Author: Chris
On the afternoon of May 6th, XPeng Motors announced an update to its business plan, including the launch of the new XPeng P5 and four versions of the XPeng P7. Starting from May 9th, the XPeng E series and above models will be equipped with intelligent driving assistance software and upgrade services as standard. Additionally, XPeng will no longer provide lifetime free charging services, free home charging pile, and installation rights from May 9th.
Obviously, it’s hard to summarize the benefits and losses of this business plan for all XPeng car owners. So, if you have just received your XPeng vehicle or are planning to order one, please continue reading.
Five new models launched with intelligent driving assistance system standard
Starting from 0:00 on May 9th, 2022, if you order XPeng P5 or P7 models with XPILOT 3.0 hardware or above (E/E+/P), the corresponding version of the intelligent driving assistance system software and upgrade services will be adjusted to standard. That means NGP, whichused to require a payment of 20,000 to 25,000 RMB (later available as an option for 36,000 to 45,000 RMB), will now be included as standard.
(Note: XPeng designs vehicle models with different configurations based on their cruising ranges and intelligent hardware specifications – P, E, N, G series correspond to models equipped with XPILOT 3.5, 3.0, 2.5 and models without driving assistance systems.)
Let’s take a closer look at the five new models.
XPeng P5 460 P version is the goalkeeper of XPeng’s high-end intelligent driving models and also the most affordable laser-radar equipped vehicle in the industry.
XPeng P7 480 G+/E+ version has the same price as the 480 G/E version, but comes with 19-inch wheels at no extra cost.
XPeng P7 586 G version is a mid-ranger with a cruising range between 480km and 670km.
XPeng P7 625 E version is the newly added cruising range version, located between 580km and 670km. According to ClassyBeasts, 625 is based on the 670, with one battery module removed to meet customers’ diverse needs for cruising range.
In addition, as the intelligent driving assistance software and upgrade services have been changed from optional to standard, the XPeng P5 550 P and 600 P will increase their prices by 7,000 RMB.
Why is it standard now?Starting from May 9th, all models of XPeng based on XPILOT 3.0/3.5 advanced intelligent driving platform will be equipped with high-end intelligent driving software system as standard, including industry-leading intelligent driving functions such as NGP for high-speed driving assistance, AVP for parking assistance, and the upcoming city NGP for XPeng P5.
Considering the solid engineering capabilities of XPeng in intelligent driving and the reputation it has gained from users over the past three years, this is a critical change that has been made to continuously reduce the threshold for high-end intelligentization from the user’s perspective.
The newly updated XPeng P5 460 P has a starting price of RMB 209,900, which is the lowest price for a vehicle equipped with dual LiDAR and will soon support city intelligent driving that you can buy globally.
At the 1024 XPeng Intelligent Day in 2021, a Star Channel analysis article pointed out that one of XPeng’s key value propositions is technology democratization.
The standardization of high-end intelligent driving software after May 9th is undoubtedly the latest practice of XPeng’s technology democratization. From XPeng’s perspective, this actually indirectly shows that XPeng has made new progress in the intelligent driving technology field.
He XPeng once publicly talked about XPeng’s logic for promoting hardware engineering:
“The first rhythm is to first make things, make them safe and scalable; the second rhythm is to make things within a relatively converged cost. Ensure that this scale is safe and that the cost is greatly reduced as the capabilities increase.”
And He XPeng also elaborated on the second rhythm:
“It is really difficult to achieve good autonomous driving within a relatively converged cost. It is 10 times more difficult to create a good thing for 30 RMB than for 100 RMB, but this is very important for generalization.”
Combining this update of high-end intelligent driving software standardization, a reasonable speculation is that after years of development and investment in XPeng G3 and P7, XPeng is moving into the “second rhythm” mentioned by He XPeng, which is to greatly reduce costs while continuing to iterate on intelligent driving capabilities and reflecting it in the terminal price.
Cost AnalysisDifferent stances and needs lead to different interpretations of the same sales policy for new and old car owners. Starting from 12:00 a.m. on May 9th, Xpeng will no longer provide the “lifetime free charging service” and the “free home charging pile and installation rights”.
