Xiaomi’s YU7 Launch: Founder-Led Vision and the Fastest Road to Automotive Profitability

26.06.2025

Original Publication

Thematica

Xiaomi

YU7Launch

Electric Vehicles

FounderLed

FutureMobility

Xiaomi: Founder-Led Innovation and the Fastest Path to Profitability in Automotive History

Xiaomi, a core holding in our Thematica – Future Mobility Fund, is making automotive history today with the official launch of its YU7 SUV, marking another milestone in what could become the fastest journey to profitability ever achieved by a car manufacturer. As a founder-led organization with audacious global ambitions, Xiaomi exemplifies the qualities we seek when identifying winners in the rapidly evolving EV supply chain.

The YU7 Launch: Expanding the Product Ecosystem

Today, June 26, 2025, marks the official launch of Xiaomi's highly anticipated YU7 SUV. Positioned as a direct competitor to the Tesla Model Y, the YU7 arrives with three variants: Standard (320hp, 835km range), Pro (496hp, 770km range), and Max (690hp, 760km range). The flagship Max version accelerates from 0-100 km/h in just 3.23 seconds, showcasing Xiaomi's commitment to performance leadership. A standout feature across all YU7 variants is its ultra-fast charging capability: drivers can add up to 350 kilometers (217 miles) of range in just 15 minutes, setting a new benchmark for charging convenience in its class.

Over 500 units have already rolled off the production line at Xiaomi's F1 factory, with the vehicle featuring advanced capabilities including external voice control through eight microphones and one speaker. This launch represents a critical expansion of Xiaomi's mobility portfolio, building on the success of the SU7 sedan which has delivered over 258,000 units since its March 2024 debut.

Founder-Led Vision: Beyond EVs to Global Automotive Leadership

Lei Jun's ambitions extend far beyond the electric vehicle sector. The Xiaomi founder has publicly stated his goal to make Xiaomi one of the top 5 car manufacturers globally within 15-20 years, not just in EVs, but across the entire automotive industry. This means targeting annual sales of over 10 million vehicles by 2044, with the ultimate vision of having "Xiaomi vehicles driving on every street in the world".

This founder-led ambition is precisely why we favor Xiaomi in our portfolio. Lei Jun’s direct leadership and vision were instrumental in Xiaomi Corporation’s decision to commit an initial $1.4 billion (RMB 10 billion) to its EV business, with further investments planned over the coming decade. His ability to mobilize over 3,000 engineers to the automotive project demonstrates the kind of long-term thinking and risk-taking that separates market leaders from followers. His direct involvement ensures strategic alignment and rapid decision-making, critical advantages in the fast-moving EV landscape.

The Fastest Road to Profitability in Automotive History

Perhaps most remarkably, Xiaomi expects its EV business to achieve profitability in the second half of 2025, what could be the fastest path to profitability in the history of car manufacturing. Lei Jun's confidence in this timeline, announced publicly on June 3, 2025, reflects the company's exceptional execution and margin discipline.

The trajectory toward profitability is already visible in the numbers. In Q1 2025, Xiaomi's EV division achieved a gross margin of 23.2%, up from 20.4% in the previous quarter. More importantly, the operating loss shrank dramatically to $69 million (RMB 500 million) in Q1 2025, down from $97 million (RMB 700 million) in Q4 2024. This represents an 85% improvement in per-unit losses compared to 2024, when the company was losing approximately $6,250 per vehicle.

Consistent Margin Improvement

Since the launch of its EV segment, Xiaomi has demonstrated impressive and consistent margin improvement each quarter. In Q2 2024, the EV division posted a gross margin of 15.7%. This increased to 20.4% in Q4 2024, and further to 23.2% in Q1 2025. This steady progression underscores Xiaomi’s ability to scale production efficiently, optimize costs, and enhance its product mix. The company’s relentless focus on operational excellence and premium positioning is clearly translating into healthier margins, setting a strong foundation for its anticipated profitability in the second half of 2025.

Execution Excellence and Scale

Xiaomi's Q1 2025 results demonstrate remarkable execution. The EV division generated $2.5 billion (RMB 18.1 billion) in revenue, representing 11% quarter-over-quarter growth despite broader industry headwinds. With 75,869 vehicles delivered in Q1 alone and over 258,000 cumulative deliveries since launch, Xiaomi has demonstrated its ability to scale production rapidly while improving margins.

The company has raised its 2025 delivery target to 350,000 units, supported by expanded production capacity and a growing retail network spanning 216 outlets across 64 cities. It’s important to note that this ambitious delivery target is solely for the Chinese market. There is significant excitement, not just among investors like us, but also among automotive enthusiasts about when Xiaomi will begin exporting the YU7 and its other EVs to Europe and global markets. Just wait until Xiaomi’s vehicles hit the international stage; the potential for growth could be even more substantial. The addition of the YU7 to the lineup, with its competitive pricing and premium features, positions Xiaomi to capture significant market share in the crucial SUV segment.

Competitive Positioning in a Challenging Market

Lei Jun's profitability timeline stands in stark contrast to the broader Chinese EV market, where price wars and margin pressure continue to challenge competitors. While market leader BYD cut prices by up to one-third in late May 2025, Xiaomi's focus on premium features at competitive prices, combined with its integrated ecosystem approach, provides defensive positioning against commoditization.

The YU7's feature set exemplifies this strategy: 10-million-pixel driver assistance, 700 TOPS computing power, LiDAR, and Xiaomi's panoramic display system come standard across all variants. This approach mirrors successful strategies in Xiaomi's consumer electronics business, where premium features at accessible prices drove market share gains.

Why Founder Leadership Matters

In our investment approach, founder-led companies consistently outperform because they combine authentic vision with operational agility. Lei Jun's hands-on leadership, from personally announcing delivery targets to directly engaging with customers on social media, creates organizational alignment and execution speed that traditional automotive companies struggle to match.

This founder-driven culture extends beyond Lei Jun himself. The company's willingness to enter adjacent markets, integrate AI and IoT capabilities, and pursue aggressive growth targets reflects the entrepreneurial mindset that we believe will define the next generation of automotive winners.

Valuation and Analyst Consensus

Despite its remarkable execution and growth trajectory, Xiaomi's valuation remains attractive relative to its prospects:

• P/E FY2025E: 31.9x
• P/E FY2026E: 24.9x
• P/E FY2027E: 20.0x

Analyst sentiment remains overwhelmingly positive, with a consensus "strong buy" rating and average upside of 18.88% over the next twelve months. Of 34 analysts covering the stock, 25 rate it a strong buy, 8 a buy, 2 hold, 1 sell, and 1 strong sell.

Expanding Horizons: Humanoid Robots and the Next Trillion-Dollar Market

Beyond its rapid growth in electric vehicles, Xiaomi is actively investing in cutting-edge technologies such as humanoid robots and artificial intelligence. This diversification aligns with the company’s broader vision of creating a smart, interconnected ecosystem that goes well beyond mobility.

Industry leaders like Nvidia’s founder Jensen Huang have highlighted humanoid robots and AI as the “next trillion-dollar market,” underscoring the unprecedented growth potential in these fields. By leveraging its expertise in AI, IoT, and consumer electronics, Xiaomi is well positioned to capitalize on this emerging opportunity, potentially unlocking new revenue streams and driving long-term value for investors.

This strategic expansion into robotics and AI not only complements Xiaomi’s EV ambitions but also reinforces its status as a founder-led innovator with a diversified growth platform.

Disclaimer: Xiaomi is a holding in our fund. This article is for informational purposes only and does not constitute investment advice. All data as of June 26, 2025. Company information sourced from recent filings, official announcements, and industry reports.