Author: Feng Jingang

The biggest change in the new energy vehicle market last year was that XPeng defeated NIO and became the champion of the new energy field.

Behind this, the important factor was that XPeng successfully established a differentiated intelligent label. We have done a detailed analysis of this (see “How did XPeng defeat NIO for three consecutive times?”).

However, we also noticed that while intelligence has become XPeng’s strong suit, the previously leading three systems have gradually become its weak point, even forming a gap between supply chain, brand, and users.

From recent events, this gap seems to be worsening, which is not a good thing for XPeng, who is advancing rapidly.

Intelligence is the key to XPeng’s development from scratch, but we must also recognize that the three systems are the foundation of the current intelligence of electric vehicles. If XPeng wants to climb higher, it must quickly remove the obstacles caused by the three systems.

Having no shortcomings is the biggest strength.

It is obvious that the generation of XPeng’s three system issues and their becoming the weak point were not caused overnight, but were the results of long-term strategic deviations and swings, which means that they will generate a series of chemical reactions.

From last year until now, especially this winter, the “accidents” about XPeng’s three systems have never stopped.

Firstly, in various media and user’s different range review, XPeng’s mileage performance was generally overstated, which was dubbed “the new king of overstatement.”

If intelligence and electric systems are regarded as the two major product strengths of intelligent electric vehicles, then for XPeng now, intelligence is a plus, and the three systems are a minus.

This was unimaginable a few years ago.

At that time, whether it was G3 with a range of 520 or P7 with a range of 706, they were leading industry launches and had technological effects. Especially the latter, which had the global first range under standard tests, earned XPeng’s three systems a lot of face.

Here, it is not that the higher the range, the better. It is merely a hard indicator that emphasizes the strength of the brand’s three systems, and to some extent, it can empower product completion.

The establishment of the label “P7 with 706 ranges” was the key to XPeng’s one battle to fame.

Looking at the current XPeng, it has almost ignored the basic but core indexes of mileage, and at the same time, the issue of overstating the three systems has emerged. XPeng’s three system advantages have disappeared, and even started to counteract product strength and brand strength.

For XPeng, which is growing rapidly, this is the last thing that should happen, and the sniper effect it creates in the market will be unavoidable.

In addition to ignoring the technical aspects and overstating mileage, XPeng’s other problem with the three systems is the chaotic development caused by the lack of overall planning, which is also rapidly fermenting.

And it seems that I am involved in it as well.As one of my preferred pre-order cars, I consulted the P5 at a certain Shanghai direct store of XPeng Motors before the Chinese New Year. The pre-ordered version was 460e.

There are mainly three reasons for selecting this configuration. Firstly, P5’s advanced driving assistance system is convenient for us to do testing. Secondly, for my car usage scenario, 460 km of driving range is already sufficient. Thirdly, P5’s battery cells are from CATL.

However, on the night of the 17th, one day before XPeng’s official announcement of the price increase, the XPeng salesperson from that store called me and said that XPeng was going to raise the price. If I wanted to order the car, I should hurry up and order, and he also said that the 460e configuration cannot be ordered, and he suggested that I change to another configuration, or wait for the previous cancelled orders to be transferred to me.

Although I have not officially placed an order yet, this change has already surprised me. Whether it is in reference to Tesla Model 3 or its own cost performance, the 460 version can be said to be the main selling model of P5. Is it appropriate not to allow consumers to pre-order it?

According to the salesperson, this is because of the rising raw material costs and the shortage of lithium iron phosphate batteries, in order not to make customers wait too long, they are not accepting new orders.

Regarding this explanation, my first question is why the lithium iron phosphate battery supply of P7 and G3i is not affected?

Looking at other brands, such as Tesla, which has switched 99% of its battery supply to lithium iron phosphate, and sells tens of thousands of units per month, there have been no serious battery shortages. So why is it that XPeng P5 is short of batteries?

At least it’s difficult for me to be convinced by this salesperson’s explanation.

Like me, there seem to be many people who are confused about the pre-order of P5.

On February 27th this year, Shanghai TV station released a consumer rights protection event as usual. At that time, this event did not receive widespread attention in the new energy vehicle circle until the “315” event was widely discussed after being re-reported.

