Chinese Tesla rival launches $22,000 EV with self-driving features. Here's why that's a big problem for Tesla.

• The Chinese electric-vehicle maker Xpeng launched a low-priced EV.
• The cheapest version of that car is nearly half the price of Tesla's Model 3 in China.
• Elon Musk's car company faces stiff competition in China from a wave of cheap, tech-heavy local EVs.

One of Tesla's Chinese rivals launched a low-priced electric vehicle with self-driving tech — and it shows just how big a challenge Elon Musk faces in staying competitive in the world's largest EV market .

On Tuesday, Xpeng launched the Mona M03, an electric car with a starting price of 119,800 yuan, or about $16,800.

The EV is available in three models, including a "Max" version with autonomous-driving features that costs 155,800 yuan, or about $21,900.

The cheapest M03 model is just over half the price of Tesla's most affordable car, the Model 3, which starts at about 231,900 yuan in China.

Tesla has repeatedly cut prices in China over the past year as it tries to keep up with its local rivals. It's said to be close to gaining approval to sell its Full Self-Driving tech in the country .

Tesla faces brutal competition from Chinese companies capable of matching its tech-heavy electric cars while undercutting it on price.

Xpeng's M03 joins a crowded market that includes the smartphone maker Xiaomi's SU7, a smart car with an estimated 500-mile range and a price tag of about $30,000 .

The industry leader BYD, which briefly overtook Tesla as the world's largest producer of EVs in late 2023, has also slashed prices this year . In March, it cut the sticker price of its Seal electric sedan by 10,000 yuan, to 179,800 yuan.

The premium-EV giant Nio, meanwhile, is planning to launch an affordable-EV brand called Onvo in China that's set to compete directly with Tesla's Model Y.

The L60, the first car in the Onvo range, would be about $5,000 cheaper than the Model Y and offer drivers access to Nio's network of battery-swapping stations , which the company says cuts charging times to as little as three minutes.

Nio, BYD, and Xpeng also advertise their versions of Tesla's driving-assistance tech . BYD is racing to add AI features to its vehicles to appeal to tech-savvy Chinese consumers .

These Chinese EV companies are also being challenged by growing competition in the region and pressure to compete on price.

Musk likely hopes that Tesla's robotaxi, which he's reportedly keen to launch in China , can give the US automaker an edge.

Still, a victory for Tesla in the most cutthroat EV market is far from assured.

Tesla did not respond to a request for comment from Business Insider sent outside normal working hours.