Xiaomi shares surge after new SUV gets 289,000 orders in an hour

Xiaomi Corp.’s shares rose 8% to a lifetime high after the smartphone maker drew strong initial orders for a $35,000 sport utility vehicle intended to compete with Tesla Inc.’s Model Y in China.

The company on Thursday took the wraps off the 253,500 yuan ($35,360) YU7, debuting its second car in a crowded EV market while grappling with scrutiny over its assisted-driving technology. Xiaomi drew a better-than-anticipated 289,000 orders in its first hour of availability.

Xiaomi founder Lei Jun attacked Tesla head-on during Thursday’s launch event, stacking his vehicle against the Model Y much as he compares Mi devices with the iPhone. The YU7’s price tag—largely in line with analysts’ expectations—comes in just under the 263,500 yuan for the latest version of the Model Y, China’s most popular SUV. BYD Co.’s Tang L SUV, slightly smaller than the YU7, sells for between 239,800 yuan and 289,800 yuan.

“We’re going to face the biggest competitor, and also face fierce challenges from all the other manufacturers,” Lei said at the launch event in Beijing.

Lei, who shot to fame with bold plans to unseat Apple Inc. in China, is counting on EVs to take on Elon Musk’s Tesla and fuel the final chapter of his entrepreneurial career. He’s pushed Xiaomi into new arenas from chip design to AI glasses, pledging to spend 200 billion yuan over five years to try and turn the Chinese company into a global device leader.

The company began taking pre-orders Thursday with a 5,000 yuan deposit. In a surprise twist, Lei declared that buyers of Xiaomi’s first car—the SU7 sedan—have three days to switch to the SUV if they haven’t taken delivery of the original vehicle. Xiaomi announced shortly after the event it had processed more than 200,000 pre-orders for the YU7 within three minutes.

“Consumer demand for Xiaomi’s YU7 far exceeds our and market expectations, which should enable Xiaomi to continue consolidating its leadership position in the premium auto market in China,” Goldman Sachs Group Inc. analysts including Timothy Zhao wrote. They raised their price target on the stock 6% to HK$69. 

The top model goes for 329,900 yuan and can travel 760 kilometers (470 miles) on a single charge and accelerates to 100 kilometers per hour in 3.23 seconds. They come in 9 colors, all equipped with lidar, which strengthens driver assistance technology, and an 800 volt platform for fast charging. Many feature the touches and amenities now familiar to Chinese drivers, from large touch screens and massage-chairs to drawers.

The new model will be a key test of demand for Xiaomi cars after a fatal accident involving an SU7 sedan that sparked scrutiny from Chinese authorities and hammered orders.

The YU7’s debut coincides with heightened concerns from Chinese authorities about an extended price war. BYD, Xiaomi and more than a dozen other automakers were warned to self-regulate and prevent the use of “zero-mileage” used cars to inflate sales numbers and pay suppliers in a timely manner to improve the overall cash flow of the entire supply chain.

Lei remains confident about the prospects for Xiaomi’s foray into cars, predicting the new model will help the company’s EV unit achieve profitability in the second half—one of the fastest brands to hit that milestone in the automotive sector.

Investors have warmed to that vision, sending shares north. Now worth around $200 billion, it’s bigger than BYD—the EV powerhouse that dominates the Chinese market—and its SU7 is outselling Tesla Model 3 so far this year.

Beyond cars, Thursday’s event also showcased a pair of 1,999 yuan black-rimmed AI glasses that can film video and answer questions off visual cues; the MIX Flip 2, Xiaomi’s new folding phone; and a tablet that uses its in-house Xring O1 chip.

This story was originally featured on Fortune.com