XPENG Motors: Tesla’s Closest Counterpart Among EV Startups in China (Part 2)

Hi, this is Gasgoo. In this episode of "Wheels of Change: Stories of Chinese Auto Giants," let's continue our talk about XPENG, a company known for its expertise in intelligent driving technology.

The Merits and Faults of XPENG Models

It’s not easy to build a recognized positive image for an automotive brand. The prestige of Mercedes-Benz, the sportiness of BMW, and the safety of Volvo are the results of long-term investment and accumulation. In just about seven years, XPENG, as a newcomer in the automotive industry, has remarkably secured the rare label of "intelligent" for its vehicles.

XPENG X9; Photo Credit: XPENG

Moreover, as a core element of future competition in the automotive industry, the label of "intelligence" is probably the most valuable among all automotive tags. Indeed, the success of XPENG's popular models can be largely attributed to the company's years of dedicated efforts in developing intelligent driving capabilities.

If the launch of the XPENG G3—the company’s first mass-produced model—fulfilled the difficult task of ensuring survival, then the subsequent introduction of the XPENG P7 marked the beginning of a rapid growth for the company. With monthly sales reaching 3,000 units, the P7 once left many fuel vehicles in its dust and solidified XPENG's position as one of the top three new automakers in China.

In April 2021, XPENG launched its third model, the XPENG P5. It was reported that this model received over 10,000 pre-orders within just 53 hours of opening reservations. This achievement can be largely attributed to XPENG’s intelligent capabilities. After all, the P5 was the world's first mass-produced smart EV equipped with lidar at that time, featuring the latest XPILOT 3.5 and the third-generation smart cockpit of XPENG.

In 2021, XPENG experienced its own "harvest year" for deliveries. Total deliveries reached 98,155 units, a staggering 263% increase compared to 27,041 units in 2020. Among them, the flagship model P7 topped the sales list for NEVs among Chinese new start-ups in 2021. What’s more, XPENG’s software revenue was also included in its earnings for the first time in the first quarter of 2021.

2022 is a turning point.

In September of that year, the XPENG G9 was launched. However, this model, which He Xiaopeng called “the best SUV within 500,000 RMB”, had faced significant criticism due to the confusing configuration types. As a result, just two days after G9 was launched, the model was reworked and relaunched with a simplified version, featuring some price reductions and function enhancements.

Since then, XPENG's deliveries began to decline sharply, and its stock price also fell to HKD 24.75 per share, plunging the company into a dark period. In December 2022, the sales of G9 totaled only 4,020 units. It was around this time that rumors like “XPENG won’t survive 2023” started to circulate.

In fact, the failure of the G9 highlighted a series of disconnects in XPENG's technology, products, and market strategies. The same issues were evident in the company’s product rollout, with frequent fluctuations in product positioning—moving up from the P3 to P7, down from P7 to P5, and then back up from P5 to G9, leading to consumer confusion.

In October 2022, He Xiaopeng swiftly implemented a major organizational restructuring, establishing five committees and three product matrix organizations. Additionally, marketing, sales, and after-sales services were integrated, while the charging division was elevated to a first-tier department within the company.

After several months of restructuring, two new models—XPENG G6 and the 2024 version of the G9—emerged as potential saviors for the company.

Phtot Credit: XPENG

In the second half of 2023, XPENG's deliveries began to rebound, with monthly sales returning to the "10,000-units club".

It can be said that the launch of G6 and 2024 G9 has contributed greatly to XPENG’s turnaround. In November 2023, XPENG delivered a total of 20,041 vehicles, a year-on-year increase of 245%, surpassing 20,000 deliveries for two consecutive months and setting a new monthly record. The G6 alone accounted for 8,750 units, maintaining its lead in the sales of electric SUVs among Chinese brands priced above 200,000 RMB. By the end of 2023, XPENG's cumulative deliveries reached 400,311 units, breaking the 400,000 delivery milestone.

It’s noteworthy that this impressive delivery volume is the result of XPENG’s self-initiated overhaul. In particular, at the launch event for the 2024 G9 in September 2023, He Xiaopeng remarked that only two of the 12 executives mentioned in last year's earnings report remain this year.

This raised questions about how the company managed to turn around over the past year.

Internal Reforms and External Partnerships: XPENG's Self-rescue and Rebirth

He Xiaopeng has publicly reflected on troubles of XPENG at the earnings conference, concluding that “the problem must be in people”.

Thus, this tech-savvy engineer turned his attention to managing “people”. During the internal restructuring in October 2022, He Xiaopeng personally took on the role of chairman of the Product and Strategy Committee, while XPENG’s top executives have also undergone a shake-up.

In early February 2023, Li Pengcheng, the former CEO assistant of XPENG, left the company.

In March of the same year, Liu Minghui, head of the powertrain center, also departed; and Gu Jie, the former senior director of the department, took over the position.

Furthermore, Chief Talent Officer and Sales VP Liao Qinghong was rumored to have left as well.

In August 2023, Wu Xinzhou, head of the Autonomous Driving Center, resigned, with Li Liyun, the former head of XNGP, succeeding as the new leader.

Soon after, VP of Finance Lü Xueqing also departed, with former CFO of SAIC-GM-Wuling Wu Jiaming succeeding him.

Additionally, VP of Styling Design Derta Emanoel left in 2023, and the Styling Center is now overseen by Wang Tan, VP and Chief Designer of XPENG AEROHT.

On the other hand, XPENG also brought in several executives from outside. Among them, the most significant was Wang Fengying, known as the "Iron Lady" of the automotive industry, who joined in January 2023. Upon her appointment as President of XPENG, she took full responsibility for product planning and matrix, as well as sales system. 

