The Chinese Xiaomi boom or when the enemy is at home
Scene one. In early April 2016, Tesla unveils the Model 3 with great fanfare. The car won't be delivered to its first customers until a year later. 115,000 of them already reserve their car within the first half hour of opening orders on a Friday. By the end of Sunday, the number has risen to 276,000, and three weeks later, 400,000 users have already paid the required $1,000.
Scene two. Late March 2024. Xiaomi, the mobile phone manufacturer, enters the automotive world with the launch of the SU7, a 100% electric sedan that rivals a Tesla Model S or a Porsche Taycan. In the first 24 hours, 90,000 eager buyers register to be the first to own it.
Scene three. Early July 2025. We're not changing companies, but we are changing vehicles. Now it's the turn of the YU7, a battery-powered SUV that's five meters long. And the madness breaks loose: in just 18 hours, the company announces it has 240,000 firm orders. That's customers who have shelled out between $700 and $2,000 to secure one and, what's more, priority delivery. The car, for reference, costs 253,500 yuan in its base version, about $36,000 at the current exchange rate. That's about $1,400 less than the Tesla Model Y, once the bogeyman for all rival brands.
Although the fear is spreading like an oil slick far beyond Tesla, which in the first five months of this year only held a 4.6% share of the NEV (New Energy Vehicle) market. That is, electric, extended-range electric, and plug-in hybrid vehicles.
The seismic wave is also shaking other startups like Zeekr, LeapMotor, and Nio, and reaching BYD, the giant whose NEV market share is close to 30%, almost 10 times that of Xiaomi. In April, BYD unveiled its flagship, the Tang L, a model that surpasses the YU7 in many specifications and is cheaper, but "it did so without tens of thousands of pre-orders and without the attention of most mainstream media," notes Jiri Opetal, editor-in-chief of the digital publication CarNewsChina. "Xiaomi's fan base is something BYD and other Chinese manufacturers can only dream of," he adds.
The author of this report can attest to this when, a year ago, visiting the Beijing Auto Show, he encountered a swarm of journalists and members of the public, phones in hand, following someone. That someone wasn't a music or movie star or a mega-influencer: it was the company's CEO, Lei Jun. And the only car on display at the show, the SU7, was also the only one that required waiting in a long line to see it up close or to get into it.
Jun has no shortage of followers, who are even willing to forget the accident involving one of his cars while the semi-autonomous driving system was engaged, which killed three people.
It's not short on ambition either. The Beijing-based company announced its foray into the automotive world in 2021, with an initial investment of $1.4 billion. It then added a promise to inject another $10 billion by the end of this decade, with the stated goal of selling 10 million cars worldwide. That's slightly less than the number sold by Toyota in 2024, the longtime world leader in this industry, but also half of what Elon Musk has promised to achieve with Tesla...
It won't be an easy task. In fact, the technology boom could lead to its eventual collapse. Or at least, it could face a dilemma: its limited production, far outstripped by the avalanche of orders, has caused waiting lists for the YU7 to skyrocket to 60 weeks , causing dissatisfaction among many customers.
Some of its competitors are taking advantage of the situation, launching advertising campaigns inviting these users to purchase one of their models with near-immediate delivery , compensating them for the money they would have paid in advance for the Xiaomi SUV. Jun is also having to contend with opportunists who sell priority delivery orders or the car itself when they receive it, earning huge profits, of course.
"Please bear with us a little and wait," the company's CEO stated. This is also why they are allowing some customers to modify their orders, so that wait times are more realistic and the production schedule doesn't explode in their hands.
Xiaomi only has one factory near Beijing with a theoretical production of 300,000 units per year. But it has already purchased half a million square meters to increase those volumes by 50%. Even so, this is insufficient capacity, as committed orders for the YU7 alone, plus the normal flow of the SU7, exceed the forecast for the entire 2026. Furthermore, estimates suggest that demand for the new model will triple that of the sedan.
These tensions will force the company to delay its entry into foreign markets until at least 2027. It will only consider starting exports "when the current significant pressure to meet orders in China has eased," said Lei Jun, although that date had previously been considered.
Nothing is impossible given what BYD has achieved. It took 13 years to produce its first million vehicles, but then just 18 more months to reach three million, and in another nine months it had reached five million... And the last two million, up to the 11 million it has now, were sold in four months. Incidentally, these achievements were cemented in its Chinese factories, since by 2024 only 10% of its production—4.27 million vehicles—was sold abroad.
The victimsThe question is at whose expense Xiaomi will grow. Western brands have gone from having 65% of the total Chinese market to just over a third, but they won't disappear from the scene. So the losers will mostly be local competitors.
"The Chinese automotive market is one of the most competitive in the world, with a very intense price war, rapid innovation, and new entrants continually raising the bar," notes a study conducted by the consulting firm AlixPartners.
This situation, coupled with excess installed capacity, is undermining companies' profitability, leading the study's authors to predict that "of the 129 brands currently selling NEVs in China, only 15 will be financially viable by the end of this decade," as fierce competition will drive some out of the market and encourage the consolidation of others. In fact, the Chinese government itself is considering doing the latter with some of the manufacturers it controls.
AlixPartners doesn't name these 19 survivors, only that between them they will account for 75% of the electric and plug-in hybrid market. According to Stephen Dyer, the consultancy's automotive director for Asia, "the consolidation process will be slower as local governments could support non-viable brands due to their importance to local economies, employment, and supply chains."
The richest man in the worldCurrently, the markets are clearly supporting three of these plug-in car manufacturers: BYD, Xpeng, and, above all, Xiaomi. Over the past 12 months, their shares have risen 37%, 138%, and 241%, respectively. Over the same period, the global index on which they are listed has risen 36%.
This development has made Xiaomi's CEO the richest man in China, with an estimated fortune of $74.5 billion.
Among the new companies, however, only Xpeng is on track to meet its 2025 targets. At this point, it has already sold more than half of the planned cars (380,000), while Xiaomi is at 45%. BYD (which aims to reach five million vehicles) does not appear in this ranking as it is not an automotive startup.
One of the aspects that most concerns Chinese regulators is the price war. They have therefore urged manufacturers to stop this brutal fight, although AlixPartners believes it "will continue through hidden factors such as insurance subsidies or interest-free financing, rather than direct price discounts."
BYD is one of the companies that has been most aggressive with its prices, which has earned it criticism from its competitors and a close watch from the Chinese government. But here are the numbers: in June, it reached a monthly record, with 377,628 vehicles sold, an 11% increase. 55% of them were pure electric.
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