dollars in market capitalization.
At the same time, Xiaomi’s EV business presents a starkly different picture. In May 2026, Xiaomi EV deliveries exceeded 30,000 units for the second consecutive month. The Xiaomi SU7 ranked fourth in sedan sales for May with 24,023 units sold, while the smart EV segment reported RMB 19 billion in Q1 revenue, up 5.1% year-over-year.
On one side, a product phenomenon with monthly sales firmly above 30,000 units; on the other, a stock price continuously hitting new lows. What market logic lies behind this seemingly contradictory divergence?
Core Business Losing Momentum: The Smartphone Segment Becomes the Biggest Drag
Any analysis of Xiaomi’s stock price must start with its revenue structure. In Q1 2026, the "Smartphone × AIoT" segment contributed RMB 79.3 billion, accounting for about 80% of total group revenue. This means the smartphone business remains the "proverbial bedrock" determining the group’s overall performance.
But this bedrock is cracking. Xiaomi’s smartphone revenue in Q1 was RMB 44.3 billion, down 12.5% year-over-year. Global shipments fell to 33.8 million units, a sharp 19.1% decline. In the Chinese market, Xiaomi even dropped out of the top five. Gross margin for smartphones fell to 10.1% from 12.4% in the same period last year, hitting a near two-year low.
The core reason is a pincer movement of rising upstream costs and downstream price wars. Prices for key components like memory chips keep rising, while market competition prevents Xiaomi from fully passing these costs on to consumers. Even though the average selling price (ASP) of Xiaomi smartphones rose 8.2% year-over-year to a record high of RMB 1,310, it still couldn’t cover the cost increases.
When the core business contributing 80% of group revenue suffers a simultaneous decline in both revenue and profit, the market’s pricing logic is inevitably shaken at its foundation.
The Second Growth Engine: The EV Business Remains Mired in Losses
The automotive business, once highly anticipated by the capital market, is undergoing a difficult transition from "expectation-driven" to "performance-verified."
In Q1, revenue from the smart EV and innovations segment (including AI) was RMB 19.9 billion, up 6.9% year-over-year. However, the segment reported an operating loss of RMB 3.1 billion for the quarter. This ended the brief period of quarterly profitability seen in Q3 and Q4 of 2025, sending the EV business back into a phase of heavy investment.
Behind the RMB 3.1 billion loss lies a confluence of multiple factors: a product gap from the discontinuation and replacement of the first-generation SU7, new models still ramping up production, and rising upstream component prices. Xiaomi’s R&D spending in Q1 increased 33.4% year-over-year to RMB 9 billion, with a significant portion directed towards automotive smart technology. These strategic investments cannot be converted into profit in the short term but directly erode current earnings.
From a financial structure perspective, the automotive business remains a "cash consumer" rather than a "cash generator" for the group. When a business seen as the "second growth engine" is still burning through cash, the patience of the capital market wears thin.
Valuation Logic Restructured: Repricing from Growth Stock to Value Stock
The 65% stock price decline is not just a result of poor performance; it’s a process of the market systematically repricing Xiaomi’s valuation logic.
During 2024 and the first half of 2025, the market tended to view Xiaomi as a high-growth ecosystem technology platform company, willing to assign a higher valuation premium to the "car + IoT" narrative. At that time, Xiaomi’s P/E ratio once exceeded 50 times. However, by 2026, amidst rising costs, intensifying competition, and short-term earnings volatility, some institutions re-anchored the valuation logic back to traditional consumer electronics manufacturing stocks, bringing the P/E ratio down from over 50 times to 17-18 times.
This shift in valuation logic is essentially a re-examination of the fundamental question: "What kind of company is Xiaomi?" If defined as a "smartphone manufacturer + emerging automaker," its valuation should align with consumer electronics and automotive manufacturing. If defined as a "human-vehicle-home full-ecosystem technology platform," it deserves a higher growth premium.
The Q1 report provided the answer: the smartphone business is losing momentum, and the automotive business is losing money. Faced with such performance, the market chose the former.
Delivery Targets vs. Reality Gaps: The 550,000 Vehicle Commitment Under Pressure
Xiaomi EV’s full-year 2026 delivery target is 550,000 vehicles. This target builds on the over 410,000 vehicles delivered in 2025 and was positioned by Lei Jun as a reasonable goal, "neither too high nor too low."
However, the gap between the target and execution is widening. In the first five months of 2026, Xiaomi EV delivered approximately 150,317 vehicles cumulatively. To reach the 550,000 annual target, it needs to deliver about 400,000 vehicles over the remaining seven months, averaging roughly 57,000 per month.
Q1 deliveries were 80,856 units, up 6.6% year-over-year. This growth rate stands in stark contrast to the over 200% year-over-year growth seen in 2025. The sharp deceleration has broken the market’s expectation of a "linear, high-growth trajectory" for Xiaomi EV.
The capital market’s valuation of emerging businesses heavily relies on expectations of future high-speed growth. When growth decelerates from "explosive" to "industry average," the valuation premium naturally contracts.
Buybacks vs. Sell-offs: Why a 200 Billion HKD Buyback Couldn’t Prop Up a Trillion-Dollar Market Cap
Facing a sustained stock price decline, Xiaomi launched a HKD 20 billion share buyback plan. As of May 22, 2026, Xiaomi had cumulatively repurchased about HKD 8.4 billion during the year, exceeding the total buyback amount for all of last year.
