Xiaomi Corp
HKEX:1810
Xiaomi Corp
Xiaomi Corporation, often pegged as the budget-friendly alternative to high-priced tech giants, has masterfully woven a business model that thrives on delivering quality technology at accessible price points. Founded in 2010 by Lei Jun, Xiaomi started its journey with an ambition to create a seamless interface between hardware, software, and internet services, drawing parallels with the likes of Apple. However, Xiaomi's differentiation lies in its approach to affordability without compromising on innovation. The company's strategy hinges on maintaining razor-thin hardware margins, coupled with robust internet services. Devices like smartphones, smart TVs, and IoT products serve as gateways to an expansive ecosystem of services, where recurring revenue is cultivated through advertising, online gaming, and fintech services.
Operating primarily through e-commerce channels initially, Xiaomi managed to disrupt traditional supply chains and retail markups, allowing for significant cost savings which were passed on to consumers. This model facilitated rapid market penetration, particularly within price-sensitive emerging markets. Its distribution mechanism further graduated to a more holistic network, encompassing offline stores and partnerships to expand its reach. The company emphasizes community-driven input, encouraging feedback from their extensive user base to refine and enhance their offerings. By nurturing a robust fan community known as "Mi fans," Xiaomi not only crowdsources innovation but also markets its products with genuine consumer backing, creating a virtuous cycle of feedback and refinement that fuels continuous growth.
Earnings Calls
In the third quarter, Xiaomi reported a revenue of CNY 92.5 billion, a 30.5% increase year-over-year, driven by robust growth in both domestic and international markets. The smart handset segment grew 13.9% to CNY 47.5 billion, maintaining a gross margin of 11.7%. The IoT division showed exceptional performance with revenue rising to CNY 26.1 billion, reflecting a 26.3% increase. The company anticipates continuous momentum, especially with plans to expand its retail presence from 15,000 to 20,000 shops by 2025. Overall, Xiaomi's focus on premium offerings and enhanced brand influence supports a strong growth trajectory.
Management
Lei Jun is a prominent Chinese entrepreneur and the co-founder of Xiaomi Corporation, a leading electronics and technology company. Born on December 16, 1969, in Xiantao, Hubei, China, Lei Jun graduated from Wuhan University's Computer Science Department in 1991, where he developed a strong foundation in technology and innovation. Before founding Xiaomi, Lei Jun had an extensive career in the tech industry. He played a pivotal role at Kingsoft, a leading software company in China, where he rose to the position of CEO and led the company’s IPO in 2007. His entrepreneurial spirit was further showcased through various successful investments in the technology sector. In 2010, Lei Jun co-founded Xiaomi with the vision of delivering high-quality technology products at affordable prices. Under his leadership, Xiaomi quickly grew to become one of the world’s top smartphone manufacturers and expanded its product range to include smart home devices and other consumer electronics. The company is renowned for its direct-to-consumer online selling strategy and fostering a strong community-based approach with its user base. Lei Jun's leadership style is often described as charismatic and visionary, with a strong emphasis on innovation and consumer feedback. He has been recognized for his contributions to the tech industry with numerous accolades and continues to be an influential figure in global technology. Through Xiaomi, Lei Jun has significantly impacted how technology is developed and marketed, aligning closely with changing consumer needs and technological advancements.
Bin Lin is the co-founder and former president of Xiaomi Corporation, a global technology leader known for its smartphones and other consumer electronics. Born in the Jiangsu province of China, Lin Bin studied engineering at Sun Yat-sen University, followed by a Master of Science in Computer Science at Drexel University in the United States. Lin began his career at Microsoft, where he worked on numerous Windows Mobile projects. He later moved to Google, serving as the engineering director of Google China and supervising the development of several key mobile applications. In 2010, Lin Bin co-founded Xiaomi Corporation with Lei Jun and several other partners, with the ambition to provide high-quality technology at affordable prices. Under their leadership, Xiaomi quickly rose to prominence, becoming one of the world’s largest smartphone manufacturers. During his tenure at Xiaomi, Lin Bin played a crucial role in the company's rapid expansion and innovation, helping to establish its reputation for producing feature-rich, competitively priced products. In 2019, Lin transitioned from his role as president to vice chairman, focusing on long-term strategy and talent development within the company. Mr. Bin Lin's expertise and vision have been instrumental in Xiaomi's evolution into a major player in the global technology market.