Some of the XPENG executives involved in recent personnel changes; Photo credit: Gasgoo

Wang Fengying's arrival has propelled XPENG’s self-rescue efforts to new heights.

In her first eight months at XPENG, Wang Fengying introduced numerous changes. She emphasized the need for XPENG to focus on intelligent technologies, enhancing users' perception that XPENG is good at smart driving. Additionally, she brought lean management principles of traditional automakers to XPENG, helping the company achieve cost reduction and efficiency improvements across its marketing system, supply chain, and team adjustments.

Firstly, in terms of the supply chain, XPENG faced high procurement costs. In October 2023, Li Feng, then head of the procurement department, was suspended and taken away by police due to corruption. Liu Yongjie took over the procurement department, and all department heads were subsequently questioned.

Secondly, regarding the marketing system, XPENG had the most stores among the three new EV players. In 2022, the proportion of sales expenses to revenue for XPENG was five times that of traditional automakers. In response, XPENG unveiled a transformation plan titled “Project Jupiter” in September 2023, which aimed to reduce number of its sales regions from 24 to 12 nationwide, gradually phasing out underperforming direct-sales outlets while expanding the scale of franchise dealers.

Additionally, in the autonomous driving team, starting in August 2023, former VP of the Autonomous Driving Center Wu Xinzhou and former head of visual perception for the U.S. team, Wang Tao, were reported to left the company. People familiar with the matter said that Wang Fengying had been controlling the budget, intending to merge the North American and domestic teams and relocate key members back to China as a means to cut costs and improve efficiency.

Wang Fengying; Photo Credit: XPENG

In July 2023, Volkswagen Group announced a technical framework agreement with XPENG. In the initial stage of cooperation, both parties planned to jointly develop two electric models under VW brand for the Chinese mid-sized car market. As part of the long-term strategic partnership, Volkswagen Group would invest approximately $700 million in XPENG, acquiring about 4.99% of its shares. This exciting news led to XPENG’s U.S. shares soaring by over 40%.

Behind the cooperation is Volkswagen's recognition of XPeng's autonomous driving capabilities.

Photo Credit: XPENG

Following this, the collaboration with DiDi adds yet another good news for XPeng in 2023.

In August 2023, XPENG announced that it would issue A-class ordinary shares accounting for 3.25% of its total post-transaction share capital to acquire related assets and R&D capabilities in the smart EV project of Didi. In other words, XPENG used its own stock to purchase Didi's vehicle manufacturing business, making Didi a shareholder of XPENG.

According to the agreement, XPENG and Didi plan to jointly launch an A-segment smart electric vehicle, but this vehicle will not adopt the XPENG brand; instead, it will debut under a new brand codenamed “MONA.” This collaboration is seen as a significant step for XPENG into the competitive market segment priced around 150,000 RMB.

Through partnerships with Volkswagen and Didi, XPENG's partner network has expanded significantly, with both “friends” offering invaluable resources and support.

XPENG’s Overseas Expansion 

According to He Xiaopeng, 2024 will mark the first year of the elimination round for Chinese automotive brands. To stay competitive, XPENG is accelerating its overseas expansion, securing a stronger position in the face of intensifying competition.

XPENG embarked on its overseas journey as early as 2020, with the first batch of 100 G3i models shipped to Norway and started delivery, marking the company’s entry into the European market. Since then, models like the XPENG P7, P5, and G9 have steadily entered Europe.

While accelerating its product lineup, XPENG has also been establishing its overseas sales channels. In addition to collaborating with local European dealership groups, XPENG began setting up direct-sales stores in Europe in 2022, leading the "Direct Sales + Authorized Dealership" 2.0 model for Chinese brands expanding overseas.

However, these early overseas efforts were relatively small in scale and did not yield significant results, seeming more like paying to build brand awareness rather than achieving substantial sales.

Data from the China Passenger Car Association shows that XPENG exported a total of 3,261 units in 2023. The P7 and G9 led this export effort, with cumulative overseas sales of 1,004 and 2,030 units respectively, accounting for 93% of total exports. In addition, export sales made up only 2.3% of XPENG's overall sales in 2023.

In 2024, XPENG redoubles its efforts, focusing heavily on international markets once again.

According to XPENG’s 2024 Open Letter, He Xiaopeng has defined 2024 as the "first year of XPENG’s Globalization V2.0." This year, XPENG plans to expand in core markets across Europe, ASEAN, the Middle East, Latin America, and Oceania, enhancing the intelligent advantages of its products, strengthening localization efforts, and setting a new path for global growth in terms of products, autonomous driving, and brand presence.

Moreover, starting in early 2024, XPENG has pursued more frequent strategic partnerships overseas, especially in the Middle East and Africa.

On February 22, XPENG announced a strategic partnership with UAE dealership group Ali & Sons. To date, XPENG has established alliances with various dealership groups such as Ali & Sons in the UAE, RAYA Group in Egypt, SR Group in Azerbaijan, TGargour & Fils in Jordan, and Gargour Asia SAL in Lebanon.

It is generally believed that entering the Middle East and Africa market marks an important "first step" for XPENG on its global journey.

Following these partnerships, XPENG began selling its G6 and G9 SUV in the UAE starting in the third quarter. Meanwhile, deliveries of the XPENG P7 and G9 launched in Jordan and Lebanon in the second quarter and in Egypt in the third quarter.

Now, XPENG Motors, growing through transformation, has gradually found its own pace for development. Meanwhile, after years of experience, He Xiaopeng has also matured, shedding the early inexperience he had when he first entered the automotive world as an internet entrepreneur.