The Model 3 EV leadership position in China’s market ended when Xiaomi’s SU7 achieved higher sales numbers. Xiaomi has set its sights on Tesla’s Model Y as it attempts to take over the world’s largest EV market.
The Chinese market witnessed Tesla become the first international automaker to build a fully owned factory, which manufactured 50,000 Model 3s during its first six months of operation at Gigafactory Shanghai in 2020. Xiaomi achieved better results than the initial 70,000 SU7 units produced during its first six months of last year. During January, Xiaomi sold 22,000 SU7s, while Tesla managed to sell only 8,000 Model 3s.
The SU7 achieves market success through its affordable price point, extended range capabilities, and innovative additional features. The SU7 outclasses the Model 3 with its lower 20,000 Yuan (~$2,500) price tag and extended 10% range capacity and heads-up display and rear mini fridge and traditional turn signal stalk that Tesla has eliminated from its vehicles. The SU7 has such high demand that customers must wait for up to 34 weeks for delivery despite the Model 3 having a delivery window of 1-3 weeks.
Xiaomi applied Tesla’s production methods of gigacasting and structural battery packs to the SU7, which provides it superior performance compared to the Model 3. The YU7 from Xiaomi adopts these advancements as it prepares to launch as a Tesla Model Y direct competitor. The upcoming summer production start of the YU7 presents a significant market challenge to Tesla’s Model Y, which currently holds the top spot in sales.
The Model Y received updates from Tesla, yet the Chinese automotive industry continues to increase its competitive pressure against the company. The fading premium brand image of Tesla in China will lead to reduced market share and profit margins throughout 2025, which will create difficult conditions for the American EV company.