De Liu, also known as Liu De, is one of the co-founders of Xiaomi Corporation, a prominent Chinese electronics and software company. He played a significant role in shaping the company, which is known for its wide range of consumer electronics, including smartphones, smart home devices, and various internet services. Liu De was born in China and has an educational background in industrial design. He graduated from the Beijing Institute of Technology with a degree in industrial design and later pursued further studies at the Art Center College of Design in Pasadena, California, which is renowned for its design programs. This background in design greatly influenced his approach to product development at Xiaomi. At Xiaomi, Liu De has been instrumental in overseeing the design and engineering aspects of the company's products. His expertise has helped Xiaomi create devices that are not only technologically advanced but also user-friendly and aesthetically appealing. Such an approach has contributed to the popularity of Xiaomi products both in China and internationally. In addition to his work in design and engineering, Liu De has been involved in Xiaomi’s ecosystem strategy, which focuses on creating a comprehensive range of interconnected smart products. This strategy aims to build an ecosystem that enhances user experience across different devices and services. Throughout his career at Xiaomi, Liu De has made significant contributions to the company's growth and global expansion, helping it become one of the leading technology companies in the world.
Lu Weibing is a prominent Chinese business executive known for his role in the technology and consumer electronics industry, particularly with Xiaomi Corporation. Before joining Xiaomi, Lu gained significant experience in the telecom and smartphone sectors. He was the president of Gionee, a Chinese mobile phone manufacturer, which helped him establish a strong foundation in the smartphone market. In January 2019, Lu Weibing joined Xiaomi Corporation as the Vice President and became the General Manager of the Redmi brand, a subsidiary of Xiaomi known for its budget-friendly and mid-range smartphones. Under his leadership, Redmi expanded its product lineup and strengthened its market position, achieving significant growth in sales and brand recognition globally. Lu's strategic vision and expertise in marketing and product development have contributed to the successful expansion of Redmi's presence in international markets. His role at Xiaomi extends beyond the Redmi brand, as he is involved in various strategic initiatives and product planning across the company's diverse portfolio. Lu Weibing is recognized for his dynamic leadership style and ability to navigate the highly competitive landscape of the tech industry, driving innovation and maintaining Xiaomi's competitive edge in the global market.
Li Wanqiang is a Chinese entrepreneur and one of the co-founders of Xiaomi Corporation, a major Chinese electronics and software company. He played a pivotal role in shaping Xiaomi’s brand and user experience. Li served as the Vice President and was significantly involved in the development of MIUI, Xiaomi’s Android-based operating system, which contributed to building a strong community of users and fans around Xiaomi products. Before joining Xiaomi, Li Wanqiang worked at Kingsoft, where he met Lei Jun, the founder of Xiaomi. His experience and expertise in software development and marketing were instrumental in Xiaomi’s early growth. Li is often recognized for pioneering innovative internet marketing strategies that helped the company quickly gain a foothold in the competitive smartphone market. After years at Xiaomi, Li Wanqiang stepped away from daily operations, but his influence continues to be felt within the company and the tech industry at large. His approach to fostering community engagement and creating a strong brand identity has left a lasting legacy at Xiaomi.
Sai Wai Lam, often recognized in the executive circles of Xiaomi Corporation, is a key figure overseeing financial strategies within the company. Currently serving as the Chief Financial Officer (CFO) of Xiaomi Corp, Lam is instrumental in guiding the company's fiscal initiatives and policies. He plays a vital role in managing Xiaomi's financial health, capital allocation, and investor relations, contributing to the strategic fiscal planning that aligns with the company's growth objectives. Prior to joining Xiaomi, Sai Wai Lam accrued extensive experience in finance and investment banking, having held significant positions within major financial institutions. His leadership and financial expertise are pivotal in driving Xiaomi's financial strategy in the dynamic tech industry.
Mr. Sudhin Mathur is a seasoned professional in the consumer electronics and mobile industry. He previously served as the Managing Director for Motorola Mobility India and the Executive Director for Lenovo MBG India, where he played a pivotal role in elevating the brand's presence and market share in the region. Known for his strategic acumen, Mathur has a wealth of experience in sales, distribution, marketing, and operations. At Xiaomi Corporation, he took on leadership roles to guide and enhance the brand's initiatives in the highly competitive Indian market. His expertise in navigating business complexities and driving growth has been instrumental in Xiaomi's expansion and innovation strategies. Mathur is recognized for building strong teams and driving sustainable business practices. His leadership has been marked by a deep focus on customer-centric approaches and fostering partnerships to leverage new technologies.