Let’s first talk about the “lifetime free charging service”. Xpeng’s first car owners were given this benefit, which was announced at the 2020 Beijing Auto Show. Each Xpeng car owner could enjoy free policy up to 3,000 kWh per year, based on the high energy consumption of 20 kWh/100 km, 3,000 kWh of electricity could run the car for at least 15,000 km.
15,000 km/year is basically enough for most people’s daily use, especially when supplemented by home charging, especially when they cannot find free charging piles. I believe that for many car owners, 3,000 kWh/year is not that easy to use up, of course, this is an early benefit for the first car owners.
Afterward, Xpeng adjusted the relevant benefits. From August 2021, the Xpeng G3 series and P7 no longer enjoy 3,000 kWh/year, and the benefit changed to 1,000 kWh/year. In November, the benefit of the Xpeng P5 also changed to 1,000 kWh/year.
If we refer to Tesla, Tesla canceled its lifetime free charging service for the first time in 2017 but resumed it in 2018 in some vehicle promotions and discontinued it completely in 2020. Tesla CEO Elon Musk said that “lifetime free charging is unsustainable in large-scale production, and Tesla should have ended this incentive earlier.”
I believe Tesla’s logic here is also applicable to Xpeng. As of March 23, the 100,000th Xpeng P7 has been mass-produced offline. At the same time, the demand in the entire new energy vehicle market has also continued to change positively. For Xpeng, it is just a matter of time to cancel the lifetime free charging service, and it chose to fix the date on May 9th.
The underlying logic here is that in the early stages of the development of the new energy vehicle industry, users who choose to buy new energy vehicles often need to bear higher vehicle costs in terms of price, depreciation, and other dimensions. In order to level the playing field with mature fuel vehicles, both regulatory agencies and new energy vehicle companies will introduce different forms of incentives or subsidy policies.
“But in terms of long-term commercial logic, it is foreseeable that such benefits will gradually shrink until they are completely canceled.”
Let’s calculate how much the new car owners will “lose”?The free entitlement to 1000 kWh/year equates to a value of 1500 yuan, calculated at an average price of 1.5 yuan/kWh for fast charging. Based on the average 6-year car replacement frequency in China, the 6-year free charging entitlement brings in a revenue of 9000 yuan.
What about home charging piles? Tesla’s third-generation home charging pile (including installation) costs 8000 yuan, while third-party home charging piles are relatively cheaper, with 7 kW–11 kW home charging piles ranging from 2000 to 4000 yuan. XPeng will definitely launch brand-exclusive home charging piles in the future, and we believe that the price won’t be too high.
If we calculate it based on a home charging pile costing 6000 yuan, then the combined value of XPeng’s “free lifetime charging service” and “free home charging pile and installation entitlement” is 15000 yuan.
However, for users who have installed a home charging pile, the “free lifetime charging service” may be a useless entitlement because it’s difficult for one car owner to use up 1000 kWh/year with home charging.
For owners of P and E versions, XPILOT 3.0/3.5 software costs 20000 yuan and 25000 yuan, respectively, so the software is more cost-effective.
For owners of G and N versions, the entitlement is reduced, but fortunately, the above policies are not immediately updated and effective. After a quick calculation, you have over 30 hours to make a decision, and before the zero hour on May 9th, you can freely choose your desired sales strategy.
In conclusion, if you’re not interested in autonomous driving, then it’s worth ordering the G and N versions before May 9th to still enjoy the free charging entitlement and home charging pile service. If you want to configure autonomous driving, then after May 9th, NGP will become standard, which is naturally more cost-effective than the free charging entitlement.
For me, compared to the two predictable adjustments of “free lifetime charging service” and “free home charging pile and installation entitlement”, it’s clearly more exciting that the XPeng intelligent driving system software and upgrade services are adjusted to standard. Considering XPeng’s G9’s comprehensive upgrade of the intelligent driving hardware and software platform, the new journey of XPeng’s intelligent driving has begun.
We look forward to the arrival of the “third rhythm” of XPeng’s intelligent driving system, as mentioned by He XPeng.
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.