Tesla's rivals in China are launching a wave of new Model Y killers to take on the best-selling SUV

Xiaomi's YU7 received more than 240,000 pre-orders in 24 hours when it went on sale last month.VCG/Getty ImagesTesla is battling backlash to Elon Musk's politics in the US, but in China, it faces a different problem.Local rivals are launching a wave of "Model Y killer" cars to take down Tesla's best-selling EV.Analysts told BI that Tesla is falling behind high-tech new models like Xiaomi's YU7.China may not care about Elon Musk's politics, but that doesn't mean things are going well for Tesla there.Despite Tesla's sales in China rising in June amid upbeat sales of the refreshed version of its Model Y SUV, the electric vehicle giant is stuttering in its second-largest market.Tesla sold 129,000 vehicles in China during the second quarter of 2025, according to data from the China Passenger Car Association, down nearly 12% from the same period last year.Sales of the Model Y, Tesla's most popular car and China's best-selling SUV, have been flat since 2022 — and it's now set to face a new wave of competition.Last month, smartphone giant-turned EV maker Xiaomi launched its YU7 electric SUV, which amassed more than 240,000 preorders in 24 hours, while EV startup Xpeng debuted the G7, its Model Y rival, a week later to strong early demand.Both cars are priced below the Model Y, and are set to be joined by Nio's L90, another electric SUV that will go on sale later this month.Lei Xing, an independent analyst covering the Chinese auto industry, told Business Insider that Tesla has weathered attempts to dethrone the Model Y before.But, he added, Elon Musk's automaker has never faced a challenge quite like the YU7, which has taken China by storm."I think it's the Model Y killer. There's been a lot of rivals that have come before it, and the Model Y has been very resilient, but the YU7 seems to be the one that can overtake it," he said.Xiaomi's EV revolutionXiaomi scored a massive hit with its first EV, the SU7, selling more than 200,000 since it launched in March 2024.The company faced a crisis earlier this year when an SU7 was involved in a fatal highway crash, but the sedan has continued to sell well.Xiaomi CEO Lei Jun shows off the YU7 at a company event earlier this year.ADEK BERRY/AFP via Getty ImagesLei Xing said that Xiaomi's cars had proved extremely popular with women and young people. In comments posted on social media last week, Xiaomi CEO Lei Jun said that the average age of YU7 preorder holders was 33, and around 30% came from women.Lei Xing added that the company had successfully tapped into a massive, tech-obsessed consumer base of "fanatics" that already own multiple Xiaomi products.He said one of the earliest SU7 buyers in Shanghai told him he owned around 300,000 yuan ($41,000) of Xiaomi products in his home in addition to the company's first EV."Xiaomi over the last 15 years has expanded their product lineup to all sorts of devices. They've built this home-car-human connection. And now that last missing piece is the car," said Lei Xing.Snow Bull Capital CEO Taylor Ogan, whose Shenzhen-based firm invests in the EV and battery industry, told BI that Xiaomi's tech ecosystem had handed the company a major advantage in China's ultra-competitive market."My home has over 15 Xiaomi devices, my TV is Xiaomi, my bed is a Xiaomi. This is very common in China — once you're in the ecosystem, it's really hard to get out of," Ogan said.Losing ground on techLei Xing said that while Tesla was still the "benchmark" for many Chinese automakers in terms of tech, the US firm was now behind on some key features, such as advanced driver assistance systems.Musk has previously said that Tesla's attempts to launch its Full Self-Driving system have been hampered by Chinese rules around data sharing.The company launched a limited version of FSD in China earlier this year, but it charges Tesla owners around $8,000 to access it, unlike many of its rivals, who have begun offering similar systems for free."On ADAS, because of some of the regulatory restrictions, Tesla is behind in China," said Lei Xing."These features are becoming commoditized. The BYD Seagull offers highway ADAS as standard. Customers have come to expect these kinds of things," he added.Tesla's sales in China fell nearly 12% in the second quarter compared to last year.VCG/VCG via Getty ImagesOgan said that Tesla still has a good reputation in China, but the company's ageing product lineup and tech have left it vulnerable."Tech-wise, there are probably 10 companies that have better tech. Xiaomi definitely has better tech than Tesla. It has better motor tech, it has better infotainment, and it actually makes a lot of its own tech," Ogan said, who is an investor in Chinese auto giant BYD."Tesla is just refreshing the bumpers and their headlights and adding an LED strip in the car. That might work enough in Western markets, but it's not enough in today's market here," he added.Ogan said that Tesla's previous tactic of lowering prices to fend off competition would likely be less effective now that many of its rivals offer cheaper models, and said that some Tesla showrooms had turned to new tactics to boost sales."The one that's nearest to me, almost every night they're hiring street performers to perform outside of their showroom to try to drive traffic," he said.'They're nowhere to be seen'One thing that might help Tesla fend off the threat of the YU7 in the short term is the painfully long delivery times for Xiaomi's new EV.The company's website is advertising delivery times of up to 60 weeks for the YU7. Lei Xing said some customers unhappy about the prospect of waiting over a year for the high-tech SUV might instead turn to the Model Y.Xiaomi CEO Jun himself backed that idea, telling his social media followers they should consider buying rival models like Xpeng's G7 and the Model Y if they're in a "hurry."Tesla has faced protests and backlash this year over CEO Elon Musk's political interventions.Tom Brenner/The Washington Post/Getty ImagesIn the long run, however, that is unlikely to solve Tesla's main problem in China: a lack of new products."They haven't launched a new product in years," Tu Le, the managing director at Sino Auto Insights, told BI."The reality is that Tesla doesn't face an Elon personality challenge in China like it does in the rest of the world. It is a lack of competitive products in the Chinese market that is causing Tesla problems," he added.Read the original article on Business Insider