Anita Chan is recognized for her leadership within Xiaomi Corporation, where she plays a crucial role in the company’s strategic initiatives and global operations. At Xiaomi, she has been instrumental in driving the expansion of the brand both internationally and domestically, focusing on innovation and customer engagement. Her efforts often encompass the integration of technological advancements with consumer needs, helping Xiaomi to maintain its competitive edge in the rapidly evolving tech industry. Under her guidance, the company has launched numerous successful products and initiatives that have bolstered Xiaomi’s presence in the global market. Chan is known for her strategic vision and ability to foster collaboration across different sectors within the company.
Hao Liu is a notable executive at Xiaomi Corporation, a leading Chinese electronics company known for its smartphones, consumer electronics, and smart home devices. Serving as a key figure in the company, Hao Liu has significantly contributed to Xiaomi’s strategic initiatives and global expansion efforts. Xiaomi is renowned for its innovative approach, competitive pricing strategies, and direct-to-consumer sales model, and individuals like Hao Liu have played a critical role in these successes. Hao Liu's work typically involves overseeing various administrative, strategic, and operational functions within the company. Given Xiaomi's rapid growth and expanded international presence, his efforts in bridging the company's core technology strategies with marketplace demands are vital. Additionally, executives like Hao Liu help in navigating the competitive technology landscape, adapting to emergent trends, and ensuring the company's product offerings remain cutting-edge and consumer-friendly. Please note, specifics about his educational background and personal biography might not be widely publicly disclosed, as corporate executives often maintain a focus on their professional roles and responsibilities.
Ms. Yan Qi is not a widely recognized figure associated with Xiaomi Corp in public databases or prominent media sources. Xiaomi, a major Chinese electronics company, is known for its leadership under figures like Lei Jun, the founder and CEO. If Ms. Yan Qi has a specific role or has made contributions to Xiaomi that are noteworthy, this information may not be widely documented or available in the public domain. For the most accurate and updated details, consulting official Xiaomi press releases or the company's website may provide the latest information. For now, "FALSE," as there doesn't seem to be publicly available detailed information or a biography on Ms. Yan Qi in connection to Xiaomi Corp.
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[Audio Gap] 2024 Third Quarter Results Announcement Investor Conference Call and Audio Webcast. Today's conference is being recorded. [Operator Instructions]. Ms. Anita Chan, Head of Investor Relations and Corporate Finance, will be your host today.
Good evening, ladies and gentlemen. Welcome to the investor conference call and audio webcast hosted by Xiaomi Corporation. Before we start, we want to remind you that this call may include forward-looking statements, which are underlined by a number of risks and uncertainties and may not be realized in the future for various reasons. Information about general market conditions comes from a variety of sources outside of Xiaomi.
This presentation also contains some unaudited non-IFRS financial measures that should be considered in addition to the company's financials prepared. Joining us, we have Mr. Lu Weibing, Partner and President; Mr. Alain Lam, VP and CFO of Xiaomi Corporation, Chairman of Airstar Digital Technology. To start, Mr. Lu will share strategies and business update, and then Mr. Lam will review the company's financial performance in the third quarter. And following that, we'll turn over to Q&A. Mr. Lu, over to you.
Good evening. Welcome to our third quarter results announcement. At the beginning of the year, when we made these changes, I have talked about fundamental changes to the capability building of Xiaomi in the recent years. We are now able to tackle uncertainties in the external environment.
After 3 quarters, I can show you that our capabilities have been enhanced, showing good profit in premium, and we have very solid foundation to support future development. We're approaching the end of the year. Earlier this year, you had some questions, what is happening to Xiaomi's automobiles and what about premiumization strategies, what about profit level when the cost along the supply chain has increased. And also, can we sustain the big home appliance and also eco-chain profit level?
I think you have seen the results today. So our focus on these questions that I have just mentioned and also what we have done behind the scene. In the third quarter, with fierce competition and higher cost along the supply chain, we have maintained stable growth. Total revenue of the group reached CNY 92.5 billion. The first quarter went beyond CNY 90 billion, up 31%. Handset IoT core business revenue, CNY 82.8 billion, up 17% gross margin, 20.4%, which is above the healthy level of 20%. Gross margin for handset, 11.7%, smart eco, an innovative business, 17.1%.
After adjustment, total profit, CNY 6.3 billion. And we have narrowed the losses for the innovative business, CPY 1.5 billion after restoration, CNY 7.7 billion. And I will talk about our major strategy development. For premiumization, we invest heavily in tech, and we need a lot of tolerance and determination. HyperOS 2 behind this product, we have a team of more than 3,000 engineers, and we are able to provide high-end offerings. After accumulating our capability, Xiaomi 15's selling price increased from CNY 4,000 to CNY 4,499. But still, it was selling faster compared to Xiaomi 14. The Pro version actually sold more quickly than a standardized version.
