As impressive as Tesla’s entry into the Chinese market was, Xiaomi’s own EV venture in China has been even more remarkable.
Tesla was the first foreign automaker to secure a wholly-owned car factory in China. It built it and started production at the plant in record time, an incredible moment for the EV industry in China and globally.
Within the first 6 months of Model 3 production at Gigafactory Shanghai in 2020, Tesla built around 50,000 vehicles, which was unprecedented.
Xiaomi, better known for its electronics, produced 70,000 SU7 EVs in the first six months of production last year.
In its first full year of production, Xiaomi came out of nowhere and outsold Tesla’s Model 3 in the critical Chinese market.
In January, Tesla sold about 8,000 Model 3s in China, while Xiaomi delivered more than 22,000 SU7 EVs. This trend is expected to continue.
It’s not too surprising to see why. The base Xiaomi SU7 starts at 20,000 Yuan cheaper (~$2,500 USD) than the Model 3 and offers a bigger battery pack with 10% more range, as well as many tech features that Tesla doesn’t provide, like a heads-up display.
It even has a rear mini fridge, and since we are comparing it to Tesla, it also has a turn signal stalk.
The most unambiguous indication that the SU7 has taken over the Model 3 is the wait times.
Despite SU7 production already being higher than Model 3, you can get a Model 3 within “1-3 weeks” of ordering, while you have to wait “31-34 weeks” for a new SU7, according to Xiaomi’s online configurator:
If anything, the long wait times on the SU7 are helping Tesla as some can’t wait that long for a new car. However, Xiaomi is still ramping up production.
Speaking of production, Xiaomi took clear inspiration from Tesla. The SU7 is using large casting parts, which Tesla calls “gigacasting” and Xiaomi calls “hypercasting.”
The Chinese company is also using a similar design as what Tesla calls “structural battery pack”, where the pack is a structural part of the vehicle’s chassis.
Interestingly, Tesla uses these features on the Model Y but hasn’t transferred them to the Model 3 yet. Xiaomi uses them on the SU7, its Model 3 competitor – giving it an advantage, and it will do the same on its upcoming Model Y competitor.
That’s where Tesla needs to worry.
Model Y is by far Tesla’s best-selling car, and China is the world’s biggest EV market by a wide margin. What the SU7 did to Model 3, Xiaomi’s upcoming YU7 is likely to do to Model Y.
Xiaomi is going to start production of the YU7 this summer and it is expected to ramp up production just as quickly as it did with the SU7.
It compares similarly to Model Y as SU7 compares to Model 3.
Fortunately for Tesla, the new competition comes as it updated the Model Y, which should help – although current wait times on new orders do point to soft demand for the new version.
As I was writing and researching this article, by the way big hat tip to Troy Teslike for helping a ton with research for this, I was reminded of the legend of the “Tesla killer.”
It’s a term that the media loved to use every time a legacy automaker launched a new EV in the early days of Tesla. We laughed at them for even suggesting it, as they would apply it to vehicles that didn’t match Tesla’s performance, production volumes, or profitability.
Sure enough, none of them came even close to negatively affecting Tesla, let alone “killing” the company.
But Xiaomi is coming as close as I’ve ever seen in my 15 years of covering Tesla (coming on 10 years full-time professionally).
Let’s be clear: Xiaomi owes Tesla quite a bit for its EV success. The automaker pioneered gigacasting and structural battery packs, and Xiaomi followed suit to great success. I am sure these are not the only Tesla features that inspired Xiaomi.
With that said, this is the reality now, and Tesla is getting left behind.
Tesla benefited from being a foreign brand in China. Buyers saw it as a luxury brand, but the company is now a victim of its own success. The cars became so popular that the brand deteriorated, and it is not seen as premium or exclusive anymore.
At the same time, Chinese manufacturers became much better at making EVs, and now, several of them have achieved a better reputation from buyers in China than Tesla.
Furthermore, with the new Model Y, Tesla went with design accents that are already popular in China. As we previously reported, the new Model Y looks very similar to Xpeng’s vehicles. This is making Tesla “like any other brand in China.”
In my opinion, Chinese competition, especially Xiaomi, will hurt Tesla badly in China this year.
The automaker is planning to roll out cheaper models in the second half of the year. This should help, but the entry EV market is already quite crowded in China, and Tesla is likely to cannibalize itself more than anything.