The original story is that 148 XPeng P5 pre-car owners from all over the country wrote an open letter to XPeng Chairman He XPeng, mainly complaining that they have not received the cars they ordered since around October last year.

In addition to explaining the contradictions, the letter also has demands for consumer rights protection, as well as a list of 148 pre-car owners, which shows that they have some impact.

From the letter, we can know that the two main contradictions between the two sides are:

Firstly, these pre-car owners believe that the XPeng official apology is not “sincere and truthful” and has not been supplemented for more than four months since the cars have not been delivered;

Secondly, XPeng has substituted the concept of batteries. Originally, salespeople said that it was CATL’s battery, but in the end, it was XPeng’s self-assembled battery (which may or may not include CATL battery cells).

Regarding the first point, the “Today’s News” column of Electric Drive has reported on news tracking. XPeng has provided some explanations later.Regarding the incident, the relevant person in charge of XPeng Motors stated to the media: “Due to the impact of the epidemic, the industry is facing an extremely tight supply of core components, including lithium iron phosphate batteries, which has also brought great uncertainty to the production of XPeng P5 460 car models, resulting in delayed delivery of 460 car models. XPeng Motors deeply apologizes for this.”

As for the second point of the three-dimensional demands raised by users, they do not fully accept the official explanation provided earlier, since a delay of four months in delivery has resulted in losses. Some compensation should be provided, but to date, we have not seen any policy similar to that.

With regards to the second point, this letter does not provide a detailed explanation, but only asks XPeng to establish a traceability mechanism for power batteries based on policies and to implement the main responsibilities of both auto and battery manufacturers. We will elaborate on this point in detail in the following sections.

The fact that P5 reservations are blocked, resulting in inability to deliver, and triggering user rights protection, whether or not it is related to the supply of P5 lithium iron phosphate batteries, is no longer the main issue.

From the results perspective, the root cause of the rights protection is the problem with XPeng’s three-electric plan.

On March 19, Dongfang News and Shanghai Broadcast Television jointly produced a report on XPeng Motors’ battery swapping, titled “Is XPeng Motors’ Battery Switching a Case of Fraud by the Company Letting Salespeople Take the Blame?”

At first glance, this title may be confusing, but it has something in common with the above-mentioned rights protection, which is the second point – XPeng’s concept of switching batteries.

What does this mean?

Generally, when introducing products to customers, if Ningde Times battery is used in the product, a salesperson will mention it, because whether it is sales or customers, they know that Ningde Times battery is the hard currency in the battery and generally adds points to the product’s quality, which will further prompt customers to make a purchase.

However, in XPeng’s plan, Ningde Times is not the only battery supplier, and other brands of batteries, such as Yiwei Lithium Energy, are also produced by XPeng in Zhaoqing.

The problem lies here. Customers who care about batteries may think they are getting Ningde Times batteries, but in reality, they may be getting Yiwei Lithium Energy batteries. Such “change of configuration” is naturally difficult for customers to accept.

For example, Mr. Song, a P5 owner, in the interview with Look News said, “I am not very confident about the safety and reliability of XPeng’s batteries”; Ms. Xu, another XPeng owner, said, “If the battery is XPeng’s, I definitely would not buy a XPeng car”; and Mr. Tang, another XPeng owner, said, “This is a problem of sales deception and fraud. If at the beginning they had said that it was not Ningde Times battery, then the purchasing premise would not have been established.”

Although the above interviews represent only some of the users’ voices, they at least indicate that the problem does exist. As the situation continues to escalate, it cannot be guaranteed that other users will not also demand an explanation.In Xiao Peng’s view, whether it is a CATL battery or a EVE Energy battery, they are both products of Xiao Peng, and they meet the Xiao Peng battery production standard.

Both customers and Xiao Peng have their own opinions, so the problem inevitably points to the sales approach, hence the statement “the company lets sales ‘take the blame.'”

However, with the emergence of this issue, and its subsequent development, can sales really take the blame? It is doubtful.

This issue is difficult to defend. Customers claim that the salesperson said it was a CATL battery, but the salesperson can also deny it, since it was only spoken and nothing was signed in black and white.

Mr. Song said he had chatted with the salesperson, and although the chat group was disbanded by the salesperson, he still retained the chat records. As for those customers without chat records, what can they do?

