TMTPOST -- Chinese smartphone giant Xiaomi has reported a 30.5% increase in revenue for the third quarter, driven by a recovery in the global smartphone market and strong growth in its electric vehicle (EV) business.

The company’s revenue for the three months ending in September reached 92.5 billion yuan (US$12.8 billion), beating the 90.3 billion yuan estimated by analysts surveyed by Bloomberg.

Adjusted net income for the quarter grew 4.4% year-on-year to 6.3 billion yuan, exceeding the forecast of 5.9 billion yuan. And its cash reserves reached 151.6 billion yuan (US$21 billion) as of September 30, up nearly 19% from a year earlier, according to data from the Beijing-based tech giant's third-quarter earnings report.

In a statement, Xiaomi emphasized its commitment to its 2020-2030 strategy, focusing on investing in core technologies with the goal of becoming a global leader in the rapidly evolving field of cutting-edge innovations.

Xiaomi’s "smart electric vehicle and other new initiatives" segment generated 9.7 billion yuan in revenue, reflecting the positive reception of its first electric vehicle, the SU7 sedan, which was launched earlier this year. The company reported delivering 39,790 SU7 series vehicles during the third quarter.

Xiaomi CEO Lei Jun said that no industry is facing a more intense price war than the EV industry. From the moment Xiaomi entered the EV sector, the company adopted a "fight to the death" mindset. Three years ago, after deciding to enter the EV manufacturing business, Xiaomi began to steadily accumulat cash. Over the past three years, Xiaomi has built up 30 billion yuan in cash reserves. The company aims to have sufficient cash reserves to gear up for any fierce competition in the EV industry over the next five years.

As Xiaomi’s second electric vehicle, the SU7, prepares to enter the market, the company’s cash reserves have grown by nearly 30 billion yuan compared to the same time last year. This suggests that Xiaomi is bracing for even fiercer competition in the automotive sector than it had originally anticipated.

The performance of Xiaomi’s EV business has become a central focus for investors, particularly the financials of the SU7 model, which was launched earlier this year. In Q2, Xiaomi’s EV segment generated 6.4 billion yuan ($870 million) in revenue, with a gross margin of approximately 15.4%. However, the business segment also incurred a loss of 1.8 billion yuan ($241 million). During this period, Xiaomi delivered 27,307 vehicles, sparking the discussion that "Xiaomi loses over $8,000 on each car sold."

In response to concerns, Lei emphasized that these figures were part of Xiaomi’s planned investment in the long-term growth of its electric vehicle segment. He noted that although the company incurred losses in the second quarter, the scale of its operations would eventually help the company break even as costs decline.

By Q3, Xiaomi’s SU7 deliveries had climbed to 39,790 vehicles, bringing the total number of units delivered to 67,157 by September 30. This was accompanied by a significant reduction in the per-vehicle loss. Xiaomi’s EV business generated 9.7 billion yuan ($1.3 billion) in revenue, while the net loss for the segment shrank by about 50% from the second quarter to 1.5 billion yuan ($201 million).

After announcing on Weibo last week that Xiaomi had achieved its goal of producing 100,000 vehicles this year, Lei shared in a separate post on Monday that the company is now aiming for 130,000 deliveries.

With its entry into the electric vehicle (EV) market, Xiaomi is expanding its diverse lineup of lifestyle products, which already spans items such as luggage, umbrellas, washing machines, and refrigerators. This approach aligns with the company’s newly articulated strategy, “Human x Car x Home.”

Lu Weibing, president of Xiaomi’s smartphone division, highlighted that the strong financial performance underscores the wisdom of the company’s strategic moves into EVs and premium smartphones, despite intense market competition and rising supply chain costs. 

Under Xiaomi’s fully connected ecosystem strategy, vehicles, smartphones and other smart devices have been integrated into each other, Lu said during the earnings call. Xiaomi has identified fresh starting points for growth and will continue to roll out new products, leveraging IoT expansion to drive our future development, he added.

The company's core businesses, which include smartphones and "artificial intelligence of things" (AIoT)—a category covering Internet of Things and lifestyle products—generated 82.8 billion yuan in revenue for the quarter, marking a 16.8% year-on-year increase.

However, the gross margin of Xiaomi’s smartphone declined from 16.6% in Q3 2023 to 11.7% in Q3 2024. This decline was attributed to higher production costs, primarily driven by the increased prices of key components such as memory chips and displays.

Despite this, Lu reassured investors that Q3 would likely represent the lowest point for the smartphone division's margins, with an expected rebound in Q4. He cited factors such as the peak prices for memory in Q3, which are expected to drop in Q4, and the higher pricing of new models like the Xiaomi 15, which has an increased starting price of 4,499 yuan ($607) compared to last year’s Xiaomi 14 model, priced at 3,999 yuan ($540).

In China, Xiaomi rose to fourth place among smartphone vendors, with 10.2 million units for shipments and a 15% market share, according to Canalys. The company ranked behind Vivo, Huawei Technologies, and Huawei’s spin-off brand Honor.