Author: Chang Yan

Little did He XPeng expect that he created a festival for his own company and ended up being roasted on fire by the public.

Every new force brand has its own annual commemorative day. He XPeng’s choice of October 24th cannot be said to be unwise. On the one hand, it can win the favor of the tech-savvy crowd he values the most, and on the other hand, it can also benefit from the “Golden September and Silver October” car market. In a sense, he can seize both the past and the future.

However, unexpected setbacks may occur anytime, just like a calculator that ruins one’s perfect plan. Not only did sales drop drastically compared to the same period last year, the cross-border innovation that he painstakingly showcased at the press conference was also criticized as not focusing on the mainstay business.

All of these setbacks may stem from the unexpected misfortune encountered by He XPeng’s new flagship G9 release which has been under development for years, as well as the sinister atmosphere during the largest organizational adjustment in the company’s history recently exposed by the media.

So what will He XPeng say when he faces the media for the first time after this incident?

Dropping sales, to jump higher next year?

In 2022, the most abundant number is 2.

He XPeng said that there are two things that he did not anticipate in this extraordinary year.

The first is the pandemic. Based on last year’s situation, he did not expect that this year’s control measures would have such a significant impact on production. He hopes that the impact of the control measures will gradually reduce in 5-6 months.

The second is the ore price. The prices of minerals related to batteries have increased by 7-8 times compared to the beginning of last year, which has a great impact on XPeng’s pursuit of reducing the gross profit margin.

Due to these changes, He XPeng spent a long time thinking alone in March and April.

However, XPeng believes that macro environment is beyond anyone’s control. It is difficult for Chinese new energy vehicle and technology companies to maintain overall stability.

“In moments of uncertainty, it is important to choose certainty. This is what XPeng’s products represent.”

XPeng prefers to focus on future new vehicles. He believes that XPeng’s product planning is always ahead of the curve and correct. He still thinks that the planned product strength and time frame for the three upcoming platforms are correct.

The recent decline in sales is due to competition and new vehicle upgrades. For instance, many customers expect the P7 to be upgraded and are now waiting and watching.

According to industry norms, few car companies will update two major models at the same time. Apart from superficial propaganda and the collision of sales resources, it also means that companies will face enormous financial and market risks. In the current situation, XPeng’s primary focus is G9. The upgrade of P7 is likely to be carried out 1-2 quarters later.Although the total number of G9 deliveries in October did not even break one thousand, He XPeng said that this is a common phenomenon in the early stage of new products: G9 is the first car on a new platform, “the first car on any platform is difficult to make, including hardware production, software loading, and landing of autonomous driving. They are all technical challenges, but there will be better sales after that.”

He XPeng said that he pays more attention to the regularity of the sales cycle when it comes to changes in sales volume. For example, the lowest sales usually occur in July, and they will rebound in August. These judgments were also confirmed in his previous communication with the team. As for the traditionally booming sales in October, he said that according to statistics, XPeng’s order volume is better than that of its competitors. “I have confidence that sales will increase with the launch of G9 and the new P7.”

Regarding XPeng’s current sales volume, he emphasized several details, such as the fact that all of XPeng’s orders are to C and “have gone through a highly competitive market”; they are all domestic, and there is no initial rush for overseas sales; and “among all the old models, XPeng’s sales are now the most stable.”

I asked He XPeng to confirm the previous rumor of “XPeng will significantly reduce its car models” in the product planning direction. He said that XPeng’s SKU will decrease, “less in 23 than in 22, and less in 24 than in 23,” but it does not mean that the number of car models will be reduced. “Because, after a thinking process at the beginning of the year, I realized that relying on a single explosive product strategy cannot lead to the future,” and more car models are still needed to meet more demands.

He XPeng’s future vision includes not only three new car models but also three insistence points. Externally, they need to maintain “appearance and intelligence”; internally, they need to “reduce costs.””We are still in our original product development rhythm. In terms of overall sales this year, we still rank first among the ‘Three Friends of Winter’ in the market, and we rank second with several other companies,” said the representative of the automotive industry.

As for what to do in the competition for new platform products, he said, “There are many competitors in each smart electric vehicle racing field, and XPeng, as a mainstream brand, will have 5-7 competitors in each field, (XPeng needs to) grasp the main characteristics, and gradually solve the problems.”

“I’ve always said that squatting down is to jump higher.”

Was the organizational adjustment sudden?

“The recent widely circulated XPeng organizational restructuring is one of the issues that needs to be ‘gradually solved’.”

“There were some problems with the G9 launch event, but we made adjustments immediately.”

“Our colleagues made some mistakes in terms of technology, experience, and customer satisfaction. They did not fully communicate with the media and customers, and simply applied the P7 financial model, resulting in different opinions among everyone.”

“The next day I had the production and sales teams communicate, and then we made some big moves. This is also related to our special success last year. We were very confident internally, and some views about the future have changed. (Some problems have arisen), but if these problems persist until the end of next year, it will be even harder to change. I firmly believe that (the incident with G9) can turn problems into opportunities.”

