Xiaomi to launch 'Tesla-challenging' YU7 electric sports utility vehicle

China's Xiaomi will launch its highly-anticipated YU7 electric sports utility vehicle on Thursday, as well as other products, such as a mobile chip developed by the company, it said.

Analysts have touted the YU7 as a challenger to Tesla's best-selling Model Y in China, the world's largest auto market, and Xiaomi had disappointed fans last month by not showcasing the car at the Shanghai autoshow.

Lei Jun, Xiaomi's founder and CEO, said on his Weibo account on Monday that the YU7 will be launched at the event alongside other products, such as the Xring O1 mobile chip and new Xiaomi 15S Pro smartphone.

Xiaomi began manufacturing EVs last year with the launch of the SU7 sedan after selling smartphones, household appliances and smart gadgets for most of its 15-year history. Since December, the SU7 sedan has outsold Tesla's Model 3 on a monthly basis.

Analysts say it is still outselling, but the company's orders for its SU7 sedan have fallen following a fatal accident in March involving an SU7.

Apart from EV rivalry, China’s smartphone market has intensified as competitors, including Huawei and Apple , leverage their own custom-designed chips to create tightly integrated ecosystems and enhance user experience.

In a separate Weibo post, Lei said Xiaomi had invested 13.5 billion yuan ($1.87 billion) to self-develop its advanced mobile chip Xring O1 and that it planned to invest at least 50 billion yuan more in chip design over at least 10 years.

A Xiaomi representative told Reuters the 50 billion yuan investment timeline starts from 2025.

Xiaomi began designing chips in 2014 and launched its first mobile processor, the 28-nm Pengpai S1, in 2017, which debuted in the Xiaomi 5C smartphone.

The company later shifted its focus to less complex chips, including battery management and image chips because of "various setbacks," Lei said. In 2021, however, the year it decided to start making cars, it also decided to start developing mobile phone chips again.

"Xiaomi has always had a chip dream because in order to become a great hard technology company, chips are a peak that must be climbed," he said. "We will definitely go all out."