Therefore, the above letter was written, and these 148 users can only appeal to He XPeng for Xiao Peng’s misrepresentation of the battery. It is rather tragic that they can only admonish Xiao Peng to establish a battery traceability mechanism.

Clearly, the issue above is not simply a matter of customer rights protection, it has completely exposed Xiao Peng’s problems in the planning, research and development, and marketing of the three electric vehicles.

In the early product directory of the Ministry of Industry and Information Technology, the energy storage device production company for Xiao Peng P5 was listed as Contemporary Amperex Technology Limited (CATL) (battery pack and cells), but in the new directory since the end of last year, the energy storage device production company for Xiao Peng P5 has been changed to Zhaoqing Xiao Peng Automobile Co., Ltd. (Xiao Peng battery pack, CATL or EVE energy cells).

This change was very secretive, but had a huge impact on end-users. Some salespeople believed that the P5 used a CATL battery and thus convinced the consumers that it was also a CATL battery. However, with the changes in the directory, the salespeople who had not received timely internal training or did not pay attention naturally did not know about it, leading to misunderstandings.

Indeed, this crisis actually points directly to Xiao Peng’s marketing loophole in the battery switch. They did not effectively communicate timely information internally and did not present a technical brand like the blade battery or magazine battery to the outside world, but rather only an empty “Zhaoqing Xiao Peng”, failing to establish a reputation for their technology.

If it were not for this successive rights protection issue, the Zhaoqing Xiao Peng battery would probably not have attracted any attention.

And the marketing gap is precisely one of the consequences of Xiao Peng’s long-term neglect of the importance of the three electric vehicles.

Looking at the battery switching action itself, within the current industry development, it is a common practice for Xiao Peng P5 to start with CATL’s mature design, then master the technology, switch to Zhaoqing Xiao Peng, and then develop multiple brand cells from suppliers such as CATL and EVE Energy.Is the performance of battery packs with different brands of battery cells the same, especially given Ningde Times’ massive reputation in the market? Can this be easily overlooked? This is worth discussing.

Personally, as someone who has participated in the development of several new energy vehicles and has been reporting on new energy vehicles for many years, I attach great importance to the quality of batteries, or rather, to the brand of batteries.

As we all know, many new energy vehicles have caught fire in recent years, which has also made consumers fearful of new energy vehicles. However, it is not difficult to find that most of the models that have caught fire are equipped with batteries from unknown brands in the second, third, or fourth tier market.

Therefore, I told XPeng’s sales team that I only want Ningde Times battery cells, and I don’t need any other brands.

I even think that when buying an electric vehicle, you are buying a battery.

As for other consumers, if car companies make the brand of the battery cells in their electric vehicle battery packs public, the number of consumers opting for Ningde Times battery cells will not be small.

Since becoming the world’s top power battery champion in 2017, Ningde Times has held the top spot for five consecutive years until 2021. In the domestic power battery market, Ningde Times even has more than half of the market share and is far ahead of the competition.

When the market share of a product exceeds 50%, its brand premium is huge and cannot be ignored.

In addition to the data, Ningde Times is also leading the comprehensive development of China’s power battery technology, from materials – from ternary lithium, to lithium iron phosphate, to sodium batteries; from structure – from square shell batteries, to CTP, to CTC; to business models – from car manufacturer-battery factory bundling development, to battery swapping modes, and so on.

With such reputation and strength, Ningde Times’ brand perception has long been ingrained in end-users, and cannot be easily covered up or even replaced.

Based on these facts in the industry, when switching the P5 battery pack manufacturer from Ningde Times to XPeng, XPeng should have been prepared in marketing, at least to let the sales team know in advance, and then inform the public through the media and user groups to avoid the current passive situation.

Furthermore, how to measure the value of different brands of battery cells is also something that XPeng needs to consider in the future.Using the battery pack of Zhaoqing equipped with CATL cells and that of XPeng’s equipped with other brands such as EVE Energy may have similar specifications on paper, but there is definitely a difference in long-term quality, especially as CATL has a strong reputation among end-users. Therefore, can we propose a solution that uses different cells with different prices?

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When it comes to the availability of multiple cell suppliers, it is necessary to extend the discussion.

If you ask any industry insider, they will likely say that having multiple suppliers is normal and that the OEMs must maintain control…

Judging by the current state of industry development, it is indeed common practice for multiple cell supplies, but the specifics differ between manufacturers.

