The YU7 is only Xiaomi’s second vehicle, and one that undercuts Tesla’s Model Y in price by nearly 4 per cent.
Tesla’s Model Y, China’s best-selling SUV, will likely lose more market share, analysts said.
That would only rub salt into the wound for the US automaker, which has steadily lost ground to domestic EV makers that have won over consumers with snazzy new models. Xiaomi’s SU7, for example, has outsold Tesla’s Model 3 in China on a monthly basis since December.
The YU7’s price is “slightly below that of Tesla’s Model Y but it offers much better specs and performance”, said analysts at Jefferies.
Citi analysts said Tesla may have to cut prices further, offer its “Full Self-Driving” driver assistance software for free and offer more financing incentives if it is to successfully compete with Xiaomi.
Tesla did not immediately respond to a request for comment.
Its share of the Chinese EV market has fallen from a peak of 15 per cent in 2020 to 10 per cent last year and then again to 7.6 per cent for the first months of 2025.
Xiaomi shares soared 8 per cent to a record high in Hong Kong after the surge of early orders.
The Beijing-based commercial tech giant made its first foray into car-making with its SU7 EV model last year, part of a broader industry push to boost domestic consumption.
Initial enthusiasm for intelligent driving features in such vehicles was tempered by the fatal crash of a Xiaomi SU7 in March. The vehicle had been in assisted driving mode just before it crashed, killing three students.
Premier Li Qiang used the World Economic Forum in Tianjin this week to outline China’s ambition to become a “major consumption powerhouse”, emphasising policies to stimulate demand for high-value goods such as electric vehicles.
