How copycat phone maker Xiaomi became a force in China's EV market

Chinese electronics company Xiaomi became the world's third-largest phone maker by selling devices that critics said were iPhone copycats.

The company is now becoming a force in the electric vehicle market, a feat Apple never managed.

Xiaomi released its much anticipated YU7 crossover on Thursday, a vehicle that some have said could be China's first serious rival to the best-selling Tesla Model Y.

"People are anticipating that it's going to really, really do some damage to the Model Y sales in China specifically," said Tu Le, founder and managing director of Sino Auto Insights, which studies the Chinese automotive market.

Once again, Xiaomi is taking cues from leading brands.

"If you squint, it kind of looks like that Ferrari SUV," Le said, referring to the Ferrari Purosangue.

The the SU7, Xiaomi's only other vechicle, has drawn comparisons to the Porsche Taycan. A prototype of the Xiaomi SU7 Ultra, a high-performance version of the four-door sedan, outperformed cars from Porsche, Tesla, and electric supercar maker Rimac on Germany's famed Nurburgring racetrack.

However, Xiaomi is facing some challenges. A crash in late March left three dead. In the aftermath the Chinese government began cracking down on how automakers market and test self-driving vehicle software.

Sam Abuelsamid, vice president of market research at Telemetry, said it will be important to watch Xiaomi's "sales over the next year to see if there's been any impact."

"If they can prove to consumers, prove to the public, that their vehicles are safe, they may well do fine," Abuelsamid said.

But China's EV market is brutally competitive.

"They'll need to broaden out their product portfolio and begin to look internationally for sales growth, because they're also going to run into a buzz saw of competition in China," Le said. "And I don't know if they can be a runaway hit like a BYD."