Xiaomi shares fell sharply on Friday as traders took profits after the stock had significantly risen ahead of the long-awaited launch of the company's electric sedan SU7 update.
However, the pricing of the new SU7 model raised concerns as investors feared margin compression due to rising component costs for electric vehicles, especially chips and batteries.
Shares of Xiaomi Corp (HK:1810) fell by 6.9% to HK$33.80 and were among the worst performers on the Hang Seng index, which lost 0.6%.
Shares rose by 12% this week ahead of Xiaomi's launch of the new SU7 model on Thursday. The company also introduced its new flagship artificial intelligence model MiMo-V2-Pro.
Xiaomi CEO Lei Jun stated that the company will invest at least 60 billion yuan ($8.7 billion) in artificial intelligence over the next three years.
Xiaomi reported on Thursday that the updated SU7 model will cost from 219,900 yuan ($31,900) and will aim for direct competition with Tesla Inc's Model 3 (NASDAQ:TSLA).
The Max model SU7 will cost from 303,900 yuan, Xiaomi reported.
The company has demonstrated high sales of electric vehicles since its market launch in March 2024: the first generation SU7 sold a total of 381,000 units.
Although the company reported a profit from electric vehicle sales in the third quarter of 2025, markets remain concerned about the low margin in this segment.
It is expected that increased price competition and rising component costs will limit Xiaomi's margin on electric vehicles, especially considering that the company is also aggressively pricing its cars for better competition with Tesla.
Xiaomi will present its fourth-quarter earnings report next week. S&P analysts expect a slowdown in growth amid weakness in the company's core electronic devices division.
However, revenue from electric vehicles is expected to grow steadily: S&P forecasts that initiatives in electric vehicles and artificial intelligence will surpass the core device business by 2026 and become the company's largest source of income by 2027.
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