Xiaomi's auto business though is still operating at a loss. The unit reported an adjusted loss of 1.5 billion yuan for the quarter, with a gross profit margin of 17.1%.

During the quarter, Xiaomi maintained its position as the world's third-largest smartphone maker with shipments of 42.8 million units, up 3% and capturing 14% of the market, according to research firm Canalys.

Lu said the company planned to increase the number of offline retail stores in mainland China from 13,000 to 15,000 by the end of the year and 20,000 to next year, and was investing heavily in technology to grow its market share.