Financial results released by Xiaomi Group on August 19th show that for the first half of this year, the company's innovative businesses, including Smart Electric Vehicles and AI (collectively known as 'Xiaomi Auto'), generated revenue of 39.84 billion yuan (approximately $5.49B USD), with an operating loss of around 800 million yuan ($110M USD). Notably, in the second quarter, Xiaomi Auto achieved a gross margin of 26.4%, while narrowing its operating loss to just 300 million yuan ($41.3M USD).

Automotive gross margin is a critical indicator of an automaker's profitability. According to financial data from major automakers this year, among the 13 manufacturers tracked by Yicai, five have achieved gross margins exceeding 20%, including Seres, Xiaomi, Zeekr, Li Auto, and BYD.

Xiaomi Auto's Q2 gross margin has now surpassed Tesla's, positioning it at the top among automakers that have reported their Q2 figures. When considering performance from the first quarter, Xiaomi Auto's gross margin was second only to Seres (27.6%) among the tracked manufacturers.

High-End Strategy Driving Margins

Among the five automakers with margins exceeding 20%, both Xiaomi Auto and Zeekr remain unprofitable overall. Seres similarly operated at a loss for several years before its partnership with Huawei helped boost sales of its AITO brand, enabling the company to return to profitability in 2024. With the exception of BYD, the other four high-margin automakers generally market products at premium price points.

It's particularly significant that several Chinese automakers have now achieved gross margins higher than Tesla. While many emerging EV manufacturers continue to report losses, their gross margins have been steadily improving, including those of XPeng and Leapmotor. Leapmotor has emerged as the sales leader among new EV manufacturers, despite focusing primarily on the economy segment with lower-priced vehicles.

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