Comments

Business News

Miners help propel FTSE 100 to new record high

Independent

Comments

Similar News

Grok had a chaotic few days &mdash; and now Elon Musk says he's adding the AI to Teslas

Investors grow restless as Tesla inches toward key shareholder meeting deadline &mdash; and risks violating Texas law

What Happened to Tesla’s Annual Shareholders Meeting?

Elon Musk tells Tesla bull Dan Ives to 'shut up' after analyst calls for company oversight of the CEO

Tesla’s board of directors urged to ‘act now’ and rein in Elon Musk after vow to form America Party

How Tesla's Board Should Rein In Elon Musk, According To Prominent Analyst

Tesla shares dive as investors fear new Elon Musk political party will damage brand

Elon Musk loses $15 billion in net worth after Tesla stock sinks

Tesla shares slip after Musk says he will create a new political party

Tesla tumbles as Musk returns to the political fray amid feud with Donald Trump

Tesla investors have a very clear message for Elon Musk: Stay away from politics

Reignited Trump-Musk feud burns Tesla investors, shares of EV company tumble 8%

Tesla stock price drops as Musk leaps back into politics

Tesla Stock Price Falls After Elon Musk Plans New Political Party

Tesla stock sinks after Elon Musk announces launch of ‘America Party’

Tesla shares sink as Musk launches political party

An anti-DEI investment firm is postponing its Tesla ETF, saying Elon Musk has 'gone too far' by launching a political party

Asian shares are mixed, tracking Wall Street split as momentum slows and Tesla drops

Asian shares mostly higher after US stocks hit another record as Tesla and Nike rally

Tesla Reports Worst-Ever Delivery Drop as Musk Faces Political Heat

Business News

Miners help propel FTSE 100 to new record high

Dozens of jobs at risk at Reach in overhaul of sports coverage

Gordon Ramsay seeks 24 hour licence for his Lucky Cat skyscraper restaurant in the City

Miners help propel FTSE 100 to new record high

Former Moët Hennessy exec claims ‘sexist’ bosses told her she needed ‘anti-seduction’ training: lawsuit

