China’s Xiaomi who products are distributed in Australia by Sydney based Panmi has reported a 20% drop in sales and a 67% drop in net earnings, the stock has fallen 40% as the business struggles to find new markets.

A major supplier of electric scooters to the likes of JB Hi Fi, the business has failed to establish a market for their Xiaomi smartphones in Australia or their smart home technology despite Panmi CEO George Saad, claiming that the business was set to become a major player in the connected homer market.

At the weekend, the Chinese business posted a steep fall in second quarter revenue with sales falling to 70.17 billion yuan from $10.31 billion.

Net income fell 67% to 2.08 billion yuan, also missing analysts’ estimates.

“In the Chinese market, there was the resurgence of the pandemic, so as a result, demand was difficult and weak,” said Xiaomi president Wang Xiang on an earnings call.

Wang added that rising fuel prices, input costs, and inflation affected overseas sales as well. Net profit fell as a result of pressure to clear inventory via sales and promotions.

Several Companies are looking to exit the Chinese market with Japanese business TDK now moving to manufacture in India and Vietnam.

TDK CEO Noboru Saito said on Friday, “We no longer see China as the world’s manufacturing hub,”.

China is currently struggling to recover from an exit of businesses and COVID lockdowns.

China’s long-stagnant smartphone sector has been especially hit by the downturn, with unit shipments down 10% year on year in the second quarter, according to research firm Canalys.

Xiaomi’s smartphone sales, which generate more than half of the company’s total revenue, fell 29%.

Nikki Asia reports that in 2021, Xiaomi saw a sales surge after it grabbed market share from rival Huawei Technologies, whose ability to procure components was crippled by U.S. sanctions.

In India, Xiaomi’s strongest market outside of China, the company has been subject to government probes for allegedly dodging tax regulators.

Indian tax authorities in April seized $725 million in assets from the company, claiming it illegally transferred funds abroad under the guise of royalty payments. Xiaomi has denied any wrongdoing.

The weak smartphone market in China and globally has led the company to seek new opportunities and it said earlier this month it had started testing self-driving vehicles in select cities in China.