Xiaomi's automotive division once propelled its market capitalization beyond 1.5 trillion Hong Kong dollars, but today, its value has evaporated by more than half from its peak. Can Xiaomi's stock price rebound in the near term?

Eight years ago, on its first day of trading, Xiaomi's shares fell below their offering price, forcing founder Lei Jun and several executives to take refuge in a storage room at the Hong Kong stock exchange to avoid the media. After several ups and downs, Xiaomi's stock price continues to trouble Lei Jun. Over the past seven months, the share price has steadily declined, halving from its peak in June of last year and wiping out over 760 billion Hong Kong dollars in market value.

On April 14, Xiaomi announced another round of share buybacks. Since the beginning of the year, the company has spent more than 6.4 billion Hong Kong dollars on repurchases. However, these efforts have failed to stem the decline. Even after reporting strong revenue and profit growth last month, Xiaomi's shares continued to fall in subsequent trading sessions.

Apart from buybacks, there is no clear strategy to halt the stock's slide. Recently, however, Xiaomi appears to be making adjustments. Early collaborators Lei Jun, Li Wanqiang, and Hong Feng have completely exited the shareholder lineup, a move interpreted by outsiders as a shift in control. Additionally, media reports indicate that Xiaomi has recruited former Tesla sales executives and a former "star factory manager" to bolster its automotive division.

Notably, since April 8, Lei Jun has resumed his gym routine after a two-month hiatus, suggesting he may have more bandwidth. But can he afford to relax?

The automotive narrative is losing its appeal. On June 27 last year, Xiaomi's shares reached an all-time high of 61.45 Hong Kong dollars, pushing its market capitalization to 1.59 trillion Hong Kong dollars. This surge was driven by the rapid progress of Xiaomi's automotive business.

In March 2024, the SU7 model launched, garnering over 100,000 reservations within days and more than 40,000 locked orders. From the latter half of that year through the first half of the following year, as the SU7 entered mass production and deliveries climbed, Xiaomi's sales momentum overshadowed many electric vehicle startups, and its stock price embarked on a sharp upward trajectory.

After hovering near its peak for some time, Xiaomi's shares began a downward trend last September, with losses far exceeding the decline in the Hang Seng Tech Index during the same period. Despite numerous buybacks this year, the stock has struggled to maintain the 30 Hong Kong dollars per share level.

It was the electric vehicle story that lifted Xiaomi's shares from a previous trough of around 8 Hong Kong dollars. The current retreat may be partly due to the fading appeal of this narrative.

Lei Jun has set a delivery target of 550,000 vehicles for Xiaomi Auto in 2026. How challenging is this goal? Last year, Xiaomi Auto delivered approximately 411,000 vehicles, exceeding its initial target of 300,000. This year's target represents an increase of over 30% compared to last year's performance—a seemingly achievable goal given Xiaomi's earlier momentum.

However, reality tells a different story. Xiaomi's debut as an automaker was so impressive that the SU7 and YU7 models created reservation "myths," but subsequent sales have paled in comparison. SU7 sales reached around 12,500 units last November before production halted ahead of the next-generation model's launch. The YU7, launched in June last year, secured over 200,000 reservations within three minutes. While cumulative deliveries have surpassed 200,000 units, the initial locked orders are nearly depleted.

Xiaomi Auto's overall sales have already been impacted. In the first quarter of this year, cumulative deliveries amounted to approximately 79,000 vehicles. To meet the annual target, monthly deliveries must average 52,000 for the remainder of the year. However, March delivery data showed just over 20,000 units. Achieving monthly sales exceeding 50,000 will pose significant challenges for Xiaomi Auto's sales team.

For Xiaomi Auto, boosting sales hinges on expanding beyond its core fanbase and younger demographics to capture a broader consumer audience. The company recognizes this and plans to launch multiple new models this year, including all-electric and large-to-mid-size extended-range SUVs. The extended-range SUV, in particular, targets a different consumer segment. Nevertheless, competition in this market is fierce, with players like Li Auto, AITO, Volkswagen, Geely, and XPeng all vying for market share.

As competition in the new energy vehicle sector intensifies, profitability—not just scale—becomes critical for survival. Although Xiaomi Auto turned a profit last year, its ability to sustain profitability remains uncertain. Moreover, expanding its product lineup presents greater challenges in funding, production capacity, and management.

Rising uncertainties in the automotive business make it an unlikely catalyst for a significant rebound in Xiaomi's stock price in the near term.

Profitability in the smartphone segment is declining. While automotive represents Xiaomi's future, instability in its core business could undermine long-term prospects.

On March 24, Xiaomi reported earnings for 2025: revenue reached 457.3 billion yuan, up 25% year-over-year, while adjusted net profit surged 43.8% to 39.2 billion yuan—a record high. Despite these results, Xiaomi's shares began falling the next day, with only three positive trading sessions out of eleven by April 13. Market observers largely attribute this to pressures in the smartphone division.

