By CHEN Xiaotong
On the one hand, Chinese EV startup XPeng had a great year in 2022. Revenue was up by more than a quarter to 26.9 billion yuan. XPeng delivered 120,000 cars last year, up by 23 percent. With every industry bleating about the terrible effects of the pandemic on business, the 28 percent revenue growth achieved by a startup in a very competitive market should be a cause for celebration.
On the other hand, arch-rivals NIO and Li Auto both made about twice as much last year as XPeng. To make matters worse, a net loss of 9.1 billion yuan (US$1.3 billion), on top of the 4.9 billion yuan lost in 2021, looks far from sustainable.
Change at the top
In November last year, co-founder HENG Xia resigned as an executive director for “personal reasons,” but remained president of the company.
In a conference call Friday, HE Xiaopeng, another founder, and current CEO of XPeng put a brave face on things. He admitted on that the company was under immense pressure, citing troubles brought by the “macroeconomic environment.” In essence, He blames the market.
The company, He said, had reflected on its mistakes and made changes, including the January appointment of WANG Fengying, former CEO of Great Wall Motors, to oversee business operations.
Wang, 53, is to steer the company into China’s vast mass market and focus on making and selling cheaper cars. So far this year, China’s car buyers have drifted towards cheaper models assembled by domestic carmakers, such as BYD and Great Wall, amid worries about job prospects and incomes. Wang was the driving force behind Great Wall’s rise to become the mainland’s largest SUV maker. At XPeng, she will be responsible for planning, portfolio management and sales.
Excited throngs of happy customers
The CEO said the changes had already shown some results in Q1 this year. But if that was really the case, evidence was hard to come by in the financial report. Deliveries in Q1 were less than 20,000 vehicles. That’s a disappointing half of the number sold in the first three months of last year. Revenue is likewise expected to shrink about a half to around 4 billion yuan. NIO and Li Auto both expect to deliver more cars and make more money.
On March 10, XPeng released P7i, an advanced version of its bestselling model. The price ranges from 249,900 yuan to 339,900 yuan, which is considered slightly high in today’s market. A price war is being fought out before XPeng’s eyes. Setting a price too high in order to offer “crazy discounts” in the future is not a bad strategy, even if it is a transparent one.
According to He, XPeng showrooms have been flooded by intrigued passers-by in the past week. “In a bleak market, we have seen a bounceback of orders,” said He, without offering evidence for his claims. Orders in February had doubled, the boss insisted, and growth in March was exciting.
XPeng imagines that the release of the new model the G6 will be one of the highlights of Auto Shanghai, China's annual automotive love-in officially known as the Shanghai International Automobile Industry Exhibition, which begins April 18. Priced between 200,000 and 300,000, He is confident that the G6 will be big seller. A 7-seat MPV will be revealed in the second half of this year, He said. Sales volume to set to surge in Q3, but that is a long time to wait.
XPeng and its CEO seem completely unfazed by the carnage in China’s car market as prices of EVs and gas-guzzlers alike plummet. The second-hand car market has all but collapsed.
It seems highly likely that the flocks of “intrigued” potential customers will have migrated elsewhere by Q3. The chances of XPeng passing unscathed through the fire of the next six months must be slim.
On the bloodthirsty atmosphere in the marketplace, as prices are cut, slashed and decapitated all around, He said old-style personal transportation – the internal combustion engine – was facing enormous pressure and would surely fight back.
XPeng would mind its own business and quietly pursue its personal autonomous driving ambitions. XPeng’s forthcoming technological edge, claimed He, would give the company more autonomy in the pricing of future models.
