TLDR
- Xiaomi’s new YU7 electric vehicle directly competes with Tesla’s Model Y in China, priced similarly at $35,000-$45,000
- Tesla’s China sales dropped 25% in early Q2 2025 due to trade tensions and consumers avoiding American products
- Tesla stock jumped 43% after April earnings despite declining deliveries and missed expectations
- European sales show steep declines with registrations down 59% in France, 46% in Germany, and 62% in UK
- Tesla trades at 180x forward earnings while facing increased competition and potential loss of $7,500 EV tax credit
Tesla faces mounting pressure from multiple fronts as new competition emerges in China while sales decline across key markets worldwide. The electric vehicle maker’s challenges come at a time when investors remain focused on the company’s autonomous driving prospects rather than current sales performance.
Chinese smartphone maker Xiaomi launched its YU7 electric vehicle over the weekend, targeting Tesla’s best-selling Model Y directly. The crossover-sized all-electric car offers impressive specifications with a range of about 460 miles per charge, significantly more than the Model Y’s 360-mile range.
🔥 Xiaomi YU7 with 835 km range unveiled!
🔋 96.3 kWh LFP and 101.7 kWh NMC battery
🛣️ 835/760 km range (NMC battery: YU7 Max)
🔌 10-80% charge in 12 minutes, 620 km range in 15 minutes, 800V architecture
⚡ 320 HP + 528 Nm torque rear-wheel drive (YU7) and 690 HP + 866 Nm… pic.twitter.com/k3RZAztxja
— Licarco ⚡🔋 (@licarcommunity) May 22, 2025
Pricing for the YU7 ranges from $35,000 to $45,000, directly competing with Tesla’s Model Y which sells for $37,000 to $44,000 in China. Citi analyst Jeff Chung expects the YU7 to erode Tesla’s Model Y market share, projecting annual sales of 300,000 to 360,000 units after ramping up production.
Tesla sold approximately 660,000 cars in China during 2024 out of 1.8 million globally. The company doesn’t break out sales figures by individual models in the Chinese market.
China Sales Under Pressure
The timing of Xiaomi’s launch creates additional challenges for Tesla as the company already faces declining sales in China. Through the first seven weeks of Q2 2025, Tesla sales dropped about 25% compared to the same period last year, according to registration data.
The decline stems partly from U.S.-Chinese trade tensions that have led Chinese consumers to avoid American products. Tesla’s China sales remained roughly flat in Q1 but deteriorated in the second quarter as geopolitical factors affected buyer preferences.
Despite these challenges, Tesla has maintained just below 10% market share of China’s battery-electric vehicle market over recent years. This performance is considered impressive given Tesla lacks a lower-priced vehicle that accounts for roughly 40% of the Chinese BEV market.
Tesla plans to launch a lower-priced vehicle within weeks, though investors haven’t seen the product yet. Some analysts worry it may simply be a cheaper version of existing Model 3 or Model Y variants rather than an entirely new model.
Global Sales Decline Spreads
Tesla’s problems extend well beyond China as European markets show steep declines. April registration data reveals dramatic drops across major European markets, with France down 59% year-over-year, Germany falling 46%, and the United Kingdom declining 62%.
These declines occurred while global EV sales increased 30% in April, suggesting Tesla-specific challenges rather than broader market weakness. BYD, Tesla’s main Chinese rival, recorded its best sales week of 2025 during the same period.
Domestic challenges also mount as Ford’s F-150 Lightning recently overtook Tesla’s Cybertruck as the best-selling electric pickup truck. Republican-led Congress may eliminate the $7,500 EV tax incentive that benefits Tesla customers.
Stock Performance Defies Fundamentals
Despite declining sales and missed earnings expectations, Tesla stock surged 43% following the company’s late-April earnings report. Investors focused on CEO Elon Musk’s commitment to devote more attention to running the company rather than current operational performance.
The stock rally comes as Tesla trades at more than 180 times forward earnings, raising valuation concerns among some analysts. Global deliveries fell 13% in Q1 from the previous year, hurt by Model Y production updates and what Tesla described as brand challenges from Musk’s political activities.
Wedbush analyst Dan Ives raised his price target to $500 from $350, calling the current period the “golden age of autonomous growth.” Tesla plans to start a robotaxi service in Austin, Texas, in June, which investors believe could unlock new growth opportunities.
Wall Street analysts remain divided on Tesla’s prospects with 16 Buy ratings, 10 Hold ratings, and 11 Sell ratings. The consensus 12-month price target of $282.70 suggests potential downside of approximately 17% from current levels.
Tesla’s market share in China continues to face pressure from new competitors like Xiaomi’s YU7, which offers superior range and competitive pricing in the crucial Chinese market.
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