However, the buyback failed to effectively halt the downward trend. The HKD 20 billion buyback scale is dwarfed by the market cap erosion of over one trillion Hong Kong dollars. This disparity in magnitude means the buyback serves more as a signal to the market than a substantial price support mechanism.
The market’s tepid reaction to the buyback reflects a deeper issue: when a company’s fundamentals systematically deteriorate, no financial engineering can substitute for real performance improvement. Buybacks can provide temporary support but cannot rebuild market confidence in the long-term growth narrative.
Industry Context: Squeezed by Intense Competition and Shrinking Subsidies
The difficulties Xiaomi faces are not isolated but rather a microcosm of the broader pressure on China’s technology manufacturing sector.
In Q1 2026, total domestic auto sales reached 4.823 million units, down 20.3% year-over-year. Within this, new energy vehicle (NEV) sales totaled 2.96 million units, down 3.7%. Broader industry growth slowdown, combined with escalating price wars among NEV makers, is compressing profit margins for all participants.
Simultaneously, adjustments to the vehicle purchase tax subsidy policy have directly impacted Xiaomi EV’s per-unit profit model. The automotive business gross margin fell from 23.2% in Q1 2025 to 20.1% in Q1 2026, a decline of 3.1 percentage points year-over-year.
Against this backdrop of industry-wide pressure, even though Xiaomi’s product capabilities have been validated in the market, the macroeconomic and industry headwinds remain significant. When pricing a stock, the market looks not only at a company’s product but also at the competitive track and the economic cycle it operates within.
Product Hype vs. Financial Returns: Two Different Narratives
The Xiaomi SU7 sold 24,023 units in May 2026, ranking among the top large pure electric sedans. The Xiaomi YU7 entered the 200,000 RMB-plus pure electric SUV market with a starting price of RMB 233,500. From a product perspective, Xiaomi EV is undoubtedly a phenomenal success.
But the capital market doesn’t focus on "how many cars were sold." It focuses on "how much money does selling cars make?" and "when will it consistently make money?" The reality of a near RMB 40,000 loss per car sold in Q1 means the automotive business is currently in a "prioritizing market share over profitability" phase, not a "generating profit margin at scale" phase.
Product hype solves the "can it be sold" problem. Stock valuation answers the "how much is this business actually worth" question. When the answer to the latter remains unclear, success in the former cannot automatically translate into stock price support.
Summary
The 65% drop in Xiaomi Group’s stock price from its all-time high stands in stark contrast to the market enthusiasm for Xiaomi EV. The essence of this divergence is a significant time lag between product-level success and financial-level realization.
The slowdown in the core smartphone business has shaken the group’s performance foundation. The sustained losses in the automotive business have delayed the realization of the "second growth engine." The valuation logic shift from growth stock to value stock has compressed the market’s imagination space. The execution pressure to deliver 550,000 vehicles annually further amplifies short-term uncertainty.
Xiaomi EV is undoubtedly a phenomenal product. But the capital market’s pricing logic has never relied solely on "whether the product is popular." It cares about: when will this business be profitable? How much can it earn? How long can it sustain those earnings? Until these questions have definitive answers, the divergence between the phenomenal product and the depressed stock price will likely persist.
FAQ
Q: What are the main reasons for Xiaomi’s 65% stock price decline?
A: The core reason is the double blow of a faltering core smartphone business (Q1 shipments down 19% YoY, gross margin dropped to 10.1%) and persistent losses in the EV business (a quarterly operating loss of RMB 3.1 billion). This is compounded by the market’s systematic repricing of Xiaomi’s valuation logic from a growth stock to a value stock.
Q: Isn’t Xiaomi EV selling well? Why is the stock price still falling?
A: Product sales and stock valuation follow different logics. The Xiaomi SU7’s monthly sales exceeding 24,000 units prove its product prowess. However, the capital market focuses on profitability. With a loss of nearly RMB 40,000 per car sold in Q1, the EV business hasn’t achieved stable profitability and cannot support a valuation premium.
Q: Why couldn’t Xiaomi’s HKD 20 billion buyback stabilize the stock price?
A: The HKD 20 billion buyback scale is insignificant compared to the over one trillion Hong Kong dollars in market cap lost. A buyback can signal confidence, but it cannot substitute for fundamental improvements in the business. When both the smartphone and EV businesses face significant pressure, no financial maneuver can easily reverse market pricing trends.
Q: Can Xiaomi EV achieve its 550,000 vehicle delivery target for 2026?
A: With cumulative deliveries of approximately 150,000 units in the first five months, achieving the full-year target of 550,000 vehicles requires average monthly deliveries of about 57,000 units over the remaining seven months, a significant challenge. Production capacity is ramping up, but execution pressure remains high.
Q: What change has occurred in Xiaomi’s valuation logic?
A: The market’s valuation of Xiaomi has shifted from an "ecosystem technology platform company" (with a P/E ratio once exceeding 50x) to a "consumer electronics manufacturing + automotive" pricing framework (with a P/E ratio falling to 17-18x). The essence of this shift is the market re-answering the fundamental question: "What kind of company is Xiaomi, really?"
