Xiaomi Enters SUV Market with YU7 Launch, Targeting Tesla with Bold Pricing and High-Tech Features

AsianFin -- Xiaomi officially unveiled its first electric SUV, the YU7, on Thursday, marking a bold new chapter for the smartphone giant as it deepens its push into the highly competitive automotive market.

The YU7 comes in three variants: the standard version priced at 253,500 yuan ($35,364), the Pro at 279,900 yuan, and the Max at 329,900 yuan. With a starting price 10,000 yuan lower than Tesla's Model Y and a 200-kilometer longer range, the YU7 aims to deliver premium value at a competitive price.

All models come standard with NVIDIA's Thor computing platform, one LiDAR sensor, a 4D millimeter-wave radar, 11 HD cameras, and 12 ultrasonic radars, offering high-end assisted driving capabilities across the lineup.

"We reached consensus on pricing in just five minutes," said Xiaomi CEO Lei Jun, adding that the launch generated over 196,000 pre-orders within two minutes and surpassed 200,000 within three minutes. "This is a miracle co-created by our users and Xiaomi."

The pricing strategy follows Xiaomi's BOM (bill of materials) cost-based model, which trades scale for profit. The same approach drove the success of the Xiaomi SU7 sedan. Despite initial losses—Xiaomi's EV division lost 1.8 billion yuan in one quarter—its Q1 2025 report showed a narrowing loss of 500 million yuan and a gross margin of 23.2%, surpassing BYD’s 20.07% for the same period.

At a media briefing, Lei Jun stressed Xiaomi's commitment to competing directly with global leaders like Tesla and Porsche. "We must hold ourselves to the standards of a top automaker," he said. Since January, Xiaomi has made sweeping internal reforms, including its "Eagle Plan" which opened 38 key management roles to public competition—24% of applicants were born after 1990.

Lei addressed the heightened expectations and scrutiny Xiaomi faces. "We thought being a newcomer would win us more understanding, but the reality is tougher. This industry has no leniency," he said. Xiaomi has delivered over 250,000 cars in just 14 months and is preparing to scale further. With 289,000 pre-orders for the YU7 within one hour, Xiaomi is ramping up production at its Beijing facility.

The company is also supporting regional industrial development. About 30–40% of its suppliers (excluding batteries) are based in the Beijing-Tianjin-Hebei region, and Xiaomi expects this to rise to 60–70% as battery production localizes.

Lei reaffirmed Xiaomi’s focus on innovation, quality, and high-end positioning. He said Xiaomi is preparing to integrate its self-developed chips into future vehicles, with the second-generation Xuanjie chip set to debut in automotive applications.

Despite concerns that YU7 sales may cannibalize SU7 demand, Lei remains optimistic. "The SUV and sedan markets are distinct. We expect YU7 sales to exceed SU7, but SU7 orders remain strong," he said, with June projections now raised to 13,000–14,000 units.

Lei also emphasized Xiaomi’s long-term commitment to its Wuhan base, where it plans to expand its home appliance and R\&D operations. "Wuhan has the talent, location, and industrial base to become a vital Xiaomi hub," he said.

As Xiaomi scales rapidly in the EV space, Lei acknowledged the burden of public scrutiny. "We must be cautious, accurate, and consistent. Xiaomi can no longer act like a rookie. We must lead with responsibility and innovation."

With the YU7 launch, Xiaomi is signaling that it is not just in the EV race—it’s determined to lead it.

The following are the main points from Lei’s remarks at the media briefing, with edits for brevity and clarity:

Q: How do you view the current fierce competition and price wars in the automotive market? How will Xiaomi continue to innovate and maintain its competitive edge?

Lei: I think, first of all, when Xiaomi entered the automotive industry, we made up our minds to start with core technologies and to keep innovating in the tech space.

For example, our outstanding performance at the Nürburgring is inseparable from our investment in technologies such as motors, batteries, and chassis. The Xiaomi V8S super motor is not only self-developed, but also produced and manufactured in our own factory—we didn’t outsource it to any contract manufacturer, precisely because we didn’t want people to criticize us for that.

In addition to competing on technological innovation, we also have to compete on safety, quality, and durability. That’s why we conduct 24-hour endurance tests.

Moreover, we Chinese are very strong in the mid- and low-end product segments, but I think the real challenge is how to break into the high-end market and compete on the same stage as world-class automakers. So, when we entered the automotive market, we immediately set a high bar for ourselves: could we match Porsche and Tesla? We set very ambitious goals.

As for countering excessive competition, I think there are three key points: First, technological innovation—we must increase our investment in technology. Second, we have to focus on quality. Third, we must have the courage to compete head-on with the world’s top carmakers.

At last year’s launch, I said: as long as you start chasing, you’re already on the path to victory—don’t be afraid. The Tesla Model Y is indeed impressive, and among domestic manufacturers, there’s often talk of a “seven sects besieging Bright Summit” scenario, but in the end, they all lost. I think there’s no need to be afraid—Model Y is excellent, but we still need to have the courage to take up the challenge.

