Xiaomi’s EV division posts a $98 million profit in Q3 2025, validating a “ruthlessly efficient” consumer tech strategy that puts Apple’s failed car project to shame.

Xiaomi has achieved the holy grail of the electric vehicle industry—profitability—in record time, reports 彭博社. The Chinese consumer electronics giant reported a 700 million yuan ($98 million USD) profit for its smart EV and AI division in the third quarter of 2025, just 19 months after launching its first vehicle.

For context on just how disruptive this pace is: it took Tesla 61 months (five years) to reach its first quarterly profit after delivering the original Roadster. Even efficient Chinese rivals like Li Auto took 24 months. Xiaomi has effectively rewritten the startup playbook, proving that a tech-first “ecosystem” approach can scale faster than traditional automotive manufacturing models.

Disputing the “Cash Burn” Narrative

The industry standard for new EV entrants is years of bleeding cash. Xiaomi avoided this by leveraging its massive existing user base and supply chain expertise.

According to Bill Russo, founder of consultancy Automobility, Xiaomi “entered the market with several structural advantages that most pure-play EV startups didn’t have.”

He noted that the company “leveraged an enormous existing user base, a strong brand with high trust, and a fully integrated ecosystem strategy that creates very low customer acquisition costs.”

By treating the car launch like a smartphone release—complete with months of high-frequency livestreams and phased reveals—Xiaomi turned its existing tech users into a built-in demand engine.

The YU7 SUV and Market Impact

Momentum accelerated with the June 2025 launch of the YU7 sport utility vehicle. The model garnered more than 289,000 orders within hours of its debut. This volume was critical in pushing the division into the black.

The company’s “HyperOS” operating system is the linchpin of this success. By unifying the car with Xiaomi’s phones and smart home devices, the company opened immediate monetization avenues beyond the hardware itself—cloud services, premium infotainment, and app integration—opportunities that standalone EV startups typically miss.

Looming Headwinds in 2026

Despite the victory lap, 2026 presents significant challenges. Chinese authorities are scaling back tax breaks for EVs and hybrids next year, a move expected to dampen demand across the sector.

In a proactive move to lock in buyers, Xiaomi is offering a rebate of up to 15,000 yuan ($2,070 USD) to customers who order before the end of November for 2026 delivery. While this protects market share, company President Lu Weibing warned in earnings calls that Xiaomi’s EV gross margin is expected to shrink in 2026 as a result.

Unlike competitors BYD, which is aggressively localizing production in Europe, Xiaomi does not plan to start overseas expansion until 2027, leaving it exposed to the intense domestic price war in China for the next 18 months.

EVXL’s Take

Xiaomi’s 19-month sprint to profitability is a humiliating data point for Apple, which spent a decade and $10 billion on Project Titan before abandoning its car ambitions entirely. It proves that the barrier to entry for “tech cars” isn’t the manufacturing—it’s the ecosystem.

While legacy automakers and even pure-play EV rivals like XPeng struggle with profitability amid price wars, Xiaomi has demonstrated that if you own the customer’s digital life, you can sell them a car with remarkably low acquisition costs.

However, the delay in overseas expansion until 2027 is a double-edged sword. It allows Xiaomi to focus resources on dominating China, but it also means they will enter the European market just as established players like BYD are cementing their foothold. For now, Xiaomi has proven that a smartphone company can build a profitable car business—something Silicon Valley promised for years but never delivered.