The Xiaomi 15 series has shown our strong capability. Other than the 15 series, we have other high-end handset products with very good results for the premium price range between CNY 3,000 to CNY 6,000 in the Chinese market, our market share increased. For the CNY 4,000 to CNY 5,000 range, we are #1 in Mainland China. So we enjoyed CNY 47.5 billion revenue for the segment, a growth of 13.9%.
Secondly, it is about home appliance and IoT business. Total revenue, CNY 26.1 billion, up by 20%. Because of the results behind our strategies of full ecology and industry capability, we are well supported by our capability and also our products. We have switched over to self research. And we have synchronized our launch of products and continuously launch new products with IPT process.
In October this year, we have shown some results for IoT products. In recent years, we have been invested very heavily in the core technologies for our home appliance offering. We offer younger appearance and smart experience, differentiating ourselves from our competitors. We have also realized product innovation in terms of our aircon and dryer washer, and we have gone beyond expected sales level showing our user-driven R&D capability, proving that we still enjoy great room for further development.
Concerning the fully connected ecology strategy. We are combining vehicles with handsets and other smart devices. So after accumulating our capability, we have identified a new starting point. We will continue to launch ship products and rely on IoT growth to support our future development globalization. We have launched our brand and also our model overseas, and we have done very good localized operations.
We've completed the first step towards going global. In Q3, we continue to increase the level of brand influence, and we ranked #3 in terms of handset delivery, and we are #3 in 52 countries in terms of handset delivery. And in September, we have achieved total active number of users around the world, 686 million, and those in China, 168 million.
In October, we have been chosen to be 1 of the best brands around the world by Interbrand. We are 1 of the 2 Chinese brands listed on that. New retail model has created great support to our business. And our handset has enhanced its market share to 14.7%, ranking #4 by the end of September.
Offline retail shops exceeded 13,000. By the end of the year, we expect to exceed 15,000 and reaching 20,000 next year. Overseas layout, we have already launched our models to the rest of the world. Our handset IoT products and also vehicles about to be launched overseas, we show our full chain advantage with IoT products being launched overseas, we see this unprecedented potential in the international market.
Our vehicle business, SU7 delivery volume at 40,000. We exceeded 20,000 units in October alone. October sales for sedans ranked #1. And on the 13th of November, we spent only 230 days to complete production of 100,000. Total delivery for 2024, the target is 130,000.
The revenue CNY 0.7 billion and net losses narrowed to CNY 1.5 billion. We continue to enhance our network. Right now, we have 130 shops and SU7 has performed very well in safety tests. And we're the only 1 receiving 3G plus and A level grade of safety performance.
In October, we have broken a new record with our Xiaomi SU7 Ultra and we have presold 114,000 units of SU7 Ultra. In 10 minutes, we have exceeded 3,680 orders. They will be officially sold in March next year. So we have taken 1 step forward.
Our success and also premiumization of our handsets are unprecedented. Finally, AI, which affects all walks of life. With AI empowerment, we are satisfying the needs of our users so that we are truly people centered. And that is the ultimate direction to combine human vehicles and the homes. We need to allow fresh experience to penetrate the users' daily lives.
AIOS is the soul of AI for chain and progression of the OS is necessary. But at the moment, OSS are not AIOS and they have not yet realized sensing, memory and inference programming and execution. According to the -- in relation to the experience side, we should allow AI to become very supportive, and they will be able to help our users to finish all the small tasks in life. There is plenty of room for further development for AI.
Finally, I would like to share 3 growth curves that have already been completed. The first 1 is about handset, tablets and wearables. We have entered mature stage, but still plenty of room for development. The second one, aircon, fridge and washers. They may be very traditional, but plenty of room for innovation. Third curve is about vehicles against great changes. There is plenty of room for imagination. And we have supported different types of products and around global markets to tackle external uncertainties. This is the unique business model around the world.
In the past 5 years, we have continued strong momentum. We enhanced our understanding. In 2000, we have completed our overall strategies. In 2023, we decided we are going to be the world leader in terms of tech. And we have the overall strategy to combine OSAI, new retail and also leading capability and premiumization. In the past 5 years, we have enhanced our systems processes, information, digitalization and also establishment of talent. So we expect a greater future for Xiaomi. And that's what I would like to share today, and over to you, Alain.
