Autobayng News Team
Making cars is hard. Making good electric cars is even harder. Making good electric cars that are actually profitable? Well, very few automakers have pulled that off.
Tesla only achieved consistent, long-term profitability once it got its China operations up and running. Most so-called “traditional” carmakers are still working toward that goal, and the startups have just as many headaches doing the same. And despite their advanced technology and battery leadership, certainly, not all of the new Chinese electric carmakers are profitable.
And yet Xiaomi, the Chinese smartphone and gadget giant that only recently broke into the EV world, has already achieved profitability. That’s a bright red warning light to the rest of the industry.
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Welcome back to Critical Materials, our morning roundup of industry and technology news. Also on deck today: more insight into why Toyota’s hybrid strategy is paying off right now, and how Elon Musk is seeking a big valuation for his AI company—and what that could mean for Tesla.
30%: Xiaomi’s EV Profit Coup Is An Industry Shocker
Xiaomi YU7
Photo by: Kevin Williams/InsideEVs
Broadly speaking, there are two reasons it’s hard to be profitable making EVs: batteries and scale.
The first one is easier to unpack. Even as costs decline over time, making a giant EV battery is an expensive endeavor right now. It’s the most expensive part of any electric car. Raw materials like lithium, nickel, cobalt, manganese and graphite can be volatile in price, and building battery plants is extremely capital-intensive.
The second one feeds into the first. The global auto industry has spent more than a century building up supply chains around gas-powered cars: vast networks supplying all the parts that make up an engine or a transmission or all their related components. A car that runs on batteries, software and electric motors is a different endeavor. With scale comes lower costs, and the entire EV sector isn’t there yet. Legacy automakers had to learn the hard way that they can’t make EVs the same way they make gas cars or they’ll get killed on costs.
A few players have been able to buck that trend. Tesla built up its own scale through two decades of vertical integration and a lot of blood, sweat and tears. But Xiaomi, maker of the SU7 sedan and YU7 crossover, just achieved a quarterly profit on EVs only 19 months after launching its automotive division. Here’s Bloomberg to explain:
The consumer electronics giant on Tuesday reported a 700 million yuan ($98 million) profit for its EV and artificial intelligence division in the quarter ended Sept. 30—roughly 19 months after launching its SU7 electric sedan.
Comparable EV makers were slower to reach the milestone. Tesla first achieved quarterly profitability in 2013, just over five years after it started delivering the original Roadster in 2008. Li Auto Inc., another Chinese automaker, took about two years to break even on a quarterly basis, though it mainly sells extended-range EVs.
Xpeng Inc. and Nio Inc. are still racking up losses, but have targeted to break even in 2025, about eight years after their first cars were unveiled.
Now, for the obvious question: How? Basically, it helps to be a tech-gadget powerhouse at the outset, with a huge fanbase in China—Xiaomi is often likened to Apple there—and a very appealing product that’s priced competitively. Add in China’s low labor cost advantage and batteries from well-established partners like CATL, and you have a recipe for success, with some lessons for the rest of the field. More below, emphasis mine:
“Xiaomi entered the market with several structural advantages that most pure-play EV startups didn’t have,” said Bill Russo, founder of Shanghai-based consultancy Automobility. “It leveraged an enormous existing user base, a strong brand with high trust, and a fully integrated ecosystem strategy that creates very low customer acquisition costs.”
The focus on one model also saved years of burning cash. The gadget and EV maker effectively treated the SU7 as a scaled consumer electronics launch—releasing months of teaser content, high-frequency livestreams and a phased reveal. That kept the market’s attention while the company was also able to leverage existing tech users, who served as a built-in demand engine, said Russo.
As that story notes, and as we have reported before, it’s not all sunshine and roses in the Chinese auto sector. Every carmaker is hurting from slowing demand, a brutal price war and EV subsidies going away. But with Xiaomi seeking to enter Europe in 2027, it’s clear this tech company is going to be a force to be reckoned with in the car space, too.
60%: Toyota’s Winning On Hybrids, But There’s A Deeper Lesson Too
Toyota at the 2025 Japan Mobility Show
Photo by: Motor1.com Deutschland
Meanwhile, as EV sales potentially slow down in America as our incentives fade, Toyota’s having a bit of an “I told you so” moment as it prints money and sees record sales on the strength of its hybrid lineup. (And interestingly, it is still bringing two new EVs to market next year despite those headwinds.)
