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Just as the auto industry was grappling with BYD ‘s rapid rise, Chinese smartphone company Xiaomi has burst into the market — undercutting Tesla and vowing to become a global player. Even as Apple this year scrapped development of an electric, self-driving car , Xiaomi’s founder and CEO Lei Jun pledged that making a car will not only be his final legacy project, but a product that turns the company into one of the top five automakers in the world in the next two decades. Xiaomi’s Hong Kong-listed shares soared last week to a two-year high after the company introduced its electric SU7 sedan at a price about $4,000 cheaper than Tesla’s Model 3 — and with similar tech capabilities. Wider analyst attention In the last several days, Xiaomi has gained wider attention from auto and tech industry analysts beyond those who previously covered it as only a smartphone play. “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 scale, improved capital discipline and lower execution risks,” Morgan Stanley auto analyst Adam Jonas said in a note Thursday. Meanwhile, Tesla last week revealed that its deliveries fell in the first quarter from a year ago . Excluding Covid, that was the first decline in Tesla deliveries since 2012, Jonas pointed out. While he still likes Tesla longer-term , he and his team will hold a client webinar on Xiaomi, Tesla and global EVs on Tuesday. “If Xiaomi can continue to outperform peers on [driver assist] and smart cabin features, we believe it is likely to become a disruption force with large growth potential,” Morgan Stanley’s greater China tech hardware analyst, Andy Meng, said in a note Monday. Meng reiterated the bank’s overweight rating on Xiaomi, and its price target of 17.50 Hong Kong dollars ($2.24). Xiaomi shares nearly reached that price during last week’s surge. The stock later gave back much of those gains, and are now little changed on the year. Meanwhile, Tesla shares are down 34% year to date. On Wednesday, Xiaomi said it had received more than 100,000 orders for the SU7, more than 40,000 of which were already locked in and not subject to cancellation. The same day, it held a ceremony celebrating its first batch of car deliveries. Six-month wait times Most customers face wait times of nearly six months or longer, according to Xiaomi’s online sales platform. Taylor Ogan, Shenzhen-based CEO of Snow Bull Capital, said that he’s watching to see how consumers actually like driving the car before he commits to buying Xiaomi shares. “I don’t think it will do particularly well for the stock price [in] the next two quarters,” he said in an interview Friday. “After that, this could be a cash cow. This is something that every single avid Xiaomi ecosystem user needs.” Months ahead of the car launch, Xiaomi announced a new operating system called HyperOS and a strategy to connect consumers with their homes and cars. The company makes most of its revenue from smartphones, but a significant share also comes from a range of home appliances, many of which are controlled using an app. During the recent SU7 launch, Xiaomi CEO Lei touted that when a driver neared home, connected lights and appliances could automatically turn on to pre-determined settings. Such an ecosystem offers “a built-in recurring revenue model that every CEO would dream of,” Ogan said. “On top of that, you can have subscriptions.” He said he sees low odds that the SU7 flops, but said it would be difficult for Xiaomi to recover if the car does disappoint expectations. Although Xiaomi is trying to build out its own ecosystem, the company also supports Apple’s Car Play system and iPads. “We believe the ultimate outcome [of Xiaomi’s EV market entry] would be a faster BEV/NEV penetration in China, thus ICE brands or products would be the main losers,” JPMorgan’s Nick Lai, head of China equity research and head of APAC auto research, said in a note Monday. He was referring to internal combustion engines, battery electric vehicles and new energy vehicles. Recognition and cash Xiaomi’s advantages include existing brand recognition in China, and 110 billion yuan ($15.7 billion) in cash on its balance sheet that can help the company weather a near-term price war, the report said. Lei has said that Xiaomi is currently producing each car at a loss, but noted the company invested in its own factory to boost production. It’s not clear whether the facility is fully operational yet, but Lei claimed last month the factory could churn out an SU7 every 76 seconds in a nearly fully-automated process. “Xiaomi also showcased its EV factory with highly automated production lines for key processes (painting, stamping, die casting, body assembly etc.), backed its smart manufacturing expertise. We believe high degree of automation should help accelerate its EV profitability improvement in the mid to long term,” JPMorgan technology analyst Gokul Hariharan said in a separate note. The bank has an overweight investment recommendation on Xiaomi, with a price target of 21 Hong Kong dollars. That’s about 35% above where the stock closed Friday. One risk is China’s ability to produce electric cars at prices far below overseas competitors has prompted warnings that trade tensions will grow. Only Friday, U.S. Treasury Secretary Janet Yellen emphasized concerns about China’s overcapacity as she kicked off high-level meetings in the country. But while Xiaomi has hinted at overseas car plans, it has promised to focus on the China market first. Right now, it sells smartphones globally, but not in the U.S.