On November 18th, Monday, Xiaomi announced its Q3 earnings report, with both revenue and profit exceeding expectations. Q3 revenue reached 92.51 billion yuan, setting a new historical high, marking six consecutive quarters of sequential growth, and the adjusted net profit increased by 4.4% year-on-year to 6.25 billion yuan.
At the earnings conference held that evening, Xiaomi Group President Lu Weibing stated that by October 13th, the Xiaomi SU7 had exceeded 100,000 units in just 230 days, and there is still a lot of room for imagination in the future automotive business.
Lu Weibing mentioned that Xiaomi has three growth curves (mobile phones, IoT products, and automotive business lines) that can help us meet the needs of different users in various global markets, thereby helping us better cope with the uncertainties of the broader environment, which is a unique business model globally.
In his speech, Lu Weibing also specifically mentioned progress in AI:
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&#34;We hope to better integrate AI with vehicles, home appliances, and other categories, allowing newer and better experiences to permeate users' daily lives. I think this is the ultimate direction forward.&#34;
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Looking ahead, Lu Weibing stated that we need to combine the existing overall strategy to further solidify our capabilities and move further towards a high-end route.
Xiaomi Group CFO Lin Shiwei stated that the growth in total revenue for Xiaomi Group this quarter is largely attributed to the stable growth of the automotive business; since the beginning of this year, Xiaomi has conducted stock repurchases exceeding HKD 37 billion.
Below is the transcript of the analyst Q&amp;A session:
Q1: What are the underlying driving factors for the growth in performance? What are the future plans? What are the reasons for the continuous improvement in gross margins for home appliances, IoT, and automotive businesses? What will the general and administrative expenses be in 2025?
The revenue growth for home appliances and IoT in Q3 exceeded 50%, and this is just the beginning.
As mentioned earlier, we have introduced new styles for various home appliances, including air conditioners, dryers, washing machines, etc., with high innovation, which has brought significant premiums. Moving forward, we will further connect and integrate both upstream and downstream.
In the home appliance sector, we will establish closer connections with customers to provide them with better products and experiences. Overall, I believe we have achieved new breakthroughs this year.
For products like air conditioners, many users may face difficulties in disassembly and installation. We hope to integrate the purchase, disassembly of old air conditioners, and installation of new air conditioners into a complete service chain. We are currently the only company that can provide such a complete service chain, which to some extent explains our good business in this area, as it is essentially a traditional business.
If you live in Beijing or Shanghai, we hope that regardless of the size of your living space, users can obtain the best experience and value. In an apartment, there may only be one water source; how do we connect to that water source? We hope to combine the dryer and washing machine together, which can save a lot of resources and energy, and this is also one of the reasons why our products are so popular
Everyone should consider what pain points users have in different usage scenarios. We just mentioned energy saving, which is indeed very, very important. Our continuous innovation is also based on user pain points and the shortcomings of existing products. We hope to achieve the best experience and value in different spaces and usage scenarios.
We believe there is still room for optimization in the future, and we hope to achieve at least 10% profit from home appliances.
In terms of automotive business, this area is growing very, very fast. We expect the growth rate in the fourth quarter of 2024 to exceed that of the third quarter of 2024, because we can achieve better economies of scale. However, having scale does not necessarily mean achieving economies of scale; high efficiency is also required to realize economies of scale.
If our factories operate at full capacity, we will quickly push our production efficiency to the highest point. We will be able to reduce costs and further improve our profit margins. Currently, we are still building many technical capabilities.
If necessary, we will further consider more investments. Our rapid progress is due to having the most reliable professionals.
Q2: How to understand competitors replicating the small-screen versions of Xiaomi's 13 and 14 series? What is the successful logic behind the Xiaomi 15 series? What are the expansion plans for automotive offline stores? What kind of synergy do you want to achieve?
Regarding the Xiaomi 15, I want to clarify that the small models of the 13 and 14 series are not simply smaller screens; this is a common misunderstanding. Competitors are launching small devices, but shrinking devices is more challenging than enlarging components; it requires more advanced technology and more refined design. We understand how to maintain a small screen while providing excellent production and design, but this is not easy.
Our product design is exquisite, the screen edges are well handled, and the battery life is strong, with no shortcomings.
