Chinese electronic company Xiaomi (1810.HK) launched its electric SU7 sedan, an EV estimated to be $4,000 cheaper than Tesla's (TSLA) Model 3. Pricing continues to be a point of contention between Tesla and Chinese automakers.

Oppenheimer Managing Director and Senior Research Analyst Colin Rusch sits down with Yahoo Finance to emphasize the evergrowing importance of vehicle pricing and full self-driving (FSD) capabilities for international EV markets.

"There could be a potential embrace of the functionality [for FSD] as folks start to look at how the vehicle drives as it mimics humans in a more substantial way than a lot of the other folks working on full self-driving," Rusch says.

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Editor's note: This article was written by Luke Carberry Mogan.

Video Transcript

SEANA SMITH: And speaking of [INAUDIBLE] the competition's is heating up. There's Xiaomi releasing an electric car that's actually 4,000 bucks cheaper than the Model 3. Given the price wars that have been heating up and already are heating up in China, how much more pressure could something like this be or put on Tesla's sales within China?

COLIN RUSCH: You know, it's-- we're going to find out here. I mean, I think they've reached a solid baseline, and the real challenge for this company is to grow at scale, right. I mean, they've talked about growing at 50% a year. Obviously this year is going to be a different story with something more akin to-- or more like 20% growth.

And we think they're making a very big pivot, and this is what we highlighted in our note earlier this week that they're moving into the recurring revenue or software driven sales process here, and we think this FSD release coupled with the one month trial that they're pushing out into the US market is a very big deal for them to move from being a hardware maker to a full solution provider.

And we'll see how mature this FSD really is. There's been some mixed reviews out on the internet with the functionality, but there could be a potential embrace of the functionality as folks start to look at how the vehicle drives as it mimics humans in a more substantial way than a lot of the other folks working on full self-driving.

BRAD SMITH: Well, and within that kind of services realm for Tesla, they've had to continue to moderate-- lower the pricing for FSD. Is FSD fairly priced at this level right now?

COLIN RUSCH: There's obviously a lot of price discovery happening right now on the functionality and so when you look at, kind of, the value of, you know, a mile driven just on a cost basis, you're kind of right around $1 a mile in terms of the cost of ownership for a vehicle.