Author | Tianhui Zhu and Shiyun Zhu
Editor | Kaijun Qiu
China’s new car force has its first EV model with sales exceeding 100,000 units.
On March 23, the 100,000th XPeng P7 was offline, securing this title.
XPeng’s ambition goes beyond that. On March 28th, at XPeng Auto’s annual financial report communication meeting, Chairman He XPeng set a goal for XPeng P7 – to exceed 10,000 units per month in sales.
At the rapid growth of China’s intelligent electric vehicles, it is natural to see the emergence of a new power with cumulative sales of 100,000 EV models. The interesting question is, why XPeng P7?
Why is it: a brand-new Chinese brand, with an average selling price of over 250,000 yuan, a smart and sporty electric sedan?
It must be the product genius behind XPeng P7.
They are not limited by the current products and market situation, but have a keen insight into the hidden needs of the Chinese people:
- Zero emissions, agile driving experience,
- A cockpit as smart as a smartphone,
- And intelligent driving assistance like a “Chinese old driver”.
Why is it XPeng P7’s product manager and not other manufacturers?
Perhaps it is due to the fact that XPeng Auto, led by He XPeng, has grasped the essence of true Internet products – anticipating user needs, precisely defining products, and efficiently developing and supplying, producing, and continually iterating and evolving.
Why did the 100,000th P7 appear at this time?
Because China’s smart car popularization door is opening. And as soon as the door opens, XPeng P7 is right there at the doorstep.
Why…
There are still many “whys” that hover in our minds.
In this article, we will explore the reasons behind the popularity of XPeng P7.
Not just “sincerely” making a sports car, but “greedy for the beauty of a sports car”
When XPeng P7 was unveiled, it looked like a sports car. Before it, Chinese brands did not have a truly popular sports car. Therefore, many people did not expect much from XPeng P7.
For example, Mercedes-Benz CLA and Volkswagen CC are already two well-known sports cars. What about their sales? In 2021, the average monthly sales of Mercedes-Benz CLA is 1,000 units, and Volkswagen CC is slightly better, but still only 1,700 units.
It is really a niche market – it should be noted that the monthly sales of cars like Mercedes-Benz C, BMW 3 Series, Audi A4L and other models in the same price range as Mercedes-Benz CLA and Volkswagen CC exceed 10,000 units.
It can be seen that if XPeng Motors had taken Mercedes-Benz CLA and Volkswagen CC as a benchmark when creating the XPeng P7, even if it met the standards, the sales volume would not be great.
However, XPeng P7 has now exceeded 100,000 units in sales, so what is the key reason behind it?
One critical reason is that during the product definition phase of the P7, XPeng Motors departed from traditional car product design thinking and adopted a method for developing internet products. On the one hand, they observed the changes in user composition, including the rise of Z-generation consumers. On the other hand, they gained insights into user needs and designed their product accordingly.
The XPeng P7 is a model that was launched in the spring of 2020. During the research and development phase, XPeng Motors noticed that car consumers, especially more and more young consumers, have extremely high demands for appearance. Beauty is justice, and this has become a common principle for almost all consumer products.
From this perspective, the XPeng P7 did not “truly” aim to produce a sedan, but rather it was “attracted to the beauty of the sedan” and thus designed to look like one.
The beauty of the sedan – low and streamlined styling – is not easy to achieve on electric cars because the battery cells have a fixed height, which makes it challenging to lower the chassis. Thus, XPeng Motors custom-ordered 110mm-high battery cells to ensure that the XPeng P7 has a low and streamlined design.
In addition, XPeng Motors realized that young users have a strong demand for intelligent car systems. However, problems such as slow updates of map information, car system crashes, and incorrect voice command recognition have always been difficult issues that consumers have criticized. This has been particularly acute in the past two years, and people have found it difficult to tolerate it.
Why have people become so demanding?
