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- Tesla is having a hard time in China.
- Chinese EV makers are taking Elon Musk's company to task as they battle on price.
- But a new vehicle in China shows local EV makers might be benefiting inadvertently from Tesla, too.
At the start of the year, Elon Musk issued a clear warning about who he thought posed the biggest challenge to Tesla's electric vehicle ambitions: Chinese EV makers.
In January, the billionaire Tesla chief told analysts that Chinese competitors, the biggest of which include BYD and Geely, "will pretty much demolish most other car companies in the world" as they ramp up EV sales globally at a far cheaper rate than Tesla can currently offer.
Musk's fears that Tesla may struggle to compete with them came to a head last week after the company posted its first quarterly decline in deliveries in almost four years: an 8.5% drop to 386,810 vehicles in the first quarter.
But as the latest entry into China's EV market shows, Musk's worries about the competition there have reason to go deeper.
Pay attention to China's newest EV
Xiaomi, a Chinese tech giant usually associated with making smartphones, launched its first electric vehicles at a plush event in Beijing at the end of March. The Speed Ultra 7, a sedan known as the SU7, starts at $30,000, or 215,900 yuan, for the base model.
Though the vehicle enters a crowded market, Xiaomi's launch of an EV cheaper than Tesla's cheapest model — just three years after its billionaire cofounder and CEO Lei Jun announced EV plans — has attracted serious attention, with almost 90,000 orders in the first 24 hours.
Xiaomi
What has also attracted attention is how it managed that feat.
At the end of last year, Xiaomi pointed out that its EVs were, in part, made possible thanks to what it described as a "hyper die-casting" process it said it had "self-developed."
For context, this portion of manufacturing turns molten metal into molds and requires huge, complex machinery. How did Xiaomi, a company that is used to making alternatives to the iPhone, manage that?
For some, there's reason to believe that Tesla might have inadvertently contributed to its feat.
Kyle Chan, a postdoctoral research associate at Princeton, recently drew attention to how Xiaomi's EVs have been made with machines similar to the "giga press" machines Tesla uses in its die-casting process.
As Chan noted on X last month, when Tesla first entered China, it worked closely with domestic firm LK Group to develop "the world's largest casting machines to make Tesla parts."
LK founder Liu Siong Song told The New York Times in 2021, the development of Tesla's giga press casting machine was a long process that took "over a year," with Tesla often asking if "it was possible to do this or that," necessitating changes to LK Group's machine.
In other words, It's a partnership that made Tesla a pioneer in this part of EV manufacturing.
However, LK's die-casting expertise was no longer limited to Tesla after 2022, as the company was reported to have struck deals with six other Chinese companies to supply casting machines to them.
Though there's no confirmation on who those companies were, Xiaomi may be making its EVs now with machinery and techniques that Tesla helped pioneer with LK Group in China with its giga press. Xiaomi did not respond to a request for comment from Business Insider.
That could be a tough reality for Musk to accept.
After spending years championing China as a place to do business, he now faces competition that is fine-tuning its production process with technology that Tesla was once gaining an edge with.
For years, Western companies have held fears about Chinese firms copycatting their ideas and innovations to serve their market with cheaper alternatives.
For Tesla, it's yet another risk as it battles sliding sales.