Tesla faces threat from Xiaomi’s new YU7

Tesla is facing increasing pressure in China as local rival Xiaomi announced impressive orders for its new YU7 electric vehicle, which directly competes with Tesla's Model Y. The YU7, priced at approximately $35,370, undercuts the Model Y by nearly 4% and boasts superior specifications, including a driving range of up to 835 km, compared to the Model Y's 719 km. In its first hour on sale, Xiaomi secured 289,000 orders, more than tripling the orders for its previous model, the SU7 sedan, and significantly exceeding market expectations.

Analysts predict that Tesla's Model Y will likely lose market share in China due to the YU7's strong performance. Tesla's share of the Chinese electric vehicle (EV) market has already declined from 15% in 2020 to about 7.6% in early 2025. Xiaomi's SU7 has consistently outsold Tesla's Model 3 since December, further intensifying competition. Analysts at Citi suggest that Tesla may need to consider price cuts and potentially offer its "Full Self Driving" system for free to remain competitive.

Xiaomi's stock surged by 8% following the YU7's launch, reaching a record high and more than tripling in value over the past year, bringing the company's market valuation to nearly $200 billion. The YU7's successful launch marks Xiaomi's significant entry into the EV market, showcasing its ability to diversify beyond smartphones and establish a strong presence in the automotive industry. Analysts project monthly sales for the YU7 to range between 60,000 and 80,000 units, indicating a robust demand for the vehicle.