Exploration

Author: Chang Yan

Everything in the world cannot resist the word “Freshness.”

A few years ago, when there was only one stock of electric vehicle companies that people were tracking, every financial report release seemed like a carnival for that quarter.

Now, when the financial conference also takes the stage one by one, the enthusiasm of the audience below has not been as high as before, even the applause has become less.

What everyone needs is endless creativity, whether it is financial goals or product technology.

Using a phrase repeatedly mentioned by XPeng at the brand renewal conference, that is:

Exploration.

Abundant Supplies, Sustained Abundant Supplies

This financial report, I don’t want to continue pasting financial data in the front.

Because the highlight is obvious at the end – XPeng gave the most eye-catching fourth quarter outlook among the new powers.

According to their expectations, XPeng’s car deliveries in the last quarter of 2021 will range from 34,500 to 36,500 vehicles, with a year-on-year growth of approximately 166.1% to 181.5%. The corresponding total revenue will range from RMB 7.1 billion to RMB 7.5 billion, with a year-on-year growth of approximately 149.0% to 163.0%.

This means that XPeng needs to continue to maintain this delivery trend after delivering over 10,000 vehicles for two consecutive months, and even challenge the achievement of delivering 15,000 vehicles in a single month.

Under the background of the industry gradually returning to conservative sales targets affected by the lack of chips, XPeng continues to improve its delivery expectations. Behind this, it requires all-round efforts in product construction, gross profit growth, capacity expansion, and supply chain management.

The recent delivery of the P5 has given XPeng a sales pivot in addition to the P7. The XPeng’s next-generation flagship G9, which debuted at the Guangzhou Auto Show, will continue to raise the attention of XPeng’s existing product lines in terms of technology and experience.

It is noteworthy that the increase in sales is not at the expense of gross profit margin. Even XPeng’s gross profit margin in the third quarter of 2021 has increased significantly, reaching 14.4%. For reference, it was 3.2% in the same period of 2020, and 11.0% in the second quarter of 2021.

Highly reusable software, after increased optional equipment, has become a tool to increase gross profit margin. As of September 30th, among the more than 50,000 P7s delivered, more than 11,000 have been equipped with XPILOT 3.0. The software penetration rate of XPILOT 3.0 on P7 has approached 20%. For the more emphasis on intelligence P5, the contribution ratio of software to the overall vehicle profits will further increase.

Increasing production capacity is the most direct way to reduce the cost per vehicle. The production capacity of the Zhaoqing plant has reached 20 hours of double shifts. With Guangzhou and Wuhan plants, the initial production capacity will reach 400,000 units per year. After all plants are running double shifts, the total production capacity will reach 600,000 units.

Cash reserve has become the most important supply for intelligent vehicles ever since the spring and autumn period turned into the Warring States period. After the initial “sufficiency” at the time of listing, people are concerned about how to sustain the adequacy.

Robotaxi, the turning point of the battle

In the world of intelligent vehicles, there are two mythical beasts that can only be heard of, but not seen.

The first one is called the “killer application”, which is said to possess illusions that makes people “unable to go back” after experiencing it.

The second one is called the “subverted business model”, which is said to understand magic that makes people “turn stones into gold”.

However, these two mythical beasts, except for a sighting at a Tesla press conference, have never been found again in the industry.

In 2019, Tesla released its network construction plan for Robotaxi during its Autonomy Day, and from that moment on, a picture of a Tesla interior without a steering wheel has appeared repeatedly in the dreams of intelligent vehicle enthusiasts.

But after two years, we heard again about using mass-produced cars for Robotaxi, and it turned out to be at XPeng’s place.

At this year’s 1024 Tech Day, XPeng announced its Robotaxi plan for the first time, and the Q3 earnings conference call was the best opportunity for inquiries.

Various details began to emerge.

“With the launch of XPILOT3.5, XPeng Motors will begin to explore the Robotaxi business in the second half of 2022. Our strategic goal in the short term is to improve the robustness of autonomous driving algorithms and verify hardware through the operation of generalized scenarios. I believe that through our ability to pre-install Robotaxi software and hardware before mass production, as well as cooperation with different travel operators in the future, we can bring users a revolutionary experience and create greater commercial value.”

The core highlight of this passage is the mass-produced software and hardware. This means that XPeng’s operating costs will be much lower than those of specially customized industry solutions, and all accumulated achievements can be quickly reused on civilian vehicles delivered by XPeng.

The second key point is that the establishment of XPeng’s Robotaxi is entirely for the purpose of serving the research and development of autonomous driving technology, rather than facing capital or completing sales targets. XPeng has explicitly stated that it has no intention of independently building a travel company, but hopes to use this service to verify the technological progress of Xpilot from 3.5 to 4.0 and even 5.0.

According to XPeng’s model estimation, after the entire service is launched, each car can accumulate 8,000-10,000 kilometers of operational mileage per month, and these data can provide more training for Xpilot’s perception, map and other systems, as well as provide more Corner Cases than ordinary car owners, which is of great help to the reliability of the software and the safety of the system.

Of course, in addition to the software system, the entire vehicle hardware system will also be verified for more mileage. As the saying goes, making cars more complicated is easy, while making them simpler is harder. Reasonably simplifying the entire vehicle system can also help continuously optimize and reduce the cost of the entire vehicle.

“This is the starting point for technology inclusiveness.”

The world of intelligent electric vehicles needs accidents.The financial reports of intelligent electric vehicle brands always surprise people, and more importantly, it is due to the continuous unexpected innovation in the technology of their whole vehicle products.

Meanwhile, XPeng is enjoying the dividends of the rapid innovation system after experiencing the initial doubts and mockery.

I believe that the new electronic and electrical architecture innovation represented by G9 and the global-oriented vehicle development logic are just another start for the upgrade of XPeng’s product system.

During the earnings conference call, He XPeng stated that XPeng Motors will accelerate the launch of products at the price range of 150,000 to 400,000 RMB, rapidly iterate and expand the penetration rate, and become an important goal of XPeng’s entire vehicle product system.

Regarding the competitive advantage of intelligent driver assistance, including safety, formed by hardware, software, and data, it is expected to form a new experience ladder in the Xpilot 4.0 phase.

Using the definition from the financial report conference, that might be the time to “enter into the era of true smart car 1.0.”

This process is definitely unpredictable for us sitting here. New models, new technologies, and new modes all make us curious and excited about the “unexpected” that this journey may encounter.

During the writing process, Carscoops, a well-known automotive media, released a set of spy photos of the BMW i7 road test.

As BMW’s flagship pure electric model, it is not surprising to see a Mercedes-Benz EQS in the comparison fleet, but unexpectedly, there was also a Tesla Model Y and a XPeng P7 following behind.

Studying the globally best-selling electric car that is expected to be produced locally in Germany, the Model Y is not unreasonable, while the appearance of XPeng represents the fact that the German automobile industry has begun to take Chinese competitors seriously.

Welcome to a new era of global renewal and exploration.

This article is a translation by ChatGPT of a Chinese report from 42HOW. If you have any questions about it, please email bd@42how.com.