Thank you, Mr. Lu. Good Evening. As Mr. Lu has said just now, we have clear strategy and guidance, and we have seen very good growth in revenue for Q3 this year and also continuously increasing profit.
Total revenue for Q3, CNY 92.5 billion, up 30.5%. With the stable growth of the vehicle business, revenue for Mainland China, 56.6% overseas, portioned 43.4%. Consolidated gross margin, 20.4%, very satisfactory. Our handset IoT segment in Q3, revenue was CNY 82.8 billion, up 16.8%.
Gross margin, 20.8% at a healthy level. I will now provide segment breakdowns, smart handset. Revenue for the quarter, CNY 47.5 billion, which is 51.3% of the revenue growth of 13.9%. Delivery level for 43.1 million sets, up by 3.1%. According to analyst data, for 17 consecutive quarters, we've been ranking #3 in terms of smart handset delivery.
Market share 13.8% among which in Mainland China, our ranking has been enhanced to #4 with obvious enhancement of market share to 14.7%, up by 1.2 points, which is 5 consecutive quarters of enhancement.
Despite certain impacts from the process of components, we maintain a healthy level of gross margin at 11.7%. At the same time, we have seen good results from premiumization strategy, continuous enhancement of capability of our products. According to third-party data for the first 9 months in Mainland China, our high-end smart handset delivery has taken up 21.3% among the overall figure, up by 3.9 percentage points.
In terms of IoT, our revenue and gross margin presented good performance for the third quarter, IoT and our IoT revenue sustained good growth to CNY 26.1 billion, a growth of 26.3%. IoT gross margin in the quarter reached 20.8%, which is a historical high, up by 2.9 percentage points.
In terms of offerings, our core IoT products maintain good growth and at the same time, contribute substantially towards profit. In the quarter, Smart Home Appliance segment had outstanding performance. Aircon delivery, more than 1.7 million, up 55%. Fridges grew by 20%, and washers up by more than 50%. Tablets sustained good growth, ranking #5 around the world with 55% growth in terms of delivery volumes, where we will sustain good growth as well. In October this year, we launched a new version of Xiaomi Wash S4 and Xiaomi Bracelet 9 Pro. They are chic, and they offer this much better experience for the users to support their healthy and sportive lifestyle.
Internet service. In September, global active user reached new heights to 686 million, up by 10%. Active users in Mainland China reached 168 million, a growth of 10.6%. Segment revenue, CNY 8.5 billion, a record high, representing 9.1% growth. Offshore Internet services revenue increased by 18.3% to CNY 2.7 billion, which takes up 32.5% of total Internet service income.
In this quarter, the revenue was CNY 9.7 billion for innovative business, including smart vehicles. For Smart Vehicles sales revenue, CNY 9.5 billion. Others associated business, CNY 200 million. 17.1% for gross margin for the Vehicles segment, an increase of 1.7 percentage points.
Xiaomi SU7 Series, total delivery, 39,790 units. Average selling price at RMB 230,650. For this segment, the performance was satisfactory. We continue to exercise control in terms of expenses. For the third quarter, total expenses are CNY 13.7 billion taking out a newly injected expenses of CNY 3.3 billion for new business, our core business expenses operation was CNY 10.3 billion at a ratio of 12.4%, which is a drop of 0.4 points. Net profit in the third quarter after adjustment, the level was CPY 6.3 billion, up 4.4%, benefiting from the unexpectedly high gross margin for the vehicle business and high level of delivery for innovative business after adjustment.
Net losses, RMB 1.5 billion, downward adjustment of 16.6%. Therefore, the core business profit level CNY 7.7 billion. And for the first 3 quarters, the accumulative level has gone beyond CNY 24.4 billion already. In terms of cash reserve, up to the end of September, the level is CNY 151.6 billion, up 18.7%. And a record high in terms of cash flow. After adjustments, the cash flow level is RMB 9.6 billion with contribution coming from new business. We have been actively repaying our shareholders and the buyback for our stock has reached more than HKD 3.71 billion.
We continued to enhance our ESG work in Q3 of the year. Because of our performance in terms of smart manufacturing and sustainability, we have been chosen to join the top ESG 50 in China for 2024. We have also been selected as the best employer in China 2024 and most popular employer in China 2024.
In October, because of the progress we have made in corporate governance and management of environmental risk, our rating has been upgraded from BB to BBB on MSCISG, and that is enhancement for 2 consecutive years. In October this year, we have organized a 5-year anniversary forum for Xiaomi Foundation, which was set up with Xiaomi's donations in 2019.