Because people have already enjoyed the excellent experience of using intelligent phones. In particular, for Z-generation young consumers who grew up using iPhones and frequently interacted with Siri and Xiao Ai, they cannot understand: why is it that cars costing hundreds of thousands of dollars can’t achieve this?
To create a sedan that pleases Z-generation consumers, traditional car design thinking certainly cannot be applied. Therefore, XPeng Motors created a P7 that looks like a sedan but has a completely different product core. The most critical difference is that XPeng P7 created a brand new intelligent cockpit.
XPeng selected the state-of-the-art Qualcomm 820A intelligent vehicle chip on its smart car hardware, ensuring the instantaneous response of the car machine function. The map information was used as the main interface of the car machine system, and excellent voice interaction was also provided.
What’s more, XPeng designed unique functions for different driving scenarios, such as the navigation voice which can play separately in the main driver’s headrest without interfering with the normal sound playback of the car audio system. The main and co-driver seats can be adjusted on the car machine screen.
What makes XPeng P7 stand out from traditional car companies is that consumers can upgrade their cars’ functionality through OTA upgrade after purchasing, keeping the car fresh at all times. Many car owners exclaimed that each update was like owning a new car.
Ultimately, XPeng P7 has both the sexy and outgoing appearance of a coupe, as well as swift power and handling experience of an intelligent cabin and intelligent driving assistance of the smart era.
XPeng P7 was born at the turning point of the shift to the Z era of car consumption in China and has become a representative product for young consumers expressing new consumer propositions. XPeng P7 launched with a bang.
Chinese intelligent cars, made by Chinese enterprises
XPeng P7 is not the first domestically produced vehicle model to achieve 100,000 units sold. Before it, vehicles such as Hongguang MINI EV and Tesla’s Model 3 and Model Y were launched.
But why do so many people talk about XPeng when it comes to intelligent cars, rather than Tesla?
Let’s ask a different question: What do people who buy Tesla actually buy?
Tesla sells conventional configurations and separately sells automated driving kits. To enjoy the advanced level of FSD active safety feature, additional purchase is required.
However, in China, the purchase rate of FSD by Tesla is only 1-2%; and even the Enhanced Autopilot (EAP) feature is rarely purchased.
What about XPeng? As of the third quarter of 2021, XPeng P7’s XPILOT 3.0 payment rate was almost 22%. At the 2021 financial report conference call, He XPeng revealed that more than 50% of P5 owners chose to install XPILOT 3.0 or XPILOT 3.5 out of a total of 5,030 cars delivered.
Buying Tesla may mean buying an electric car and buying a brand, but buying XPeng means buying intelligence.
If Tesla defined intelligent cars in the United States, then, in China, XPeng P7 is the first image that comes to mind as an intelligent car. Why isn’t Tesla as synonymous with intelligence in China as XPeng?Because the sense of recognition of “intelligence” does not come from reputation or appearance, but from experience.
Take the cabin experience for example.
Compared to XPeng P7, Tesla’s intelligent cockpit can hardly be called intelligent, with poor navigation and little content on the vehicle screen; the voice assistant is not only unaffectionate but also has a low recognition rate. Compared to XPeng P7’s intelligent cockpit, which uses China’s best Amap navigation and works with voice assistant Xiao P developed by iFLYTEK, the recognition rate is high and the feedback is fast. The entire cabin experience not only surpasses Tesla but also serves as a benchmark for other new forces.
The cabin is the most perceptible part for consumers. It is not only limited to the driver, but also family members are very aware of the level of intelligence in the cabin. As it involves many interactions and local content, the intelligent cockpit is a product that naturally emphasizes localization. This is of course XPeng’s advantage.
Taking the voice assistant as an example, although XPeng cooperates with iFLYTEK, functions such as semantic parsing, recognition enhancement, semantic noise resistance, semantic interruption, and natural language processing are independently developed by XPeng.
Even XPeng P7 supports dialect recognition. How is this possible?
