Why is Musk eyeing Chinese car companies? 2026 BYD Xiaomi SU7 Hongmeng Zhixing Three Kingdoms

Starting in the second half of 2025, Musk frequently publicly commented on Chinese car companies. At one moment, he said that BYD is the most threatening opponent in the world. At another moment, he reminded that Xiaomi SU7 will cause trouble when entering overseas. Hongmeng Zhixing’s pure electric car was also named by him. Why is Musk so nervous? From the three dimensions of market share, technology comparison, and geopolitics, this article takes a look at the three-country competition of BYD, Xiaomi SU7, and Hongmeng Zhixing in China's new energy industry, and what it means to Tesla. This article does not cite specific sales data that fluctuate widely, but only discusses directional trends. The specific figures are based on the latest public financial reports of each company.

The real gap between BYD and the world’s No. 1 company

BYD will rank first in global electric vehicle sales in terms of new energy sales in 2025. This is a fact supported by public industry data. The latest figures are subject to each company's monthly quick report.

Three key directions make Musk nervous. First, BYD Blade Battery is industry-leading in terms of cost and safety. The specific energy density parameters are subject to the manufacturer's technical release. Second, BYD's R&D investment continues to remain high, and its proportion of revenue has long been at the top of the industry. Third, BYD's overseas sales have grown significantly, and it has surpassed Tesla to become the sales champion of electric vehicles in markets such as Brazil, Thailand, and Australia.

More importantly, BYD has a product matrix in the low-end market that Tesla cannot reach - the price range of Seagull, Dolphin and other models is a range that Tesla has not entered so far.

The disruptive power of Xiaomi SU7

Xiaomi released SU7 in March 2024, which quickly became a phenomenon-level product in China’s electric vehicle market. The cumulative delivery figures in 2025 are subject to Xiaomi’s official disclosure. SU7 Pro and Max have different pricing ranges covering the mid- to high-end range, directly benchmarking the Model 3 long-range version.

Three directions that surprised Musk. First, SU7 poses a challenge to the Model 3 performance version in terms of acceleration performance and other paper parameters. The specific acceleration time is subject to official announcement. Second, Xiaomi ThePaper OS creates local differentiated advantages by interconnecting all scenarios of home appliances, mobile phones, and cars. Its unique ecosystem is that Chinese users can use one ID to connect home appliances, mobile phones, and cars. Third, Lei Jun’s lethality in ToC marketing far exceeds Musk’s own presence in the Chinese market. The magnitude of the communication at the SU7 press conference and Xiaomi Auto’s marketing rhythm are both industry-level phenomena.

Xiaomi has not yet gone overseas, but its European launch plan has been officially confirmed. The specific timetable is subject to the official announcement. This is one of the sources of Musk's worries.

Hongmeng Zhixing’s technical trump card

Hongmeng Zhixing is an automobile brand alliance deeply empowered by Huawei, covering sub-brands such as Wenjie, Zhijie, Xiangjie, and Zunjie. Sales will continue to increase in 2025. The specific figures are subject to official disclosures.

Three points that make Musk nervous. First, Huawei's ADS intelligent driving will complete the end-to-end architecture upgrade in 2025. Its experience in domestic complex urban road conditions is one of the strongest domestic echelons, and some scenarios are close to or partially ahead of overseas solutions. Second, Huawei’s Hongmeng cockpit experience is top-notch in the industry in terms of voice interaction, AI assistant, and continuous dialogue. Third, the Hongmeng Zhixing model allows traditional car companies to contribute manufacturing capabilities, Huawei provides software and electronic and electrical architecture, and the cooperative car companies include Cyrus, Chery, BAIC, and JAC. This model of "software plus electronic and electrical suppliers are deeply involved in the definition of the entire vehicle" is unique to China.

The scary thing about Hongmeng Zhixing is that it represents a new model of Tier 1 to OEM. If this model continues to work well in China, it can be copied to markets such as Saudi Arabia and Southeast Asia.

The synergy effect of three Chinese car companies

The combined sales volume of BYD, Xiaomi, and Hongmeng Zhixing is already very impressive, and is expected to still grow in 2026. The specific multiple relationship is subject to the latest sales announcements of each company.

More importantly, the product matrix of the three companies covers the full price range from economy to luxury, and almost all levels of models from A0 to D. This all-out attack makes it difficult for Tesla to find a market segment that is not covered at all.

Technically, the three companies are also working together. BYD's blade battery, Xiaomi's smart cockpit, Huawei's smart driving, through supply chain crossover and talent flow, the overall technological potential of China's new energy vehicles is rapidly amplifying.

Musk’s response strategy

Musk publicly proposed three response directions in the second half of 2025.

First, launch cheaper models to directly hit the price range of Chinese car companies. The specific model code, starting price and launch time are subject to Tesla’s official announcement.

Second, continue to upgrade FSD, accelerate the advancement to higher-level autonomous driving, and compete with the product matrix of Chinese car companies through technological generation differences.

Third, promote Optimus humanoid robots and xAI large models, expand from a single automotive business to AI comprehensive solutions, and reduce dependence on a single automotive business.

None of these three directions can bear fruit in the short term. The mass production schedule of cheaper models has been repeatedly discussed by the market. The compliance and performance differences of FSD in different markets still exist, and Optimus is still far away from large-scale mass production. This means that Tesla will continue to face the offensive of Chinese car companies from 2026 to 2028.

Weaknesses of Chinese car companies

We can’t just praise Chinese car companies. Three weaknesses should be looked at clearly.