After 5 years of exploration and development, it has established 3 major directions: technological innovation, nurturing talent and also providing assistance to those in need. Surrounding these 3 major themes up to the end of September, the accumulated donated RMB 650 million by the foundation. The planned amount has reached CNY 1.9 billion. Thank you for your support. That's the content we would like to share with you today, and we can begin the Q&A.
Thank you, Alain. Let's proceed to Q&A. To allow more people to ask questions. Please do not ask more than 2 questions.
[Operator Instructions] First question from Goldman Sachs, Timothy.
Great. Mr. Lu, Mr. Lam, congratulations on the Q3 performance, and many good surprises in the recent months. So about home appliances, can Mr. Lu share the way forward. What is the structure of your channels? What are your future plans? And then IoT gross margin was over 20%.
And then about the automobile business, the gross margin continued to improve. What are the reasons? And what about SG&A and R&D expenses for this segment. What will be the level for 2025? What will be the trend for next year?
The first question is about home appliances, the growth this year, very good, more than 50%. But such growth is just the beginning.
In recent years, we have done a number of things. For example, the ODM format. I think you see our new aircons and dry washer products. They are highly innovative. They bring very good premium. So we offer the best products. And in the next step, we need to strengthen on the -- along the upstream. We have sophisticated technologies for our handsets. And then sales channels.
Actually, as you know, we have followed up on our original relationships with our customers to further develop into the home appliance arena. But I think this year, we have achieved new breakthroughs, and we have very clear objectives.
You can see our aircon offering -- we have different models and also washing machines and refrigerators and they are all very energy conserving, well aligned with our green image. When you purchase Xiaomi products, you can purchase the entire collection.
Many people face the issues of installation. For example, it is difficult to dismantle and install aircons. So we combine all 3 steps together. We are the only one providing the whole chain of services to our buyers. That explains partially the good results. This is a traditional business essentially.
If you look at our washing machines, they are taking up less space. If you're in Beijing and Shanghai, sometimes, we are sacrificing too much space to washing machines. And very often in a flat, you only have 1 source of the water for each machine. So now we are combining dryer and washer together, which is conserving a lot of energy and resources for you. That is why we are so popular.
And then the newly launched aircon, the air is coming from the top. So we are remodeling, reinventing the concept for special family needs. And we focus on energy conservation. And we only need 2 space of 2 meters from your floor to your ceiling to accommodate our aircons.
We have identified pain points and inefficiencies in other models, and our innovation work. Some companies the same product, they will change the names 5 times. It's basically the same product. When it is sold online or outlined, they have different names. We do not do anything like that. We object to that practice. I think we have a lot of room for further optimization. We have about slightly over 10% profit for such home appliances. Other people sell something at CNY 20,000 odd when it's only worth CNY 3,000. So I think in this industry, there's plenty of room for reform and restructuring.
So Xiaomi experience is just taking off now. Our growth will continue to be very fast in 2025. You also talked about automobile business. It is growing very fast. And Q4 is expected to outperform Q3. The reasons are economies of scale. If and when you have scale, it doesn't mean you have economies of scale. You need a high level of efficiency to enjoy the economies of scale.
If you are selling 20,000 of your sedan model, you're already #1 in the market. If we are operating at full capacity in our factory, we are at highest level of efficiency so we can enhance the GP margin. We have many technological capabilities being established. So if it's necessary, we will make the investments. We are moving forward so quickly because we have reliable professionals who have high level of capabilities.
For example, we have the small chassis technology. I understand that you want us to make a good profit as quickly as possible. We do appreciate that, but we must establish a very strong foundation so that we can continue to move forward. I want to provide some figures.
Home appliances, we have more than 50% growth in September, more than 45% year-on-year. Very substantial. At the same time, GP margin also improved by a few points. Compared to IoT GP margin, home appliances will perform better therefore, making very good contribution to our overall GP margin.
Secondly, for new business. In previous 3 quarters, we've invested CNY 8.8 billion, most going into R&D expenses. Therefore, this year, for new business, we have heavy investment again with higher GP margin. We will divert more resources into future R&D projects because GP margin has gone beyond expectations. So we will spend more on our R&D capabilities.
So next year, the expenses will be even at a higher level, and we expect better results. I want to add -- I just wanted to add these 2 points.
Next question. Andy from Morgan Stanley.
