Chinese customers snapping up Xiaomi’s SUV in bad sign for Elon Musk

Exceptionally strong initial orders for Xiaomi’s YU7 electric sport utility vehicle sent shares in the automotive newcomer to a record high on Friday and fanned speculation that Tesla may have to cut prices to fight back.

In the first 18 hours after the YU7 went on sale, Xiaomi received some 240,000 orders that it considers locked in, with buyers having paid either a hefty deposit for ready-to-deliver cars or a smaller deposit for cars still to be made.

The smartphone and appliance maker made a huge splash in China’s electric vehicle market with the launch of its first vehicle, the SU7 sedan, in March last year. The car has outsold Tesla’s Model 3 in China on a monthly basis since December and has even earned a rave review from Ford CEO Jim Farley.

The YU7 is only its second model and priced from 253,500 yuan ($35,360), it undercuts Tesla’s Model Y by nearly 4%. That will likely lead to more market share loss for the US automaker, analysts said.

At one Xiaomi car showroom in Beijing, dozens of people were gathered around the YU7.

Otto Shi, a 26-year-old Tesla Model Y owner who works in finance, said he was considering getting a YU7 for his father who currently drives a Mercedes-Benz.

“We could take turns to drive the Model Y and YU7,” he said, adding that he was impressed by Xiaomi’s prowess in supply chains and the SU7’s success had made him believe Xiaomi is the ideal Chinese brand to switch to.

Xiaomi’s shares shot 8% higher in early trade to an all-time high but later pared gains to close up 3.6%. They have risen by more than 70% so far this year to value the company at roughly $190 billion, making it the best performing large-cap stock in Asia Pacific, according to LSEG data.

What can Tesla do?

As domestic rivals increasingly win over Chinese consumers with snazzy new features, Tesla’s share of the Chinese EV market has fallen from a peak of 15% in 2020 to 10% last year and then again to 7.6% for the first five months of 2025.

Citi analysts said in a note to clients that it may have to cut prices further, offer its “Full Self-Driving” (FSD) driver assistance software for free and offer more financing incentives if it is to compete successfully with Xiaomi.

Tesla, which counts China as its biggest market according to first-quarter sales numbers, did not immediately respond to a request for comment. Last year, China accounted for roughly a fifth of its revenue.

While Xiaomi CEO Lei Jun acknowledged that Tesla’s driving assistance software was superior, he touted a range of other features where he said the YU7 outperformed the Model Y.

The YU7’s base model is equipped with a 96.3 kWh battery pack, offering a driving range of up to 835 km (519 miles) on a single charge and supporting high-power fast charging.

That compares with a maximum range of 719 km for the redesigned Tesla Model Y, which uses a smaller 78.4 kWh battery.

Its backseats have drawers for storage under them and the YU7’s driver assistance software comes at no extra charge while Tesla charges 64,000 yuan for its smart driving software, he added.

On Thursday night, Xiaomi said it had received 289,000 orders for the YU7 in the first hour after it went on sale, more than three times the level for its SU7 when it launched.

Lei has said, however, that a portion of orders was likely being placed by scalpers. On Chinese secondhand platform Xianyu, there were hundreds of people on Friday looking to sell their position in the order queue to others.

Aiming to mitigate such scalping, Xiaomi is now limiting each customer to purchasing two cars at most.