Some brands are smart and anticipate the needs of the user, so they create their own power battery brands, such as blade batteries, magazine batteries, and dayu batteries, among others, in this way, the user naturally pays less attention to the differences in cell brands.

The crisis of XPeng’s rights protection is primarily due to a lack of a power battery brand.

However, everything has two sides, and when OEMs create battery brands, they must seriously consider whether they have the technical strength to support a technical brand.

Especially since batteries belong to electrochemical systems and have always been a weak subject for OEMs, there are few people who really understand batteries, and even if they hire some, they need time to produce results.

How can a company support technological progress if it lacks the strength, and how can it ensure that batteries remain problem-free in the future? After an accident, how can it shoulder the responsibility of a brand?

These are practical issues, not the repetition of hollow old routines like “other people did it, so I must do it.”

Looking again at XPeng’s experience with the threefold accumulated battery packs, as a new brand, they started from scratch with the 520km endurance G3 and the 706km endurance P7, which is largely due to the benign interaction with CATL. In other aspects, there are not many advantages to speak of for XPeng’s threefold compared to others.

Perhaps XPeng has already mastered battery pack design and has entered a new realm of flexible use of different branded cells, but this has not yet created a positive response from end users.

As Mr. Song mentioned above, he still has doubts about XPeng’s long-term performance of battery packs, including safety, quality, and service life, which is why he insists on CATL battery packs.

Mr. Song’s concern is not unfounded.

BMW’s i new energy strategy has been underway for more than ten years. The first electric car, the iX3, had a battery pack designed independently by BMW, and CATL supplied the cells. However, due to problems with the battery design, iX3 was heavily recalled by BMW last year.

If BMW can have this problem, what about XPeng?

Therefore, we should not blindly believe in the so-called supply of multiple cells. The premise is the qualification of one’s own technology. As a brand that caters to end-users, it should grasp the maturity of its technology, then proceed with commercial model innovation.

Once the technical verification is not qualified, accidents such as self-ignition will be inevitable, which will cause greater damage to the brand.

Some people say that CATL battery packs are expensive and that multiple cell supplies are necessary.Good batteries are naturally expensive. Isn’t this the industry’s open secret?

Therefore, let’s go back to the previous question: Can we create a different pricing plan for different brands of batteries to directly reflect the battery cost in the final price, and let consumers make their own choices?

However, as proven by current facts, this is not a solution to the problem.

In fact, whether it is multi-supply or single-supply of battery cells, it can be considered as a phased measure.

In the long run, automotive companies are transitioning to technology companies. This means that software, chips, operating systems, etc., which can be classified as intelligent and new hardware, are the future of intelligent electric vehicles. Currently, the three power systems that everyone is struggling with will only be the foundation of the future.

According to leading CTC technology solutions proposed by Ningde era, Leapmotor, etc., the future form of the three power systems will be a packaged solution. This means that either the automaker will solve the entire three power systems by themselves, or they will outsource the entire package and focus on their strengths.

For a young company like XPeng Motors (XPeng), they do not have the ability to fully develop both intelligence and three power systems on their own. They can only focus on their strengths. However, XPeng has already pointed out that the intelligent route is the correct one.

So, for XPeng, how to crack the three power systems sector is a strategic problem. Whether to adhere to intelligence and strategically abandon three power systems, or focus on three power systems and advance simultaneously, is a strategic problem.

Although XPeng surpassed NIO and became the new leader of new power in the automotive industry last year, the lead is not large, and even in February this year, XPeng’s sales rank dropped to third place among new power brands. This indicates that there are still some room for improvement in their enterprise system.

In terms of a single product, XPeng’s performance is not as expected. Among the three major brands of Wei, Xiao, and Li, XPeng’s positioning is relatively high-end, lower than the other two competitors, and should have the highest selling rate, but the fact is not so. This shows that their enterprise system still needs to be optimized and improved.

Regarding the current crisis caused by the three power system problem, we still hold an optimistic attitude overall about XPeng’s potential, as they have shown their strength to rise to the top among many new power brands.

As for how to solve the problem of three power systems, it will test the wisdom of XPeng management. If they can successfully resolve this issue, XPeng will definitely reach new heights.

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.