Xiaomi Shares Drop After SU7 Launch as Margin Concerns Weigh on Investors

Xiaomi shares tumbled on Friday as profit-taking kicked in following a strong pre-launch rally tied to the company's updated SU7 electric sedan. Hong Kong-listed shares of Xiaomi Corp (HK:1810) slid 6.9% to HK$33.80, making it one of the weakest performers on the Hang Seng index, which itself declined 0.6%.

The stock had surged nearly 12% earlier in the week ahead of the SU7 unveiling, but investor sentiment shifted as concerns mounted over shrinking profit margins driven by rising electric vehicle component costs, particularly in chips and batteries. Despite the excitement surrounding the launch, markets reacted cautiously to the new model's pricing structure.

Xiaomi officially priced the updated SU7 starting at 219,900 yuan (approximately $31,900), positioning it as a direct rival to Tesla's Model 3. The premium Max variant carries a starting price of 303,900 yuan. Alongside the EV reveal, Xiaomi also introduced its latest artificial intelligence model, MiMo-V2-Pro, signaling deeper ambitions in the AI space.

CEO Lei Jun announced a significant commitment to AI development, pledging at least 60 billion yuan ($8.7 billion) in investment over the next three years. Since entering the EV market in March 2024, Xiaomi has gained considerable traction, with its first-generation SU7 accumulating 381,000 units in cumulative sales.

While the company reportedly turned profitable on EV sales in the third quarter of 2025, analysts remain cautious. S&P analysts project that growth may slow due to softness in Xiaomi's core electronics division. However, EV and AI revenue streams are forecast to surpass the device business in 2026 and become the company's largest revenue contributor by 2027.

Xiaomi is scheduled to release its fourth-quarter earnings next week, which investors will closely watch for margin clarity and forward guidance.