Q: More and more Chinese car owners, and even overseas consumers, are starting to choose and trust Chinese cars. What do you think has driven this change? And how do you predict the future development of Chinese automotive brands?

Lei: We are newcomers to the automotive industry, so my perspective may not be comprehensive.

From my experience, I believe the reason why China’s automotive industry has managed to leapfrog ahead is inseparable from the tireless efforts and contributions of generations of automotive professionals over the past 40 years.

China has already become the world’s largest automobile manufacturer and consumer market. At the same time, intelligent electric vehicles have given us a unique opportunity to overtake competitors by switching tracks. What’s the technology behind intelligence? It’s chips, operating systems, AI, the internet, information technology, and consumer electronics. In this field, apart from China and the US, other countries are lagging behind. In these areas, we are absolutely capable of outperforming Japanese, German, and Korean companies. China needs to seize this strategic window of opportunity to truly make our intelligent electric vehicles world-class.

I think it’s like being a “hexagonal warrior”—we are strong in many dimensions, but still lack capabilities in some areas. For example, mechanical quality is the fundamental skill of the entire automotive industry. Also, when it comes to the high-end segment, it has always been dominated by BBA (Mercedes-Benz, BMW, Audi), Porsche, and Ferrari. Can we create that same sense of luxury and comfort? I believe that in the coming years, China’s automotive industry will continue to make significant progress.

Q: Many car enthusiasts are comparing the Xiaomi YU7 to Tesla’s Model Y. How do you view this comparison?

Lei: To be frank, the Model Y is indeed an impressive vehicle. Over the past four years, I’ve spoken with many peers in the automotive industry, and a lot of people feel that the Model Y is like an unfinished apartment. But as someone from the tech industry, after we thoroughly dismantled, studied, and analyzed the Model Y, we found that its global success is by no means just due to Elon Musk’s brand influence. There are many aspects worth learning from. Its advantages are not only in energy efficiency and FSD (Full Self-Driving), but also in many other areas. Of course, Xiaomi is doing quite well too, but we must remain humble and keep learning in order to build even better cars.

Q: Earlier, you shared your thoughts on “involution” (intense internal competition). In the context of such fierce competition in the automotive industry, what specific actions is Xiaomi taking?

Lei: Recently, national regulatory authorities have advocated for anti-involution measures, and we have responded proactively and implemented them resolutely. For example, when it comes to suppliers, we promise to make payments within 60 days—a commitment for which Xiaomi has an excellent reputation. In terms of competition, we firmly oppose price wars and have chosen to move upmarket. We hold ourselves to higher standards and are fully committed to implementing the requirements set by the authorities.

Q: Fifteen years ago, when you launched the first Xiaomi phone, the slogan “Born for Enthusiasts” became very famous. Last year and this year, with the launch of Xiaomi cars, it’s clear from the various performance aspects that these vehicles are also designed for automotive enthusiasts. Back then, although Xiaomi phones sold well, there were periods of decline. Now that Xiaomi cars are selling well, do you have any strategies in place to prevent sales from dropping, so that Xiaomi cars can maintain strong sales over the long term?

Lei: We’ve only been in the automotive industry for one year and three months, so I can’t guarantee that we’ll always maintain strong sales. However, after 15 years of entrepreneurship, Xiaomi’s overall capabilities have improved significantly. To sustain good performance in the long run, the most critical thing is to focus on capability building and addressing our weaknesses.

Over the past five to six years, everyone has witnessed Xiaomi’s growth in capabilities. On our tenth anniversary, Xiaomi announced a shift from opportunity-driven to capability-driven development, with plans to invest 100 billion RMB in R&D. I believe that building capabilities is crucial—capabilities matter more than opportunities, and we need to improve across all dimensions. Every day, we reflect on our shortcomings and strive to improve. Xiaomi’s success is not due to marketing alone; we lead in product R&D, quality, design, and other areas. Although there is still room for improvement, we will continue to make progress. Many people think Xiaomi had no experience in manufacturing or the auto industry, but in just 14 months, we delivered 250,000 cars. Our quality and manufacturing management capabilities are very strong. In fact, the smart phone factory we delivered early last year was mostly equipped with self-developed equipment. Without a solid foundation, it would be very difficult to manage manufacturing well.

Q: During your research, you mentioned that the success of Xiaomi cars is inseparable from Beijing’s business environment and industrial foundation. At the same time, Xiaomi is also expected to boost Beijing’s new energy vehicle brands. Could you share what results Xiaomi has achieved in upgrading and improving the local new energy and smart vehicle industry ecosystem in Beijing since starting car production? Currently, what proportion of Xiaomi’s components are supplied within Beijing’s half-hour industrial circle? Has this proportion shown an upward trend in recent years?

Lei: Four years ago, Xiaomi chose to manufacture cars in Beijing primarily because Xiaomi itself is a Beijing-based company. We hope that our efforts will align with national strategies, especially the coordinated development strategy of the Beijing-Tianjin-Hebei region, where industrial collaboration is crucial.