In 2025, smartphones and AIoT contributed nearly 70% of Xiaomi's revenue, but growth in this segment slowed to just 5.4%. As smartphone sales declined for several consecutive quarters, AIoT—which relies on the smartphone ecosystem—also suffered. In the fourth quarter, smartphone revenue fell 13.6% year-over-year, while IoT and lifestyle product revenue dropped 20.3%.

The smartphone segment's struggles reflect broader industry headwinds, as global smartphone makers face challenging conditions. For Xiaomi, however, smartphones remain the profit engine funding new ventures like automotive, semiconductors, and large-language models. Stagnant or declining smartphone growth raises concerns about the company's ability to sustain investments in these areas.

Prospects for the smartphone business appear dim. According to IDC, the global smartphone market declined in the first quarter of this year—the first drop since 2023. Supply constraints for memory chips and geopolitical tensions could drive up costs and further limit growth.

For instance, on April 11, Xiaomi adjusted suggested retail prices for three of its models—all budget-friendly devices—a move likely to dampen consumer upgrade enthusiasm.

Beyond sales volume, Xiaomi's struggle to penetrate the premium smartphone segment is dragging down overall profitability. 2025 results showed smartphone gross margin falling to 10.9%, with the fourth quarter margin at just 8.35%. Goldman Sachs previously forecasted a loss of approximately 4.1 billion yuan for Xiaomi's smartphone business in 2026, with margins sliding to 8%.

In contrast, gross margin for IoT and lifestyle products—including major home appliances—rose to 23.1% in 2025. Consequently, Xiaomi is shifting focus toward more profitable segments. According to Caijing magazine, since the second half of last year, the company has redirected offline store evaluations from smartphones to higher-margin home appliance sales. Internal communications emphasize that smartphones are no longer the top priority; major appliances are now the primary profit drivers. Xiaomi is overhauling its offline retail strategy to prioritize major appliances, halting store expansion, and transitioning from "expansion-focused" to "efficiency-focused" operations.

As the foundational business, however, Xiaomi cannot afford prolonged weakness in smartphones. Investors are watching closely.

Lei Jun faces mounting pressure. On April 8, he resumed posting gym updates on social media, leading some to speculate that a busy period had concluded. Given Xiaomi's current challenges, however, his return to fitness may signal preparations for intensified efforts.

Five years ago, after Xiaomi faced U.S. sanctions, the board proposed entering the automotive sector and tasked Lei Jun with leading the initiative. At the launch event, he described it as his "last entrepreneurial bet," staking his reputation and track record. Despite having no automotive background, Lei Jun test-drove over 100 vehicles, studied extensively, conducted interviews, compiled 200,000 words of notes, and even obtained a racing license.

While Xiaomi Auto has gained recognition, higher sales targets and profitability demands leave little room for complacency. In early April, multiple reports indicated that former Tesla China general manager Kong Yanshuang and former Tesla Shanghai plant manufacturing vice president Song Gang would join Xiaomi Auto.

Kong Yanshuang, a sales expert, led Tesla's sales strategy and brand promotion in China. Song Gang, the first employee at Tesla's Shanghai Gigafactory, oversaw production and participated in establishing both the Shanghai auto plant and the Shanghai energy storage facility.

Xiaomi Auto is strengthening its sales and manufacturing capabilities, likely in preparation for the 550,000-vehicle target. Failure to achieve this goal could not only drag on revenue growth and strain cash flow but also undermine confidence in Xiaomi's automotive ambitions, further pressuring the stock price.

Clearly, Lei Jun's burden in the automotive sector has grown heavier. But his challenges extend beyond cars.

In early April, Xiaomi Technology Co., Ltd. saw changes in shareholders and registered capital. Co-founders Li Wanqiang and Hong Feng exited, reducing registered capital from 1.85 billion yuan to 1.48 billion yuan, while Lei Jun's stake increased from 77.8% to 97.5%. Although Li and Hong had stepped back from frontline operations years ago, this restructuring streamlines Xiaomi's domestic holding company and consolidates Lei Jun's control, potentially lowering barriers for major strategic decisions and improving efficiency.

With smartphone sales declining, automotive goals yet to be achieved, and massive ongoing investments in semiconductors and large-language models—each capable of standing alone as a separate company—Xiaomi is transitioning from a smartphone maker to a technology platform. The complexity of its operations exceeds anything before, and Lei Jun's responsibilities have never been greater.

As of the end of 2025, Xiaomi held cash reserves of 232.6 billion yuan, providing ample "ammunition" for its automotive and AI initiatives. Yet, for the stock to recover, Xiaomi needs a new growth narrative—one that Lei Jun and the company have yet to deliver.