The CEO of Xiaomi acknowledged that his SUV was not priced competitively enough to surpass Tesla, so he introduced a new model that is.

      TL;DRXiaomi's new YU7, priced at $34,300, undercuts the Model Y by $4,350 and offers 50km more range. Sales have fallen below 10,000 units monthly.

      Most CEOs would hesitate to acknowledge that their product isn't priced competitively against a rival, but Lei Jun did just that on Wednesday night and subsequently launched a model to address the issue.

      At Xiaomi’s “Human x Car x Home” launch event on May 21, the founder and CEO revealed the YU7 True Standard Edition, an entry-level electric SUV priced at 233,500 yuan (approx. $34,300). This is 30,000 yuan ($4,350) less than the lowest-priced Tesla Model Y in China, which starts at 263,500 yuan. The previously available base YU7, now called the Long Range edition, began at 253,500 yuan, only 10,000 yuan ($1,450) below Tesla's price. Lei noted that this price difference was not compelling enough.

      Interestingly, the new YU7 Standard Edition offers a range of 643 kilometers on the CLTC cycle (about 399 miles), compared to 593 kilometers (368 miles) for the rear-wheel-drive Model Y. Xiaomi is providing more range at a significantly lower price while still including features like air suspension and LiDAR as standard—options Tesla does not offer at any Model Y price point.

      The technical modifications aim to reduce costs without noticeable compromises. The new model utilizes a smaller 73 kWh lithium iron phosphate battery from CATL, reduced from the 96.3 kWh pack found in the Long Range edition. It comes with a single rear motor that produces 235 kW and has a curb weight that has decreased by 115 kg to 2,200 kg, explaining how a smaller battery can achieve competitive range. The SUV’s exterior dimensions of five meters remain unchanged.

      This pricing strategy is a reaction to a sales decline that peaked and then plummeted. The YU7 was launched on June 18, 2025, and received over 200,000 firm orders within three minutes, creating a waitlist nearly a year long. By April 30, 2026, Xiaomi had delivered 232,000 units in ten months. However, the initial backlog has been cleared, and in April, only 9,876 YU7s were delivered out of a total of 36,702 vehicles, a drop from January's 37,869 units, when the YU7 led monthly sales in China. Lei needed to set a new price point to boost demand.

      Xiaomi has delivered over 600,000 EVs in under two years, a pace unmatched by any new competitor. The company delivered 410,000 vehicles in 2025, with a target of 550,000 for 2026. Its EV division became profitable in November 2025, about 18 months after the first SU7 sedan was shipped—a quicker route to profitability than Tesla's. The second-generation SU7, launched in April, secured 40,000 firm orders immediately. The automotive division has evolved into a core growth driver rather than just an ancillary business for the smartphone manufacturer.

      In addition to the Standard Edition, Xiaomi introduced the YU7 GT, a performance variant priced at 389,900 yuan ($57,300) featuring a 990-horsepower dual-motor powertrain. The GT achieved a Nürburgring Nordschleife lap time of 7:22.755 on April 2, 2026, breaking the previous SUV record by 14 seconds. This performance variant targets premium buyers seeking a Chinese performance SUV to compete with European rivals while also enhancing the appeal of the $34,300 Standard Edition.

      Tesla's competitive position in China faces ongoing pressure from various fronts. BYD surpassed Tesla as the leading seller of EVs worldwide in 2025, with 2.26 million battery electric vehicles sold. While the Model Y remains the top-selling EV in China, its pricing power is diminishing as competitors offer similar or superior specifications at lower prices. Tesla's Q1 2026 deliveries fell short of Wall Street's expectations, with the company producing 50,000 more vehicles than it was able to sell, indicating a demand ceiling in its primary markets.

      Chinese EVs are now entering Canada under a new trade agreement lowering tariffs to 6.1% for up to 49,000 vehicles annually. In contrast, the US is moving the other way, with bipartisan legislation introduced on May 12 to ban Chinese connected vehicles completely. Xiaomi's CEO has stated the company does not plan to enter the US market, but the YU7’s combination of more range, enhanced features, and a $4,350 price advantage over the world's best-selling electric SUV highlights the competitive situation American lawmakers are attempting to counter.

      The Chinese EV