Xiaomi is escalating its challenge to Tesla’s dominance in China’s electric vehicle market with the unveiling of its second EV model, the YU7 SUV, which the company claims delivers a longer driving range than Tesla’s best-selling Model Y.
The announcement, made late Thursday during a product showcase, marks another bold move by the electronics maker as it expands its automotive ambitions. According to Xiaomi, the YU7 will offer a range of at least 760 kilometers (472 miles) on a single charge—outperforming Tesla’s Model Y, which has a maximum advertised range of 719 kilometers for its extended-range model sold in China.
“We expect the YU7 would significantly erode Tesla Model Y’s China market share,” said Citi analyst Jeff Chung in a note released Sunday.
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Citi projects that the YU7 will be priced between 250,000 yuan and 320,000 yuan ($34,700 to $44,420), directly putting it in competition with the Model Y, which starts at 263,500 yuan in China. Xiaomi said it would reveal the official price at the car’s launch in July, and Citi forecasts monthly sales of around 30,000 units or annual sales of up to 360,000 units.
The YU7’s launch follows the release of Xiaomi’s first EV model, the SU7 sedan, which debuted less than a year ago and quickly climbed China’s sales charts. Priced at 215,900 yuan, about $4,000 cheaper than Tesla’s Model 3 at the time, the SU7 has been received well despite a recent fatal crash that prompted regulatory caution around driver-assist marketing language.
In April alone, Xiaomi delivered over 28,000 SU7 units, down slightly from March’s 29,000 units. However, Xiaomi’s momentum has put the company firmly in competition with Tesla and other local EV players.
“The YU7 is a luxury SUV and could outperform the SU7 sedan in sales,” said Elinor Leung, managing director of Asia telecom and internet research at CLSA.
Meanwhile, Tesla’s Model Y, which had been the second most sold new energy vehicle (NEV) in China from November through April, fell to eighth place in April, according to data from Autohome. BYD’s ultra-budget Seagull topped the April sales list, followed by the Wuling Hongguang Mini and Geely’s Geome Xingyuan. Xiaomi’s SU7 ranked fourth, further emphasizing the brand’s rapid ascent.
Tesla’s global sales decline has been attributed to its CEO, Elon Musk’s politics. Scott Galloway, a marketing professor at New York University, described Tesla’s growing image problem amid global EV competition as “one of the greatest brand destructions of all time,” following a storm of reputational setbacks. Musk added to that narrative by announcing on Saturday that he would now focus on his core ventures, reversing a week-long public flirtation with political endorsements and media attention.
BYD Shares Plunge Amid Price Cuts
While Xiaomi pushes forward with high-end offerings, BYD, China’s largest electric vehicle maker and Tesla’s top rival in the country, is intensifying competition at the other end of the market. On May 23, the company slashed prices on 22 electric and plug-in hybrid models, prompting its shares to plunge as much as 8.25% on Monday, a steep drop from their record high just last week.
The company announced the price cuts on Weibo, China’s top social media platform, as part of a promotion that runs through the end of June. The Seagull hatchback, already a bestseller, saw a 20% price reduction to 55,800 yuan ($7,780), while the Seal dual-motor hybrid sedan had its price slashed by 34% to 102,800 yuan.
These are just the latest in a string of cuts. Earlier this year, BYD launched new versions of its Han sedan and Tang SUV at starting prices 10.35% and 14.3% lower, respectively, than previous versions.
According to Citi analysts, these adjustments have significantly boosted consumer interest. Foot traffic at BYD dealerships between May 24 and 25 jumped 30% to 40% compared to the prior weekend.
Sector-Wide Fallout
The aggressive pricing strategy has spooked the market. On Monday, shares in several major Chinese automakers declined as investors braced for a potential price war. Geely Automobile shares were down 7.29%, Great Wall Motor Co fell 2.94%, Li Auto dropped 4.93%, and Xpeng shares fell 4.19%.
Despite the share declines, analysts at Citi remain upbeat about the broader outlook for China’s EV sector. In a note earlier this month, they wrote: “We expect BYD new energy vehicle 2025/2026 sales volumes of 5.75 million/7.2 million units on high-end brand sales growth, much better demand-supply relationship within the PHEV sector, wider average selling price positioning within the battery EV segment penetrating both the lower-end and higher-end segments going forward, and decent export sales growth.”
Xiaomi’s Strategic Edge
With the YU7 targeting the mid-to-high-end segment and the SU7 already disrupting the premium sedan space, Xiaomi is carving out a unique position. The company is leveraging its strengths in electronics, user experience, and integration with its wider ecosystem—allowing its cars to seamlessly interact with Xiaomi smartphones, tablets, and smart home devices.
The YU7 was reportedly introduced during the same event that Xiaomi used to launch a new premium smartphone, featuring a proprietary chip the company claims outperforms Apple’s on key metrics.
As rivals race to cut prices, Xiaomi appears to be betting on value through innovation, rather than undercutting competitors. Its strategy stands in contrast to BYD’s mass-market discounting and Tesla’s global brand reliance—one that is increasingly under strain in China.