Congratulations on a good performance. Two questions. First, on handset. For 13 and 14 series after gaining success, this year we see many competitors are trying to copy by launching small screen models, so more fierce competition for the small screen products, but Xiaomi 15 still sustained very good sales. So can you tell us what is the logic behind that? What is the competitive layout?
Second question about automobile business. While growing very rapidly, you need to identify points of sales and develop the network. So AIoT and handset offline retail has been successful in recent years. We can see offline shops maybe expand and entering a new development stage. So can you share with us, Mr. Lu, about the network of sales and offline business expansion, what kind of synergy can be achieved?
All right. I will talk about Xiaomi 15, as small screen model, is not just about shrinking the screen, that is a huge misunderstanding. Some competitors have rushed to create small screen devices, essentially when you shrink things or downsize certain devices, is even more difficult compared to enlarging the components. You really need very good techniques.
And we understand what needs to be done in the creation of such small screens. If you look at our products, the edges of the screens are very good. Battery storage capability is outstanding. So our product, we also have IPT. There are no shortcomings.
Certainly, we care about the feel to your touch. Compared to iPhone, our product is obviously superior. Sometimes when you hold a handset in your hand, you feel that the edges are scratching on your skin. If you hold a Xiaomi phone, you will feel very different is particularly comfortable.
And we focus a lot of our energy on the details. And things are very refined. So it's not just about downsizing the screen, it is about enhancing at the same time user experience, and Xiaomi Pro is selling so well. Why? Because they have bigger screens. And it is similarly not just about enlarging things. And for the battery storage capability is very outstanding.
The Pro version is very popular. People continue to upgrade the handsets. For example, they start from CNY 3,000-something and then upgrade it to CNY 5,000 something. And we are accumulating more users inside the range of CNY 3,000 to CNY 4,000 so that later on, they will be able to upgrade to more premium offerings.
We attract different customer groups. We retain them with the outstanding performance of our products, and then they will upgrade the products ultimately.
And about synergy. Today, if you have Xiaomi vehicle, perhaps the pacing of development was lower compared to home appliances. We have 130 shops. And let's say during the math, that is per shop, we're talking about 150 vehicles. And that's a very high level of productivity.
There is another brand, [indiscernible] is only selling like 30 vehicles. So our synergy is well achieved. And you can go to 4S vehicle cities to purchase our products. And our delivery capability remains more or less the same, unaffected.
And we also have physical shops. We started from 50 square meters with 4 vehicles at the moment. We have been expanding very quickly. In traditional shopping malls, car brands are withdrawing, they are leaving shopping malls. This trend is very obvious.
And location of our shops are very premium, and we are offering bigger and bigger shops. So in shopping mall, you can see who is the winner. We take at least 50 square meters of space. We bring traffic to the malls. So our rental enjoys a very good concession. So our cost is actually much lower compared to traditional vehicle brands sell our model. Other brands want to copy us, but they can't because we have multiple products driving sales in all directions. We are still very differentiated, and you can all be our [indiscernible].
There will be more and more shops. We have examined many different locations. And our shopping [indiscernible], it will be the biggest one when you enter the shopping mall next year, people will be pleasantly surprised.
Next question [indiscernible] from Citi.
Congratulations on our good performance. I have a follow-up question. For automobile business, we can see Q3 ASP improvement year-on-year. Is it because of product structure change or other reasons? Looking forward for automobiles, the ASP, what will be the momentum of improvement because you have fridges and chairs, the options have been enhanced over time. So your product structure should continue to improve.
And what about the construction momentum for the production lines for automobiles? When will they start contributing to the company? Any room for advancing the dates?
Concerning ASP, I think ultimately, it is about product mix. And we are looking at delivery data. On the PPT, we are presenting figures excluding Q3. So for example, the ASP has been growing because of different ratios in terms of contributions from different versions of our products. I think with the launch of new products, our ASP will further increase. We'll continue to release more capacity at our factories so that we can shorten the delivery cycle for our customers.
Next question from Huatai. [indiscernible] you may start.
I want to ask you about handsets. We can see market share continuously improving. So the difference is about 10,000. If we want to enhance productivity around the world, where would be your focus?
Well, this year, for the full year, last year was 146 million. This year, 170 million or so. If you look at the difference or the growth, both have been growing for any region, I think there was room for growth. For the Chinese market, I know it very well. Every year, we want to sustain growth of 1 percentage point. I think there is still good room for further improvement.