Cereal giant WK Kellogg’s shares surge 30% on $3B deal to be acquired by Ferrero Rocher owner

Coffee prices rise again after Trump slaps Brazil with 50% tariffs

Ford recalls 850K vehicles over fuel pump failure that could cause engine stall

Union accuses council of ‘abhorrent’ practices and calls for leader to quit

MPs sound alarm over reports Shein is pushing UK listing rules to be relaxed

AstraZeneca’s stock market exit would be devastating blow, warns ex-chancellor

Nestle offices searched by police over mineral water allegations

Kellogg shares soar as Nutella maker Ferrero takes cereal giant private in huge deal

Threat of industrial action averted as council workers agree to pay deal

Union accuses council of ‘abhorrent’ practices and calls for leader to quit

AstraZeneca’s stock market exit would be devastating blow, warns ex-chancellor

Winter fuel payment scam warning after HMRC receives over 15,000 reports in June

Everything we know about the M&S cyber attack that halted online orders

Threat of industrial action averted as council workers agree to pay deal

Trump's tariffs could send coffee prices even higher, warns Lavazza - as US President threatens Brazil with 50% tax

Is Outlook down? Thousands of users report issues accessing their email

Russian convicted of breaching sanctions by sharing knowhow from tech giant ASML

Dasha Zhukova’s new real-estate project aims to redefine ‘state of the art’

Thousands report issues with Microsoft Outlook email in apparent outage

Elon Musk says AI chatbot Grok will be added to Tesla cars by next week

Royal Mail to stop second class post on Saturdays and stamp costs to be reviewed

Threat of industrial action averted as council workers agree to pay deal

Vistry welcomes ‘unprecedented’ funding to boost building of affordable homes

Mulberry raises £20m from shareholders after sales plunge lower

UK Government must explain how it aims to cut energy bills, says minister

South West Water agrees to pay £24m after watchdog finds wastewater leaks

Mulberry raises £20m from shareholders after sales plunge lower

Royal Mail to stop second class post on Saturdays and stamp costs to be reviewed

UK Government must explain how it aims to cut energy bills, says minister

Vistry welcomes ‘unprecedented’ funding to boost building of affordable homes

Jane Birkin’s original Hermès bag is up for auction in Paris

UN says if US funding for HIV programs is not replaced, millions more will die by 2029

Rubio holds talks with Russia's Lavrov as Ukraine tensions soar

Alabama utility commission allowed to hike prices behind closed doors, judge rules

I was fed up with ‘toxic’ sunscreens so I started making my own with a ‘hero ingredient’ — now Oprah’s a fan

Abandon strikes or risk ‘fragile’ NHS recovery, Streeting warns resident doctors

Average Glastonbury reveller clocked up 50 miles of steps across Worthy Farm

WPP hires Microsoft executive Cindy Rose as new boss

Subway workers agree interim deal to avoid risk of strike during Trnsmt

Water company agrees to pay £24 million after sewage leaks

FTSE 100 jumps to new record high as investors shrug off tariff woes

PageGroup sees jobs market remain under pressure amid tariff uncertainty

Scottish and UK Governments must act to save Alexander Dennis, say MSPs

Watchdog bans host of ads for prescription-only weight-loss medications

Subway workers agree interim deal to avoid risk of strike during Trnsmt

Royal Mail given green light to scrap second-class post on Saturdays

FTSE 100 races to an all-time high as Trump tariff fears recede

Sales of new homes in London have collapsed to 'catastrophic' lows in 2025 says report

Plans to split UK market into energy pricing zones dropped

Beaches and borrowing: 10% of UK adults ‘putting summer 2025 holiday on credit’

Average Glastonbury reveller clocked up 50 miles of steps across Worthy Farm

FTSE 100 jumps to new record high as investors shrug off tariff woes

Grok had a chaotic few days — and now Elon Musk says he's adding the AI to Teslas

Investors grow restless as Tesla inches toward key shareholder meeting deadline — and risks violating Texas law