In terms of tactile design, we pay great attention to the user's direct experience. We are confident that, compared to the iPhone, our products offer a better tactile feel and comfort. Our products feel very comfortable in hand, with no risk of edge cuts on the skin.
We have invested a lot of energy into every detail of our products, not just to reduce screen size, but to enhance the overall user experience. The Xiaomi Pro series sells well because we excel in both product functionality and user experience. The Pro series has a larger screen size, which is not just a simple enlargement, but provides a better user experience through a larger screen space, while also having excellent battery life.
The Xiaomi Pro version is widely popular due to its outstanding performance. Users tend to upgrade to higher-end phones, and we offer a variety of high-quality options in the price range of 3,000 to 4,000 yuan to attract users. We hope these users will continue to choose our higher-priced products when upgrading, thereby attracting different customer groups.
Upgrading from a phone priced over 3,000 yuan to a more expensive one is an effective strategy. We are rapidly developing through the synergy of vehicles and home appliances, aiming to provide users with a seamless and consistent experience across different product categories
At the same time, we are continuously expanding the number of stores to provide a better offline experience.
In our car display strategy, each store will be able to showcase up to 150 vehicles, while the industry average may only be 30. We are committed to providing more spacious display areas, allowing customers to engage with our other product categories while learning about a specific category, achieving synergy.
We welcome you to visit our showroom, where our delivery capabilities are strong, and we can provide excellent service. In terms of store expansion, our previous data shows rapid growth, and we will choose the best locations to open new stores. With some brands withdrawing from traditional shopping centers, our store locations have become more advantageous, providing larger spaces for product displays.
In shopping centers, we can see which brands remain solid and which have withdrawn. To display cars in a shopping center, at least 50 square meters of space is required. By showcasing cars in shopping spaces, we can help shopping centers attract more foot traffic, thereby obtaining more favorable leasing conditions.
Our brand is strong, and our product strength is outstanding. By displaying cars in shopping centers, we can not only attract customers but also help shopping centers increase foot traffic, which may allow us to secure lower rents. This strategy reduces our costs and is difficult for other brands to replicate. We hope to achieve this effect across various categories, and we have a clear differentiation advantage that everyone can look forward to in our future development.
We plan to deploy more stores offline to showcase different product categories. Imagine what kind of experience our stores will bring to customers in many cities!
Q3: What are the reasons for the significant improvement in the ASP of automotive products in the third quarter? For example, will the increase in consumer expectations for cars affect the trend of average selling price (ASP) of automotive products? How is the construction of the production line progressing? When will it contribute more to profitability? What further growth plans do you have for refrigerators and other home appliances? These products have developed quite maturely over time; will there be further optimization of the product structure in the future? How is the construction progress of the automotive production line? When can it make a greater contribution to the overall performance of the company? Is there any expected timeline you can provide?
The reasons for the improvement in the ASP of automotive products in the third quarter are multiple, mainly related to the product mix. With the launch of new products, the ASP will further increase.
On the factory side, further expansion will take place, which means that the waiting time for users after paying a deposit will be greatly shortened.
Q4: Where will the focus be placed on enhancing mobile phone production capacity globally?
The growth potential varies across different countries and regions. The Chinese market is showing strong growth momentum and still has a lot of space; the African market has a growth rate of over ten percent, and the growth rate in the Latin American market is even higher, expected to reach 20%. We are optimistic about this goal and are studying the product structure, especially the growth potential of mid-to-high-end products, believing that the current growth momentum will continue.
Q5: We noticed that Xiaomi's delivery volume in the Chinese market grew very strongly in the third quarter of 2024, which may be attributed to the high-end product strategy. What possibilities do you see in the combination of mobile phone and automotive businesses?
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This year, we have indeed achieved significant growth in the smartphone market, especially in China, where our competitiveness and brand influence are both increasing. Our growth is organic and healthy. As for Xiaomi cars, they have played a very positive role in our brand building and are expected to have an even more positive impact on our future performance. Our users will benefit from these new products, and we are attracting users on a fundamental level, hoping they can convert into customers who purchase our other products. We are doing well in generating traffic.
Our automotive business is becoming an important traffic entry point, as users who purchase smartphones may also be interested in our cars. Similarly, those satisfied with Xiaomi headphones may consider trying our cars. This cross-category sales strategy has enormous potential, and we expect it to strengthen further in the future.
