'China’s Apple' is in free-fall

Shares down 63% over 12 months

Xiaomi stock price has suffered a major reversal in the last 12 months, moving from a high of H$61.55 to H$22.62 today, its lowest level since September 2024, with its market cap falling from H$1.53 trillion ($192 billion) to $74 billion. This retreat has happened amid the soaring memory prices and the ongoing retreat in EV stocks.

Xiaomi has also struggled because of its electric vehicle business. While its EV sales are rising, there are concerns that demand will wane after Beijing ended its subsidies earlier this year. All EV stocks have plunged sharply this year.

The most recent results showed that Xiaomi’s business is going in reverse gear. Its revenue dropped by 10.9% to RMB99.14 billion in the first quarter from the previous year’s RMB111.2 billion.

Its profitability metrics were worse. Its profit for the period declined by 56.5% to RMB4.7 billion, while the operating profit fell by 60% to RMB5.3 billion. These declines were mostly driven by the smartphone segment whose shipments dropped to 33.8 million units from 41.8 million in the same period last year.

The same slowdown is happening across its other segments. Vehicle deliveries dropped to 80,856 from 145,115 in the fourth quarter.

Source: Xiaomi stock analysis

NB: Selling cars, eh? 19% phone unit sales drop contributed to the story but cars are a disaster. A phone maker selling cars is a bad idea. Almost as bad as a car maker building robots.

Xiaomi is being dubbed "China's Apple" but unlike Apple Xiaomi is undisciplined about what segments to enter. Xiaomi initially decided to "fast follow" Apple into cars but when Apple cancelled their project, Xiaomi either could or would not do the same. So they plunged into a capital intense, slow to evolve, highly regulated and indefensible market.

Of course, the phone business is not great for them but they had a chance to differentiate with design for those who would insist on a Chinese phone.

Mixing phones and cars means mixing two completely orthogonal businesses. There is zero overlap in design, manufacturing, distribution, capital allocation, cycle time of product launch, and brand risk/reward.

Car makers have had more than a century to diversify. Every attempt failed.