First, overseas brand power is still weak. BYD's sales in Europe are growing rapidly, but its brand recognition is still far behind BMW, Mercedes, and Tesla. Brand building requires long-term investment.

Second, there is still a gap in overall intelligent driving. Hongmeng Zhixing ADS is one of the strongest in China, but it still has a way to go in long-tail scenarios such as European and American highway conditions.

Third, the high-end supply chain of the industrial chain is still partially dependent on overseas supply. The localization rate of core components such as chips, sensors, and lidar continues to increase, but important parts still need to be imported. If geopolitical conflicts escalate, the core supply chain will be the Achilles heel of Chinese car companies.

geopolitical variables

The Sino-US trade friction has caused Chinese cars to face three specific difficulties when going overseas.

First, the US market. Whether it is tariffs or new regulations, it is basically unrealistic for Chinese complete vehicles to be exported directly to the United States, and they can only go through Mexico or Southeast Asia.

Second, European countervailing tariffs. Chinese car companies generally face countervailing duties in Europe. The specific tax rates are subject to the EU's official announcement. Although they are not fatal, they erode profits.

Third, barriers to emerging markets such as India. Localized production requirements, technology transfer negotiations, and component content restrictions will all extend the ramp-up period.

These political barriers mean that even if Chinese car companies have strong product capabilities, they still have to face a relatively long ramp-up period when going global.

Who will win this Three Kingdoms war?

According to the pattern of 2026, there are three judgments.

First, in the Chinese market, BYD, Hongmeng Zhixing, and Xiaomi divide up the high-end and low-end segments, and Tesla’s domestic share is expected to continue to be under pressure. The specific percentage is based on industry data such as the Passenger Transport Association.

Second, in the Southeast Asian and Latin American markets, BYD and SAIC have established advantages through localized production, and Tesla will become increasingly passive in these markets.

Third, in the North American and European markets, Tesla still dominates but its growth rate is slowing down. There is more pressure from local players such as Rivian, Lucid and local European brands.

Generally speaking, Tesla will still be the benchmark brand for electric vehicles in the world before 2030, but its market share will decline, and the combined share of the three Chinese companies will increase significantly. The specific proportion is based on the public statistics of each market.

What it means for the average consumer

Three specific benefits.

First, price war. After the three Chinese companies attack the world, the price of electric vehicles will continue to drop, and the prices of models of the same level will be much cheaper than a few years ago.

Second, popularization of intelligence. Intelligent driving, car-machine interconnection, and OTA upgrades, which are originally high-end features of luxury brands, will sink to the mainstream price range.

Third, the after-sales experience is improved. In order to protect its share, Tesla will increase investment in improving service quality, and Chinese car companies will build direct-operated stores and after-sales networks overseas. Consumers are the biggest winners in this Three Kingdoms war.

FAQ

Is Musk really worried about Chinese car companies or is it just a show?

Part of it is really worried about part of the performance. The basis for real concern is that he has repeatedly listed "China's EV competition" as a major uncertainty in his internal speeches. Part of the performance was that he publicly praised Chinese car companies with the intention of forcing the U.S. government to relax restrictions on Chinese parts, because part of the supply chain of Tesla's Shanghai factory is still in China. Taken together, Musk's concerns about Chinese car companies are real, but his public expressions also contain political acting.

Can Xiaomi SU7 really kill Model 3?

In the domestic market, SU7 has formed obvious competition with Model 3 for share. The specific monthly sales comparison is subject to disclosure by each company. Overseas markets are not yet available in the short term. SU7’s domestic advantages are price, rice noodle ecology, and domestic pride. Overseas, it is necessary to build a brand, build a charging network, and build after-sales service from scratch. It will not be able to catch up with the global status of Model 3 in a few years. However, the Chinese market is the world's largest single market, and it is inevitable that Tesla's revenue will be affected after being replaced.

Can the Hongmeng Zhixing model be copied overseas?

Theory can be challenging in practice. Three challenges: Overseas car companies are not familiar with the Hongmeng ecosystem, and integration costs are high; Huawei itself is sanctioned by the United States, and overseas partners have political concerns; ADS has insufficient overseas road condition training data, and localization needs to be rerun. The feasible path is for Huawei to first conduct pilot projects in markets such as Saudi Arabia, Southeast Asia, and Brazil, and then consider Europe after a few years of success. North America is basically out of the question in the short term.

Are BYD blade batteries really better than Tesla batteries?

Each has its own advantages. BYD's blade battery is based on lithium iron phosphate material, which has low cost, high safety and long cycle life, and is suitable for the mass market. Ternary lithium batteries such as Tesla 4680 have higher energy density, faster acceleration, and better low-temperature performance, making them suitable for high-performance scenarios. The overall price/performance ratio is better than BYD, and the overall performance of Tesla is stronger. For home commuting scenarios, BYD is cost-effective. If you pursue performance, buy Tesla.

Will Chinese car companies be sanctioned by the United States?

In the short term, it will be subject to partial sanctions, but in the long term, it will be difficult to impose comprehensive sanctions. Three reasons: Chinese car companies have been deeply embedded in the global supply chain, fully sanctioning and injuring their enemies will cost them eight hundred; Chinese electric cars are cheap and have a real contribution to global carbon reduction; Chinese car companies have established established advantages in the third world market. The most likely scenario is that the United States will restrict the entry of Chinese cars into the domestic market through tariffs, subsidy policies, and national security reviews, but it will not suppress it globally.

Source of inspiration: Issue 385 of Ruan Yifeng's "Technology Enthusiasts Weekly" https://www.ruanyifeng.com/blog/2026/02/weekly-issue-385.html