Author: Wang Yi
On March 17th, XPeng Motors released its Q4 2022 and full-year financial report. XPeng Motors’ revenue in Q4 was 5.14 billion yuan, a year-on-year decrease of 40%. In addition, the net loss also reached 2.36 billion yuan, an increase of 83% year-on-year. Last Q4, XPeng Motors encountered its second major setback since its establishment. Therefore, such financial data is actually within expectations.
What we care about is how XPeng Motors will adjust for the future and whether the adjustment will be effective. Compared to the cold data of the past, these are the key indicators that measure XPeng’s future value. During the earnings call, He XPeng introduced some content on this. Overall, it is still inspiring, and the future is promising. One thing that can be certain now is that in the face of setbacks, XPeng Motors has not only refused to yield, but also strives to counterattack.
Organizational and Management Structure: Increase Efficiency and Reduce Cost
After going through the G9 “disaster”, XPeng Motors quickly corrected and made significant adjustments to the company’s internal organizational structure since October 2022. Five virtual committee departments were established, including production planning, strategy, technology planning, sales balance, and OTA. Three virtual product matrix organizations were also established, responsible for three different vehicle models.
Being able to acknowledge mistakes and make swift changes indicates that XPeng’s system is not yet completely solidified, and there is still room for maneuvering. In fact, for continuous entrepreneurs like He XPeng, this may not be a real problem, but rather an opportunity for him to recognize his true self and optimize it accordingly.
“Looking back on the whole year of 2022, the macro environment and competition within the new energy vehicle industry have brought many challenges, and our performance has come under pressure,” He XPeng said. “But from another angle, fortunately, these pressures have also helped us see the challenges in the industry earlier than most companies in the industry have. I am very pleased that we took swift action at the end of last year, analyzing and exploring these issues earlier, and we have begun to solve these problems this year.”
“At the end of last year, we decisively carried out strategic reflection and adjustment, boldly promoting the optimization of the entire organizational structure and strengthening the short board of comprehensive capabilities. We choose to overturn ourselves and truly start a second entrepreneurship on a higher dimension and platform.” Through this battle, He XPeng’s positive attitude as a continuous entrepreneur was fully revealed, providing the guarantee for XPeng’s continuous upward progress.XPeng Motors is at a turning point,” said He XPeng. “We know what our goal is, and what our strengths and weaknesses are. We not only have confidence in restoring sales growth and market share, but we also place greater emphasis on the fundamentals, including comprehensive improvements in organizational, production, marketing, and cost capabilities. This will lay the foundation for XPeng to win in the long term and truly become the No. 1 enterprise for intelligent electric vehicles in China and even globally.”
After this major adjustment, all internal team management within XPeng has become more flattened. Starting from February, all teams within the company, including design, R&D, production, supply chain, and organizational management teams, are required to report their work directly to CEO He XPeng. He XPeng himself will focus on improving team efficiency and customer value through management and innovation, as well as reducing the overall cost of the supply chain.
Improving efficiency and reducing costs is the core task of XPeng’s new team. Compared with the past extensive management, XPeng’s current management is undoubtedly more precise and efficient, which is also a basic capability necessary for a mature automotive company.
At the same time as restructuring the organizational architecture, XPeng also made a series of major personnel adjustments. Particularly in January of this year, Wang Fengying, an industry elite with more than 30 years of experience, and former general manager of Great Wall Motors, joined XPeng Motors as president, responsible for overall product planning, matrix, and sales systems. Based on customer demand, Wang Fengying will boost XPeng’s market sales and service capabilities and efficiency through stronger execution. He XPeng is confident that Wang Fengying’s addition will enhance the comprehensive capabilities and efficiency of XPeng Motors. The duo of He XPeng + Wang Fengying will form a powerful complementary force to jointly promote the advancement of the new XPeng.
According to He XPeng’s disclosure, the changes the company made in organization and management have already taken effect in the first quarter of this year. For example, after the release of the P7i, XPeng’s in-store traffic and test drive volume reached their highest levels in recent months. XPeng’s customers appreciate the clear advantages of P7i in multiple aspects, such as intelligence, appearance, and driving control, compared to its competitors. Despite the overall market experiencing extremely weak demand for new orders, XPeng has recently shown a clear upward trend, with new orders in February increasing by 100% compared to January. With the strong performance of orders after the launch of P7i, the new order volume in March increased significantly compared to February.# Translation
He XPeng said, “This is the first victory we have achieved after the overall transformation, which has greatly boosted our morale internally.”
“I believe that the overall planning ability, decision-making efficiency, and execution efficiency will improve significantly in the coming months. These adjustments have effectively activated our execution and fighting power. I believe that for a considerable period of time in the future, I will continue to focus on how to achieve many times more energy efficiency and customer value with the same number of people through management, as well as how to significantly reduce the cost of the entire chain through technological and management innovation.”
Marketing System and Product Design: Focusing on Customer Experience
XPeng’s marketing channels are becoming increasingly flat, just like the organizational structure, with the aim of improving service quality while increasing the overall channel profitability and operational efficiency.
XPeng has always used the “self-built direct sales + authorized dealer franchise” model on its terminal network. As of the third quarter of 2022, the total number of XPeng dealerships has exceeded 400, of which about one-third are agency stores. It is reported that XPeng Motor Trade and UDS are managed by different executives, and the two are at the same level in the company’s internal organization. And UDS is nominally responsible for managing all types of XPeng’s stores, so internal friction is inevitable.
Currently, the XPeng Automotive sales district has been revoked, and more than 20 sales sub-districts have taken its place, each of which is directly responsible for the direct sales and authorized dealer stores in the sub-district. The model of combining self-operated stores and authorized dealers is still being promoted and the proportion of authorized dealers is expected to increase in the future.