In the ongoing organizational adjustments, He XPeng said, “In the product planning department, we have integrated the strategy. Originally, we managed a car through two departments. Now, one department manages the car from start to finish. For car companies, some manage through two departments, while others through one department. However, our biggest adjustment is to shift to a customer-oriented approach.”

But He XPeng also said that for car manufacturing, “We definitely need to satisfy customers as much as possible, but we cannot satisfy them entirely. We should be friends with customers, but we cannot always listen to them.” He reflected that he had received many reports and feedback within the company before, but they were not direct enough. Data was processed statistically or screened. In the future, He XPeng will get closer to the users.

Regarding the deep reasons for internal organizational problems in XPeng, He XPeng believed that it was related to the rapid expansion of the company last year. “We hired too many people last year, and we failed to cultivate management and consistency in values. Indeed, we need to optimize our culture.” He said that if too many people are added too quickly, problems will emerge later.

At the same time, he seems to envy other competitors. “Many competitors had a hard time in 2019 and 2020, but they did not encounter culture problems.” “I tried to analyze it, and that may not be correct”- “maybe because the group of people who persevered through the hardest times with the company and were willing to face challenges and difficulties for a vision.”

He XPeng insisted that this organizational adjustment was not a reactive response to the failure of G9 launch, but a step that was originally planned. “We planned to make the organizational adjustments at the end of the year, and we intended to do it according to our plan. We also consulted a consulting firm that suggested we make slightly bigger adjustments this year than last year. Everything is based on the industry’s transformation.”

Regarding the pervasive pessimistic sentiment towards Xpeng, He XPeng said, “Only the company itself knows its actual status. When everyone thought we were doing exceptionally well last year, it wasn’t as good as it seemed. And when everyone is seeing us face challenges this year, it’s not as bad as it seems either. Pursuing efficiency and results has always been clear for Xpeng, and we are adjusting our shortcomings while leveraging our strengths.”

“Heading into this change, we will improve our planning and management capabilities,” he added.

How did Xpeng survive and thrive?

Time flies, and many people may have forgotten about He XPeng’s “New Car Spring and Autumn Warring States Theory.”

And He XPeng may not have expected that even though he was already planning for the Warring States period, he was still being asked how he survived through the Spring and Autumn period.

“New car manufacturing is not a secret. Even the media often knows more than the OEMs,” He XPeng said.

Therefore, what is more important when following a business is not their short-term performance, but their long-term core competitiveness.

Because despite the difficulties of the macro environment, “new energy vehicle companies won’t see as fast a development next year as they did this year”. Once we enter “an era of intense competition,” we must consider whether the fast-growing enterprises of this year can maintain the same speed next year.

XPeng still believes that difficult intelligent technology R&D will be the ace in a highly competitive era because it requires extensive technical accumulation. He also believes that XPeng is still leading in the technology roadmap. For example, he mentioned that XPeng became the first new car company to transform from relying mainly on high-precision maps to “lightweight maps and heavy perception” for urban advanced driving assistance technology at this year’s 1024 event.

“This way, there won’t be a situation where you can only use it in A city when part of the high-precision maps are open.”

This is the reason why XPeng believes that “in the era of strong competition, why can we survive the spring and autumn, survive the Warring States Period, and become one of the Five Heroes.”

However, regarding the non-smart selling points emphasized during the marketing of models such as P5 and G9, which cannot experience intelligent functions when sold, XPeng stated that he plans to “hold a special meeting to make improvements.”

As for the question of who has been selected for the Heroes of the Warring States List, XPeng said, “There is one company that is possible, and the others are still far behind.” “Some companies have not entered the era of strong competition, and some companies will encounter greater challenges on the road to intelligence.” “Only one enterprise is on the right track, and its sales and scale can still help it continue to grow positively.”

However, when asked whether this enterprise is Tesla or BYD, XPeng smiled and did not give his answer.

Is XPeng on the right path?

Regarding the external questioning of his energy being too dispersed, XPeng said: “I have a bit of a technical sentiment. I have done many cool things that haven’t made money yet. This is my characteristic and my personality.”

“The integration of the ability of these three modes of transportation, namely automobiles, robots and flying cars, is still far away. I always believe that quality is not determined by quantity. If we only focus on the quantity of things at hand, we won’t be able to maintain it. I think each thing we do should be done for ten years.”

“We invest no more than 20% in each of these companies, so it has no significant impact on our capital. However, once it creates value, it will greatly help XPeng’s channels and technological integration, which will be of great help to our technology after 2025. Some companies must do these things. If we do less now, we will face greater difficulties in the future.”

When talking about XPeng’s long-term vision, he said:

“Previously, our goal was to make intelligent electric cars into thousand-dollar machines, now we want to make unmanned cars into thousand-dollar machines on a larger scale.”

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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.