Xiaomi - Strategic expansion into premium smartphones and electric vehicles

The world’s third largest smartphone brand

Xiaomi was founded in 2010 by Lei Jun and seven co-founders, all of whom had strong backgrounds in global technology companies such as Google and Motorola. 

Known for its value-for-money home appliances and smartphones, the company went public in 2018 on the Hong Kong Stock Exchange and has since established itself as one of the world’s leading technology firms. 

Xiaomi has firmly positioned itself as the third-largest smartphone brand in the world, holding a 13.8% market share as of the third quarter of 2024, behind only Samsung and Apple. 

The company entered the smartphone market in 2011 with the launch of the Mi 1, which was priced at $300 but offered premium specifications. 

This aggressive pricing strategy allowed Xiaomi to compete directly with higher-priced brands like HTC, which sold smartphones with similar specifications for $500. 

Over time, Xiaomi’s ability to provide high-quality devices at competitive prices contributed to its market expansion, while competitors like HTC saw their market share decline to nearly zero by 2019.

Moving up the premium category

In recent years, Xiaomi has moved beyond its initial reputation as a budget-friendly smartphone brand and has shifted towards the premium market segment. 

The growing demand for high-end smartphones has played in Xiaomi’s favour, with premium smartphones, defined as those priced above 3,000 RMB (approximately $470), accounting for 21.3% of all smartphones sold in China in the first nine months of 2024. 

This marks an increase from 17% in previous years, showing that even in a weaker economic environment, consumer preference for premium devices remains strong. 

On 27 February 2025, Xiaomi launched its latest flagship model, the Xiaomi 15 Ultra, which is equipped with the Qualcomm Snapdragon 8 Elite chipset and a 200-megapixel periscope camera. 

The device is priced at 6,499 RMB (approximately $892), making it a competitive option compared to premium models such as Samsung’s Galaxy S25 Ultra at $1,299 and Apple’s iPhone 16 Pro Max at $1,199. 

Despite moving into the premium category, Xiaomi has remained committed to its core value proposition of providing high-quality devices at attractive price points.

Electric Vehicles as the next growth driver

Beyond smartphones and home appliances, Xiaomi has now entered the electric vehicle market, marking its most ambitious expansion yet. 

China has already established itself as a global leader in EV manufacturing, with significant expertise in EV supply chains. 

However, this also means that competition within the sector is intense. Xiaomi has embraced this challenge with a strong product strategy, launching its first EV model, the SU7, in March 2024. 

Priced at $30,000, the SU7 has quickly gained traction, becoming one of the best-selling EV models of the year. 

It reached 100,000 production units in just 230 days since launch, making it the fastest EV model to achieve this milestone. 

With continued strong demand and deliveries, Xiaomi has now positioned itself as a serious contender in the EV industry, even outselling established Chinese brands such as BYD and Xpeng.

Xiaomi’s approach to the EV sector follows the same philosophy that made it successful in the smartphone market. 

The company aims to offer affordable electric vehicles with premium features, including autonomous driving solutions, while also planning to introduce higher-end models to cater to a broader consumer base. 

With the global EV market currently valued at approximately $500 billion, Xiaomi’s entry into this space significantly expands its total addressable market. 

By comparison, the home appliance sector is valued at $743 billion, while the smartphone market is estimated at $600 billion. 

The EV business presents an opportunity for Xiaomi to replicate its success in consumer electronics, potentially becoming a major player in the industry.

Strong growth in both Smartphone and EV businesses

Despite its expansion into new markets, Xiaomi has maintained strong financial performance. In the third quarter of 2024, the company reported a net profit of 6.3 billion RMB, reflecting a year-on-year growth of 4.4%. 

This figure takes into account a 1.5 billion RMB loss from its EV business, which is expected as production scales up. 

The company’s revenue for the quarter reached 92.5 billion RMB, marking a 30.5% increase year-on-year. 

The smartphone segment contributed 16.8% growth, while the newly launched EV division generated 9.7 billion RMB in revenue during the quarter, a significant contribution considering it did not exist in 2023.

Strong cash position

Despite the high capital expenditure required to expand its EV business, Xiaomi’s financial position remains strong. 

The company reported a cash balance of 151.6 billion RMB as of the third quarter of 2024, representing an 18.7% increase year-on-year. Xiaomi continues to return excess cash to shareholders through share buybacks, further strengthening investor confidence.

Key risks

While Xiaomi has demonstrated strong growth, there are several risks that investors should be aware of. 

Geopolitical tensions between the United States and China remain a concern, particularly as Xiaomi operates across various technology sectors. 

The company has previously faced scrutiny, having been blacklisted by the US Department of Defense in 2021 under the Trump administration, before being removed later that year. 

Any future regulatory actions could pose risks to Xiaomi’s global operations. 

Additionally, the competitive nature of the EV market means that continued losses in this segment could impact Xiaomi’s overall profitability. 

If the EV business struggles to achieve sustainable margins, it could raise concerns about the long-term viability of Xiaomi’s expansion strategy.

Trading at 43x P/E ratio

Xiaomi’s share price has seen an impressive rally, rising 288% over the past 12 months, significantly outperforming the Hang Seng Index, which gained 38% during the same period.  The stock currently trades at a price-to-earnings (P/E) ratio of 43 times, reflecting investor confidence in Xiaomi’s ability to grow its smartphone market share while successfully entering the EV sector. 

Going forward, it will be important to monitor Xiaomi’s execution in the EV market, particularly its ability to achieve profitability while maintaining momentum in its core smartphone business.

You can now trade Xiaomi through Hong Kong Singapore Depository Receipts (SDRs). These HK SDRs offer investors a more accessible way to invest in Hong Kong-listed companies. 

Apart from Xiaomi (HXXD), Meituan and Ping An insurance would also be accessible through Hong Kong SDRs for investors from 5 March 2025. 

• Meituan (HMTD): Online food delivery giant in China; owns 69% market share of the 1 trillion yuan delivery platform market
• Ping An Insurance (HPAD): Leading integrated financial, healthcare and elderly care service provider in China.

It might be worth noting that Xiaomi can be purchased with a lower minimum outlay through SDRs. These SDRs will also be custodised in your CDP account.

This adds to a growing list of SDRs on the SGX. Earlier, we saw the launch of five HK SDRs, including Alibaba, Tencent, BYD, HSBC and BOC. 

In addition, there are eight Thai Singapore Depository Receipts, including Airports of Thailand and CP All. 

Click here to learn more about SDRs. 

Join the Beansprout Telegram group for the latest insights on Singapore stocks, REITs, bonds and ETFs. 

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