The smartphone manufacturer's entry into electric vehicles began with considerable momentum in March 2024. Lei Jun, Xiaomi's CEO, positioned the company's inaugural SU7 sedan as a direct competitor to Tesla's Model 3. Market performance validated this strategy, with the SU7 consistently outselling Tesla's Model 3 in China since December 2024. Ford's CEO Jim Farley provided notable validation for Xiaomi's automotive capabilities. His positive assessment of the SU7 demonstrated that industry leaders recognized the Chinese company's legitimate threat to established players.
Xiaomi's latest vehicle launch has exceeded all expectations regarding consumer response. "The YU7 received more than 200,000 orders within just three minutes of its launch," the company announced Thursday. This extraordinary demand escalated further, with 289,000 orders recorded within the first hour, three times the initial response to the SU7's debut.
Lei Jun strategically positioned the YU7 against Tesla's Model Y through aggressive pricing. At 253,500 yuan ($35,360), the SUV undercuts Tesla's comparable model by 10,000 yuan, representing a nearly 4% price advantage. "We could take turns to drive the Model Y and YU7," stated Otto Shi, a 26-year-old Tesla owner considering the Xiaomi alternative for his family.
Technical specifications demonstrate Xiaomi's competitive engineering approach. The YU7 features a 96.3 kWh battery delivering 835 kilometers of range, significantly exceeding Tesla's Model Y maximum of 719 kilometers with its 78.4 kWh battery. Lei Jun acknowledged Tesla's superior driver assistance technology while emphasizing areas where the YU7 excelled.
Market analysts have recognized the implications for Tesla's position. Citi analysts suggested Tesla "may have to cut prices further, offer its 'Full Self-Driving' driver assistance software for free and offer more financing incentives" to maintain competitiveness against Xiaomi's challenge.
Tesla's Chinese market share has declined substantially from 15% in 2020 to 7.6% during 2025's first five months. This erosion represents a critical concern for the American manufacturer, as China constitutes approximately one-fifth of Tesla's global revenue.Xiaomi's stock performance reflected investor confidence in this automotive strategy. Shares surged to record highs, rising over 70% year-to-date and achieving a $190 billion valuation. This performance established Xiaomi as Asia Pacific's best-performing large-cap stock.
Xiaomi's success has shown the power of leveraging existing supply chain expertise while addressing consumer preferences through competitive positioning.