However, in He XPeng’s view, a large number of small-scale channels do not play a decisive role in increasing car sales, and improving channel quality is the key focus of XPeng’s efforts next. Currently, XPeng’s plan is to gradually increase the functionality of its channels, transforming from sales-oriented to 4S-comprehensive-service channels. A more comprehensive and high-quality service undoubtedly benefits customers the most, also demonstrating XPeng’s attitude and confidence in improving customer service.
Regarding product planning and design, focusing on customer experience is XPeng’s core philosophy. He XPeng pointed out that the company will conduct more design innovations around the values and differentiation that customers can perceive. In order to satisfy XPeng customers’ pursuit of “beauty,” XPeng plans to make changes to the configuration and interior/exterior design of the vehicle models to be launched in the future, unify the modularity and intelligence of the entire car, and pursue more creative interior/exterior design space. In addition, in order to reflect its reform philosophy of customer experience-oriented, XPeng has also set NPS (net promoter score), a measure of customer satisfaction, as one of the KPIs for many business departments to assess and promote reform work.In terms of brand marketing, XPeng will focus on the core differentiators of “fully autonomous driving” to enhance user awareness, expand market boundaries, and deeply penetrate into third- and fourth-tier markets from the current first- and second-tier markets. Currently, XPeng has completed the initial integration of its brand and market teams, and has redefined its overall strategy, which will help XPeng effectively improve the quality, effectiveness, and flexibility of its marketing in the coming months, and significantly reduce marketing costs.
He XPeng said, “We have completed the organizational adjustment of flattened management of the sales network, and are strengthening network layout and improving the training and combat effectiveness of frontline sales staff. This has laid a very good foundation for creating a data-driven sales terminal with decisive capabilities for XPeng Auto and achieving a leap in sales scale.”
Platform and Intelligent Construction: Smart + Systematic Support for Development
At the end of 2022, XPeng established a financial platform, which includes the finance BP department, platform finance department, tax management group, fund management group, and other departments, with He XPeng as the highest reporting object. The main purpose of this move is to improve the refinement level of cost and expense control and the compliance capability of the entire financial system, which also fits He XPeng’s proposal in the third quarter earnings call last year to “strengthen cost control, improve operational efficiency, and streamline investment projects” to push out more new products with limited R&D costs.
It is reported that XPeng will continue to promote systematic car-making this year, and the pure electric platform, electronic and electrical architecture, power system, and intelligent assisted driving will all achieve comprehensive platformization. New car-making forces in the industry have not made much in-depth understanding and investment in platformization. Discrete car-making may also be able to launch some popular models, bringing brands visibility and benefits, but it is ultimately unable to form scale and systems.
Platformization and systematic approach can bring more stable cultural output and clearer brand positioning to brands, which cannot be achieved by just one or two popular models under a brand. XPeng has recognized this, and immediately chose to break and stand up, and dedicated itself to the long-term stable development of the company.
At the same time, XPeng has not stopped its pace of intelligence development. He XPeng said that starting from late March, XNGP will accelerate the deployment of multiple models in Guangzhou, Shenzhen, and Shanghai. Currently, the competitive effect of the new version of XNGP in the industry is still quite considerable. Meanwhile, the R&D of autonomous driving technology is also continuously advancing towards three core directions of scenario coverage, customer experience, and software and hardware costs.Recently, the popularity of artificial intelligence ChatGPT has shown the potential of generative AI models to the world. He XPeng expressed his great expectation to deeply integrate the relevant technologies represented by GPT with various aspects of XPeng Motors business, and to make autonomous driving technology quickly move from L4 to L5, bringing users a truly intelligent experience.
In addition, XPeng’s main new model P7i was officially launched on March 10th, and achieved simultaneous listing and delivery. As an upgraded version of P7, P7i has more advantages in intelligence, appearance, and driving control, bringing XPeng Motors a new vitality. In addition, the new model G6 will also be officially released and delivered at the Shanghai Auto Show at the end of the second quarter of this year. In the second half of the year, a new pure electric 7-seater MPV suitable for family travel with more prominent space advantages will also debut.
Moreover, XPeng is promoting a series of cost reduction plans. Unnecessary marketing costs and R&D costs that cannot create user value will be reduced. He XPeng believes that the company did not do well enough in cost investment control in the past. This year, a goal of reducing electric vehicle costs by 25% has been set, which is also a major adjustment.
As of the end of 2022, XPeng had more than 38 billion yuan in cash on hand, and investment in the two major production bases has been basically completed, and capital expenditures will be greatly reduced in the future. A large-scale and orderly cost reduction in the fields of intelligence, power, and complete vehicles will also be gradually carried out.
EV Says
Compared with those new forces that have encountered setbacks and have never recovered, XPeng can always burst out a magical and never-give-up resilience. For example, since the G9 incident last year, XPeng’s bottom line was completely exposed, but it was also from that time that XPeng quickly embarked on self-redemption, including streamlining product SKUs, and recruiting talents, etc. There is no forever high or low for car makers. Why should we underestimate a XPeng that actively seeks change?
The fact proves that XPeng was misunderstood and refused to sink in the face of setbacks.
Currently, the competition in the new energy vehicle market is becoming more and more fierce, and reform is a necessary means to avoid being caught in the waves and buried. Dare to break and build, this should be the attitude of all new car-making forces. The series of reform measures of XPeng Motors have changed the attitude and confidence. Although it doesn’t seem too enthusiastic at the beginning of 2023, we can still boldly look forward to XPeng’s rebirth.# 这是一个标题
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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.