Tesla has another problem in China. This time it's a smartphone maker.
Tesla faces more electric vehicle competition in China as its sales growth stalls. It could really use a new model right about now.
Chinese consumer electronics maker Xiaomi launched its YU7 electric vehicle over the weekend. It's an impressive crossover-sized all-electric car targeting Tesla's best-selling Model Y.
'We expect Yu7 would significantly erode Tesla Model Y's China market share," wrote Citi analyst auto analyst Jeff Chung in a Sunday report. He projects Yu7 annual sales, after ramping up, at 300,000 to 360,000 'considering its outstanding tech features and value-for-money."
Tesla doesn't break out sales by model in China. It sold about 660,000 cars in China in 2024 and 1.8 million globally.
YU7 trims will be priced from about $35,000 to $45,000. The Model Y in China ranges from about $37,000 to $44,000. The Y standard per-charge range comes in at about 360 miles per charge, about 100 miles less than the YU7.
The timing of a new competitive launch isn't optimal for Tesla. Global sales fell 13% in the first quarter from a year ago, hurt by the Model Y update, which reduced production, and hurt by Elon Musk's political activities that Tesla characterized as brand challenges during its first-quarter earnings conference call.
Tesla's sales in China were roughly flat in the first quarter, but the U.S.-Chinese trade war hurt results in the second quarter, with Chinese new car buyers avoiding American products, according to Wall Street analysts. Through the first seven weeks of the Q2, Tesla sales were down about 25% from a year ago, according to registration data tracked by Chung.
Up until the second quarter, Tesla's market share of the Chinese battery-electric vehicle market has been relatively stable for the past few years, at just below 10%. That's been an impressive feat considering that Tesla doesn't have a lower-priced car that accounts for some 40% of the Chinese BEV market.
Market share, however, is starting to slip amid new competition. One thing that could help would be a new model. Tesla plans to launch a lower-priced vehicle in a matter of weeks, but investors haven't seen it yet. Future Fund Active ETF co-founder Gary Black worries that it will be a cheaper version of the Model 3 or Model Y. Lower priced versions of existing models could make it tougher to address the different segments of the Chinese car market.
None of that seems to bother investors, though; coming into the week of trading, Tesla stock was up 43% since the company's late-April earnings report. Investors aren't really thinking about car sales right now. They are focused on AI and self-driving cars.
Tesla plans to start a robotaxi service in Austin, Texas, in June. Investors believe that can unlock a new wave of growth for the auto maker.
Wedbush analyst Dan Ives called it the 'golden age of autonomous growth" in a Friday report. He raised his price target for Tesla stock to $500 from $350. He rates the shares a Buy.
Write to Al Root at allen.root@dowjones.com
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