For example, in the African market, 11 points, Latin America 16 or 17 points. With our brand influence, we want to have improvement of 20% in all these markets. I think that is achievable. Other than sales, we also look at the growth in premium offering in our product structure. We believe we will continue to enjoy growth in the future. Thank you.
Next question, Juan Hansing.
I would like to ask about Chinese handset market. I can see in the third quarter very good delivery growth, especially because of premiumization, performance. So combining our automobile business, can you say in the future for the whole chain operation, do you think there will be benefits created to the handset side?
Well, I think this year, we have good growth for handsets in the Chinese market. First, we enhance competitiveness, brand influence and organic growth of Xiaomi. I think Xiaomi vehicle are making good contribution to branding influence and also new retail trends, creating very positive impact on our performance and development.
Our customer base are also benefiting. We attract customers at a more fundamental level and then slowly convert them. So I think we are very effective in creating foot traffic. And in contrast, our handsets, customers may be converted to purchase other items. Someone who starts from Xiaomi handset may end up with buying Xiaomi vehicle. So such cross influence is really showing its impact and it's getting stronger and stronger.
Next question, UBS, Zoe.
Very quickly, I want to ask about premiumization. This year, you have achieved more than 1 million sales figure even with a higher ASP. So do you think the market will continue to be able to show the highest ASP? And what about overseas premiumization? How is that going to be realized? Are you going to launch overseas or in terms of your markets, you will be more selective?
Well, if you look at different brands, some brands are not increasing the price, some increasing by 100, some 200, some 300 in terms of competitiveness, and the sales projection upon price increase will be very different.
For Xiaomi 15, after price increase it is still selling very fast or even faster because they are so popular. They understand why we're selling for more, so they find it more acceptable. We have the best offering, but the chip's prices have gone up, affecting our overall price as well.
Overseas premiumization, I think at MWC annually, we make announcements -- we also do some introduction overseas. Although in terms of timing, they do lag behind slightly compared to the launch domestically -- at the moment, for Xiami 14 series, it did very well, but the latest series is doing even better. So global influence is still quite significant. We want to focus on Europe, Southeast Asia, Middle East and Latin America and also Africa. But of course, there will be more pressure on higher-end handsets. I hope I have answered your questions.
Next question, [indiscernible] from Citi.
I am concerned about Xiaomi Home. In Shandong, you have set up many shops and you have enhanced the target to 15,000, and you want to open 500 extra large shops. So I'm wondering, in terms of strategy update and also the target for the coming year and enhancement of offstream, do you have higher, more ambitious targets?
At the beginning of the year, we set some new targets. We wanted to add 3,000 shops. And then we started to expedite the progress before the market could shoulder more shops. So by the end of the year, 15,000 shops. By 2026, 20,000 shops. By 2025, 20,000 shops. I've gone to [indiscernible] with a population of just slightly more than 1 million, they are quite lower-tier places. But the profit level of all these lower-tier shops have been very strong. So we don't come in waves.
If you look at Xiaomi, that we have products on the bestsellers list for the whole year. Can you really sell them for a long time and sell well for a long time. Ultimately, it depends on how good your products are, and that is what ultimately supporting your GP margin.
You don't aim at selling well for 1 month or 2 months, but around the year. And 40% is coming from home appliances. For other brands, they launched something new and things will go up and then it will come down very quickly. There are major fluctuations. But for Xiaomi, we don't see such ups and downs. We are very stable. This year, we will open some really big shops, covering more than 50,000 square meters, selling our cars. And we will have 120 such ultra large shops by the end of this year, and they will be in the best locations inside shopping malls.
But at the same time, we get concessionary rental. Shopping malls love us. They want us to divert traffic to their mall in a city there maybe 100 Xiaomi homes. People see our brand everywhere. And for 1 single Xiaomi shop, we can attract 5,000 per day. That is a very shocking number. For some much bigger shopping malls, they don't have that number for their visitors on a daily basis.
So we have seen growth for all our shops. Our next step, Xiaomi Homes in major cities, they are doing very well. In Beijing, Shanghai, our market shares are very high. And we have already started penetrating into more rural places. So I'm not worried about our performance in major cities at all. Apple, Xiaomi, Huawei are basically the 3 main brands. But we have to handle the next tier. But I think our direction is very clear, and we will continue to expand our network.
We will have very positive development in 2025 at the prefecture level. And in '26, '27 in prefectural level, large malls and good malls, you will find Xiaomi's ultra-large shops. We have unlimited potential. Thank you.
Due to time constraints, this is the end of today's conference. Thank you for your time, and thank you for your future support.
Thank you.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]