Many electric vehicle manufacturers in China have recorded a gross profit margin surpassing that of Tesla. In particular, Xiaomi, considered a latecomer even in China, introduced its electric vehicle products for the first time last year, and despite higher pricing compared to competitors, it achieved high sales, recording the highest profitability this quarter.
According to a recent earnings announcement by the Xiaomi Group, sales of Xiaomi cars in the first half of this year reached 398.4 billion yuan (about 77.64 trillion won), and operating losses were estimated at about 800 million yuan (approximately 155.9 billion won). The quarterly gross profit margin reached 26.4%, an increase of 3.2 percentage points from the previous quarter and 11 percentage points from the same period last year. The gross profit margin is a key indicator used to assess the revenue of vehicle corporations.
Xiaomi's achievement of industry-leading gross profit margins was due to increased average selling prices driven by premium models and strong sales that supported lower manufacturing costs.
According to the Chinese economic media Caixin, the selling price of the 'SU7 Ultra', which began deliveries in the second quarter, is significantly higher at 529,900 yuan (about 100 million won) compared to the standard model (highest 299,900 yuan or 58.44 million won). The launch of the SU7 Ultra raised the average selling price of Xiaomi cars from 228,600 yuan (about 44.53 million won) in the same period last year to 253,700 yuan (about 49.42 million won). At the same time, sales increased with more than 80,000 vehicles delivered in the second quarter. The economies of scale effect lowered manufacturing costs and maximized profitability.
According to 21st Century Business Herald and Chao Lian, Xiaomi executives noted during an earnings conference call that "Xiaomi is firmly opposed to price competition or internal competition" and confidently stated, "We believe we can achieve our annual goal of '350,000 deliveries' with high quality without participating in price competition." They further forecasted Xiaomi will post monthly profits in the 3rd and 4th quarters. Leveraging strong revenue, Xiaomi plans to enter the European electric vehicle market in 2027.
However, Xiaomi has invested 30 billion yuan (about 5.84 trillion won) in research and development (R&D) for its new businesses over three years and is still in the investment stage, likely requiring more time before achieving full profitability.
According to the companies' second quarter performance announcements, not only Xiaomi but also major electric vehicle manufacturers in China are rapidly improving their revenue. According to China Business News, five of the 13 major completed car manufacturers in China reported gross profit margins exceeding 20% in the second quarter, surpassing Tesla (about 15%). In addition to Xiaomi, this includes Seres, Zeekr, Li Auto, and BYD. Notably, Seres has successfully achieved profitable operation in 2024 with steadily increasing sales of its electric vehicle brand AITO, developed in collaboration with Huawei.
New companies are also expected to join the ranks of profitability through high-price strategies. According to Caixin, Xpeng reported revenue of 182.7 billion yuan (about 35.60 trillion won) in the second quarter, a record high and a 125.3% increase from the same period last year. The net loss decreased more than 62% from 1.28 billion yuan (approximately 249.3 billion won) in the previous year to 480 million yuan (about 93.5 billion won).
Xpeng is expected to achieve 100% revenue growth (19.62 billion yuan or about 38.18 trillion won) based on a delivery increase of about 150% compared to the same period last year in the third quarter, and to achieve its first quarterly profit in the fourth quarter. Chairman He Xiaopeng stated, "Starting from the fourth quarter of this year, the company will enter a new phase with profitability and cash generation capability" and added, "From next year, we will raise vehicle prices to further enhance profitability."