Q6: Xiaomi's sales performance is outstanding, with high selling prices (SP), and overall sales have been good since the beginning of the year. Can the market continue to support such high prices? How are you implementing the high-end strategy in overseas markets? Do you plan to promote high-end products in all overseas markets or select specific ones?
As you can see, different brands have varying price adjustment strategies; some brands have hardly adjusted prices, while others have raised them by 100, 200, or even 300 yuan. In terms of competitiveness, how does a price increase affect competitiveness? What are the market expectations after a price increase? After the price increase of the Xiaomi 15 series, sales continued to grow rapidly, even surpassing previous levels, because it is very popular, and users understand and accept our price increase.
Our chips have powerful performance, and the storage is also excellent. Regarding the overseas high-end strategy, rising chip prices may affect overall pricing and have some impact on high-end positioning overseas. At MWC, we release new products every year and promote them extensively in overseas markets, although the timing of releases may vary among companies. The timing of product launches domestically and internationally may also differ, with overseas launches typically occurring slightly later than domestic ones.
Our latest series of products has performed exceptionally well globally, with a significant impact. In overseas markets, we will focus on Europe, Southeast Asia, the Middle East, Latin America, and Africa. Although promoting high-end products in these markets may encounter some pressure, we will further explore its feasibility.
Q7: Xiaomi Home's store opening target has significantly increased, with plans to open 15,000 stores, including 500 large Xiaomi Home stores. What are your specific plans for this expansion strategy? Are you confident in achieving this goal? If future performance is outstanding, do you plan to open more stores?
At the beginning of the year, we set a target to open an additional 3,000 Xiaomi Home stores, aiming for a total of 15,000 by the end of the year, and we hope to achieve a cumulative total of 20,000 stores by 2025. We expect this expansion to enable Xiaomi Home to play a greater role and to advance strategies based on the actual conditions of different cities to achieve our goals.
In some lower-tier markets with populations just over one million, we will analyze local conditions and assess the potential profitability of opening stores. Xiaomi products occupy multiple positions on the annual best-selling list, and we hope that by opening more stores, more customers can experience our products at Xiaomi Home
Ultimately, customer preference for our products and willingness to enter the store will determine our profit margins.
Our home appliance business is performing exceptionally well, with market data showing stable growth compared to significant fluctuations from other brands. This year, we will open larger showrooms for cars, with an area potentially reaching 4-5 million square meters, and by the end of this year, we will have 120 such super-sized showrooms located in prime positions within shopping malls, while seeking more favorable rental conditions.
Shopping malls welcome us because our brand and product strength can help attract customer traffic. In a city, we may have up to 100 Xiaomi Home stores, each attracting around 5,000 customers daily, which is an impressive number for large shopping malls. We will further expand Xiaomi Home stores in major cities and penetrate more areas, especially rural regions.
In lower-tier markets and small cities, we plan to establish more Xiaomi Home stores to strengthen brand influence. We are not worried about our performance in major cities, as Apple, Xiaomi, and Huawei are the three major brands in the smartphone market. We need to continue pushing forward to make our brand stronger. Our development direction is very clear, and we will continue to expand our network. By 2025, we will see the results of our current initiatives and open more Xiaomi Home stores in smaller cities and even county-level markets. By 2026 or 2027, everyone will see us opening stores in more shopping malls and locations, unleashing the infinite potential of our brand

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Xiaomi stated that the growth in total revenue for Xiaomi Corporation this quarter is largely attributed to the stable growth of its automotive business. If necessary, it will further invest in expanding production and plans to open 120 super-sized Xiaomi Home stores, each covering an area of 400-500 square meters, by the end of the year

- On November 18, Xiaomi reported Q3 earnings, with revenue reaching 92.51 billion yuan, marking a record high and a 4.4% year-on-year profit increase to 6.25 billion yuan.  
- President Lu Weibing highlighted the growth potential in Xiaomi's automotive business and the integration of AI into their products, aiming for a high-end strategy.  
- CFO Lin Shiwei noted that the revenue growth was largely driven by stable automotive sales, alongside significant stock buybacks this year.

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Xiaomi conference call: Automotive Q4 revenue growth is expected to continue to improve, with plans to open 120 large stores of 500 square meters this year