Toyota was never as all-in on EVs as many rivals, and right now, it sees hybrids as the key to long-term security. But in an interview with Automotive News, CEO Koji Sato says that the company was also able to pivot quickly when needed and not burn money doing so like many competitors:
When we saw global market demand differing from our expectations, with the [EV] transition speed a little slow, Toyota had the capability to make an adjustment. We look at the speed to see if we should adjust the supply of BEVs a little slower and focus on developing technology for better plug-in hybrids or further evolve hybrids. So as we increase the electrification ratio, we’ve tried to respond to the actual needs of customers.
One more strength is the bond with our dealerships. Just recently, we had the national dealer meeting in the United States. Our chairman, Akio-san, participates, and I also participate every year. And the reason why is because the local dealers make business investments based on the trust that they have in us. This bond makes our business feasible.
[…] Now we have greater visibility into how BEVs fit into our multipathway approach. This is why we’re not emphasizing it like before. Because we have better visibility of this missing piece, the focus turned to the overall perspective of the multipathway. I don’t think that it means other OEMs are now converging to Toyota’s way of thinking or that BEVs are losing momentum. It’s time to look at the total approach and focus on mobility as a whole, including BEVs.
It’s certainly paying off right now, but customers clearly want good EVs from Toyota—and there do seem to be more compelling electric options coming from the Japanese giant soon. But it’s also key to remember that Toyota has the scale, capital and global reach to kind of make any powertrain its customers might want.
As I’ve written before: To pull off Toyota’s “multi-pathway” approach, it really helps to be Toyota.
90%: Elon Musk’s xAI Wants To Raise $15 Billion
xAI’s Grok on a Tesla.
Photo by: Tesla
Tesla CEO Elon Musk has made no secret of the fact that he wants his empire to be an AI powerhouse (and that he utterly loathes Sam Altman.) So while he may be bored of making cars, he sees a convergence around mobility, robotics and AI that could benefit all of his companies—all of which are separate entities, despite what people often think.
The Wall Street Journal today reports that Musk’s artificial-intelligence company, xAI, is in talks to raise $15 billion to seek a $230 billion valuation:
The new valuation would represent a significant increase from the $113 billion xAI disclosed after acquiring Musk’s social-media site, X, in March. The terms of the new fundraising were disclosed to investors by Musk’s wealth manager, Jared Birchall, on Tuesday night, the people said.
Musk’s AI startup has raised billions of dollars in its race to compete with OpenAI and to expand the capabilities of its chatbot, Grok, which competes with ChatGPT. News Corp, owner of the Journal, has a content-licensing partnership with OpenAI.
So what does this have to do with Tesla, or EVs? It’s long been thought that Tesla might invest in, or even acquire, xAI to somehow supercharge its AI and autonomy efforts—not that Tesla isn’t working on that sort of thing on its own, of course. Musk has said he’ll let investors decide, and while he’s ruled out a merger (for now), many see potential upsides to that:
Musk, who is chief executive officer of Tesla, has publicly supported the idea of Tesla investing in xAI. At a recent shareholder meeting, Tesla shareholders had a mixed response to a proposal that asked the board to make such an investment, and it is now up to the board to decide.
Ahead of the meeting, Tesla Chair Robyn Denholm told the Journal that she questioned the logic of such an investment and said the board hadn’t yet done any of the due diligence required to move forward.
If I had to guess, I’d say we’ll see a renewed push for these companies to unite next year and beyond.
100%: Would You Buy A Xiaomi EV?
Xiaomi Store Shanghai/Xiaomi Su7
Photo by: Patrick George
I couldn’t help but be impressed by the Xiaomi SU7 I saw in Shanghai, but I haven’t driven one. Kevin Williams has, and he’s always spoken very highly of them. They seem like bargain-price Porsche Taycans with much better technology, and what’s not to like when you put it that way?
Xiaomi has its sights set on Europe by the end of the decade. A U.S. debut is far less likely for obvious reasons, but who knows what the future holds. Would you buy one if you could?
Contact the author: patrick.george@insideevs.com More EV News We want your opinion! What would you like to see on Insideevs.com? – The InsideEVs team