Based on this, when selecting suppliers, if all other conditions are equal, we will give priority and extra points to suppliers from Beijing’s economic sector. Currently, if we exclude batteries, about 30–40% of our suppliers are from the Beijing-Tianjin-Hebei region. Battery suppliers will soon be locally sourced as well, so once batteries are included, we expect the overall proportion of local suppliers to reach 60–70%. It’s fair to say that the level of local supply in the Beijing-Tianjin-Hebei region is quite high, with around 70% of our suppliers coming from here. Through our own efforts, we hope to help make Beijing even better—this is the aspiration of every Beijing-based company.

Q: Just three minutes after the launch of the Xiaomi YU7, pre-orders surpassed 200,000. With such a strong market response, what are Xiaomi’s expectations for sales? How is production capacity being arranged at the Beijing factory?

Lei: Seeing so many orders is incredibly exciting—it far exceeds my expectations. The SUV market is highly competitive, so I’m deeply moved that so many users are willing to put their trust in us. Even before test drives have started, so many users have already locked in their orders, which shows the high level of trust everyone has in Xiaomi. We will strictly control product quality and accelerate delivery, so that our customers can get their cars as soon as possible.

Q: Xiaomi’s Home Appliance Center at its Wuhan headquarters is about to begin operations. Hubei places great importance on attracting investments from entrepreneurs returning to their home province. What major plans does Xiaomi have next in Hubei and Wuhan, especially projects worth over 10 billion yuan? Additionally, could you share with global entrepreneurs what investment advantages Xiaomi sees in Hubei?

Lei: As a native of Hubei, I spent four years of my university life in Wuhan, so I have a deep affection for the city. When Xiaomi set up in Wuhan in 2017, we set a goal to establish an R&D center with 10,000 staff. After years of development, our Wuhan office can now accommodate 20,000 people, and our R&D team has grown to 4,000–5,000. I believe we’ll reach the 10,000 mark very soon.

In addition, we have established our major home appliance business in Wuhan and built our first smart home appliance factory there, aiming to drive local business growth and contribute to the development of my hometown. Wuhan’s advantages are clear: it has a prime geographic location, excellent transportation links, abundant water resources, and beautiful cityscapes. More importantly, Wuhan is home to many universities, with a rich talent pool and one of the highest numbers of university students in the country. However, Wuhan still needs more large local enterprises to create a virtuous cycle and foster talent development.

Q: Xiaomi’s popularity continues to rise, but with this increased attention, some negative effects have also been amplified. How do you view this phenomenon? What reflections does Xiaomi have, and how will you respond in the future?

Lei: In today’s era of social media and viral content, any company that gains popularity will inevitably face a highly complex public opinion environment. This is a challenging reality we must confront. To address this, Xiaomi needs to focus on several key areas.

First, we must be cautious with our words and actions, ensuring that every statement is accurate and precise, as even the smallest flaw can be magnified. Second, we need to steadfastly follow our own path, making significant efforts in technological innovation and premium positioning, striving to lead in multiple fields.

Xiaomi has been in the automotive industry for four years, and it’s been one year and three months since we launched our first product. I have a lot of thoughts about this journey. There was an incident where one of my internal speeches was accidentally leaked, sparking considerable controversy. In that speech, I mentioned that last year, as a freshman in the industry, Xiaomi sold only 130,000 cars, while BYD sells that many in just one week. I originally thought that, as newcomers, we would receive more understanding and support, but that wasn’t the case. Our peers did not lower their expectations for us. This made me realize that Xiaomi can no longer see itself as a newcomer; instead, we must hold ourselves to the standards of a leading automaker, change our mindset, and pursue higher benchmarks.

Q: After the launch of the YU7, will it affect the sales of the SU7?

Lei: Many people are concerned that the launch of the YU7 will impact SU7 sales. However, I’m quite confident about this, because the customer bases for sedans and SUVs are different. While there is some overlap, the driving experience of a sedan appeals to certain users, while the spaciousness of an SUV attracts another group. Both have their own loyal fan bases.

For example, this month is the launch period for the YU7, so theoretically, new orders for the SU7 should be quite low. Initially, we estimated that the SU7 would receive about 10,000 new orders this month, but we have already raised our forecast three times, and now expect it to reach 13,000 to 14,000. This shows that even under these circumstances, SU7 orders remain strong. Therefore, I believe that YU7 sales will most likely surpass those of the SU7, but SU7 sales will not be low either. I remain very confident in the SU7’s market performance.

Q: Does Xiaomi have plans to use its self-developed chips in cars? If so, when can we expect this to happen?

Lei: The chip development cycle is quite long, typically taking three to four years. When we were developing the Xuanjie O1 chip, we didn’t anticipate it would perform so well. Due to limited initial planning, the total production of the O1 chip was capped, and it was only planned for four products.

I want to especially thank Zhu Dan and the chip team for their tremendous contributions to Xiaomi. I am currently using a phone equipped with the Xuanjie chip myself, and the experience has been excellent.

As for the second-generation Xuanjie chip, we plan to apply it in the automotive sector. The first-generation chip was primarily used for technology verification, and its performance exceeded all expectations. We have already made the necessary technical preparations for integrating the chip into vehicles, and have independently developed a four-in-one domain controller. In the future, we will definitely promote the adoption of Xiaomi chips in cars.