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KIT NORTON

This Model Y Killer Is A Big Reason Why Tesla Is 'Moving Away' From EVs And Gone All In On Autonomy

Tesla rival Xiaomi is poised to release its latest Model Y killer, with the launch of the YU7 crossover vehicle on Thursday. A top Tesla bull wrote Tuesday that this Xiaomi vehicle "explains why TSLA is moving away from 'car' and going all-in on autonomy.'"

Xiaomi will officially unveil the YU7 on Thursday, with local media claiming the model could potentially to reshape China's competitive electric SUV market. Xiaomi EV is the China-based smartphone giant's electric vehicle unit and the YU7 will be the company's first EV SUV.

The new China EV model is expected to take on Tesla's popular Model Y. Xiaomi officially launched its first model, the SU7, on March 28, 2024, which targeted Tesla's other China EV, the Model 3.

"A year ago, when Xiaomi launched the SU7, many of our clients thought it looked like a Porsche, had better tech than a Tesla M3 and was priced like a used VW iD3," Morgan Stanley analysts Adam Jonas, a longtime Tesla bull, and Andy Meng wrote Tuesday. "With the YU7 small SUV, they may have done it again. It looks like a Ferrari Purosangue or Aston Martin DBX but will be priced like a VW or low-spec Model Y."

Jonas added that this Xiaomi vehicle "explains why TSLA is moving away from 'car' and going all-in on autonomy."

"The YU7 is just the latest sign that Chinese tech firms are taking EV performance and cost to the next level. China may have already won the EV battle. Who can win the autonomy war?" Jonas wrote Tuesday.

Xiaomi Deliveries And Scrutiny

CnEVPost reports that Xiaomi EV has faced significant public scrutiny in recent months after an SU7 crash that killed three people in late March. There have also been numerous complaints on Chinese social media about the quality of the Xiaomi SU7, according to CnEVPost.

In April, Tesla's Chinese rivals — including BYD, XPeng and Xiaomi — reported strong March and first-quarter deliveries.

Xiaomi deliveries topped 29,000 in March, after topping 20,000 in each of the prior five months. That's according to the handset maker, which joined the EV market last year.

Its first EV, the SU7 sedan, is a clear Tesla rival, outselling the Model 3 in recent months. In early March, Xiaomi began deliveries of the SU7 Ultra, a high-end variant. Both the SU7 and Ultra have long wait lists, with production constrained.

Tesla stock edged up  0.3% at the opening bell for Wednesday's stock market action. On Tuesday, TSLA pared gains, rising as high as 354.99 before closing up 0.5% to 343.82.

Xiaomi's U.S. shares were not yet trading early Wednesday after popping 4.3% to 35.13 on Tuesday, clearing a 34.26 cup-with-handle buy point. On Monday, XIACY jumped 3.7% to 33.6.

Among other China EVs, BYD was also not active yet on Wednesday. BYD climbed 2.7% to 57.24, hitting a new high and exiting a buy zone, on Tuesday.

XPEV shares jumped 14.6% to 22.57 Wednesday moving above a 21.35 early entry, as the EV startup reported better-than-expected first-quarter earnings and revenue.

Li Auto advanced 3.6% while Nio gained 2.3% and Zeekr jumped 3.9%.

Tesla Implications And China EVs In The U.S.

Jonas added that Morgan Stanley believes "it's just a matter of time" before China EVs are available in the U.S.

"You can't keep the best product away from the best consumer for very long. Add Xiaomi to the list of capable China auto/tech firms that may represent attractive collaboration candidates as Western legacy auto firms look for ways to achieve higher re-shoring scale, improved capital discipline and lower execution risks," Jonas wrote.

The longtime Tesla bull wrote Tuesday that the Xiaomi YU7 launch is another sign that "market expectations around Tesla's near-term automotive business remain too high and do not fully reflect the quantum of incremental capacity and competition coming out of China, ultimately having an impact in international markets."

"Understanding this will help make more sense out of Tesla's 'all-in' push into autonomy across a range of modalities, extending far beyond four wheels," Jonas said.

All About Robotaxi And Autonomy

Meanwhile, Tesla is readying to launch a limited robotaxi service in Austin, Texas, next month. After meeting with Tesla last week, Jonas reported that this will likely be around 10 to 20 cars, on public roads and be invite only with plenty of tele-ops to ensure safety levels.

Tesla Robotaxi Launches In A Few Weeks. These Are The Details.

Chief Executive Elon Musk, speaking with CNBC on Tuesday, said that there will probably 10 robotaxi Model Ys in the first week one and that there could be 1,000 in a "few months."

The Tesla chief did not give a specific date for the rollout but said it would come before end of June. He also confirmed there will be human supervisors of the autonomous trips and that the robotaxi service will be geofenced, meaning the entirety of Austin will not be available.

Musk said during the Q1 earnings call in April that Tesla was still debating what the robotaxi service would look like but that there will be "maybe 10 to 20" vehicles on day one.

Based on the recent details from Musk and Jonas, it looks like that is now the plan for next month.

Musk also made it clear on the Q1 conference call that the robotaxi vehicles in Austin will be Model Ys.

"We expect to be selling fully autonomous rides in Austin in June," Musk said. "The team and I are laser focused on bringing robotaxi in Austin in June," adding that "unsupervised autonomy will first be solved for the Model Y in Austin."

Separately, the CyberCab product is on track for production next year, according to Tesla. The CyberCab will use the "unboxed" manufacturing system. Tesla executives said on the Q1 earnings call that the unboxed process is "progressing," suggesting it's not yet ready.

Tesla Stock Performance

Currently, aside from broad market optimism about Trump's China deal, investors are bullish on Tesla's self-driving efforts.

Tesla stock is up 21.8% in May. On May 9, shares blasted above the 200-day moving average, offering investors an aggressive entry. However, Tesla is stock is extended now and there still is a lot of overhead resistance.

"We've lost some sales perhaps on the left but we've gained them on the right," Musk said, referring to left-wing and ring-wing consumers. "The sales numbers at this point are strong and we see no problem with demand," Musk said in an interview Tuesday at Bloomberg's Qatar Economic Forum in Abu Dhabi.

"Our stock wouldn't be trading near all-time highs if things weren't in good shape, they're fine, don't worry about it," Musk added.

Shares are still down about 15% this year as of Tuesday's stock market close, even as it has surged as the general analyst consensus was positive coming out of the Q1 conference call. There is also still significant overhead, with shares down about 30% from its 488.54 peak on Dec. 18.

Trump's Auto Tariffs Are Here. What Is Next For The U.S. Auto Industry?

Tesla stock has a 21-day average true range of 5.57%. The ATR metric is available on IBD's MarketSurge charting tool that gauges the characteristic breadth of a stock's behavior. Stocks that tend to make large jumps or dives in daily action, the kind that can trigger sell rules and shake investors out of a stock, have a high ATR. Stocks that tend to make more incremental moves have lower ATRs.

With the S&P 500 and Nasdaq now in a power trend, investors can buy stocks with ATRs up to 8%, though they should be wary of being too concentrated in high-octane names.

Tesla stock has a 77 Composite Rating out of a best-possible 99. Shares also have a 92 Relative Strength Rating and a 59 EPS Rating.

Please follow Kit Norton on X @KitNorton for more coverage.

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