For example, XPeng collects spoken language data that contains dialects but is primarily in Mandarin, and gives it to suppliers to improve the voice system, so that Xiao P can successfully recognize some dialects. Tesla is far from doing this.
In terms of intelligent cockpit, XPeng is superior, but in terms of intelligent driving experience, XPeng is no worse than Tesla.
The reason why Tesla’s FSD has a low installation rate in Asia-Pacific is that the experience outside of the USA, and even in California, is not as good as it claims to be.
In fact, intelligent driving is not an invention, but a practical application of technology. It requires repeated training to gain wisdom. However, Tesla has not done as much testing in China as XPeng has.
Moreover, with the experience of XPeng G3, the XPeng P7 intelligent driving architecture design fully considers the peculiarities of the Chinese market.
With this goal in mind, XPeng P7’s cameras are arranged with different accuracy and positions for Chinese scenes; and the usage of centimeter-level high-precision positioning units helps P7 adapt to GPS signal losses in major Chinese cities full of high-rise buildings. The first onboard high-performance computing platform for vehicles, NVIDIA’s Xavier, provides up to 30TOPS of computing power to support this powerful sensing and decision-making system.
Currently, XPeng’s XPilot has achieved many firsts and records, including being the first in China to support highway navigation-assisted driving (high-speed NGP) function, the first to truly let car owners experience the convenience of automatic parking, and the first to support cross-story memory parking-assist driving system.
It is worth mentioning that the first OTA upgrade of XPeng P7 this year has further strengthened and enriched the most core VPA Memory parking function in version 2.6.0 released in June 2021. According to the special situation of the Chinese market, it has realized the “Parking along the Way” and “Route Sharing” functions that users strongly perceive. This parking system is the perfect combination of intelligent technology and local characteristics, which best reflects the advantages of XPeng in China in building smart cars.
The “Parking along the Way” function supports parking in non-fixed parking spaces, allowing consumers living in old residential areas to experience the Memory parking function. This scenario is difficult for foreign car companies to capture.
From the full-scene voice interaction system, to the high-speed road navigation assisted driving, to the VPA Memory parking, XPeng has always been the industry benchmark in creating intelligence. And XPeng P7 is the model of these new functions, making it the most intelligent car in China and the benchmark of Chinese smart cars.
Experience from 100,000 vehicles production
For traditional automakers, it is not a big deal for a single model to cross 100,000 vehicles, but for XPeng it is a major milestone.
Why?
Automobile manufacturing is already very complex and difficult, and is the crown jewel of the industrial chain. The automobile industry needs to be strong to be considered an industrial strength in the world.
For new automakers, crossing the large-scale production barrier is even more difficult.
XPeng initially adopted the model of outsourcing to Haima Auto, and later built its own factory in Zhaoqing, Guangdong. In addition to the usual supply and production challenges, XPeng’s factory faces a lot of challenges.
The core difficulties are lack of batteries and chips.
During the sales growth of XPeng P7, several key time points for mass production are worth reviewing.
In the second half of 2020, battery shortages began to spread. XPeng’s team made two preparations: one was to launch a version of P7 with lithium iron phosphate batteries in March 2021, and the other was to choose to increase multiple power battery suppliers to diversify and satisfy the demand for power batteries.Then “chip famine” struck again. Due to the impact of the epidemic, there was a serious supply shortage of car chips in 2021, resulting in production suspension for major global car companies such as Toyota, Volkswagen, and Ford due to chip reasons, but the XPeng P7 was not greatly affected.
After facing multiple challenges such as scarcity of production capacity, battery, and chips, XPeng Motors’ operational capabilities have withstood the test and achieved a steady increase in XPeng P7 sales, leading XPeng Motors to form a scale effect.
Scale effect has always been the money-making method of the automotive industry. The production and sales volume not only accumulates profits, but also represents industry status and bargaining power.
An example is in the power battery field. XPeng Motors has multiple power battery suppliers, one of which has publicly disclosed financial information showing that its battery gross profit margin is only 5.5%. It can be said that XPeng has “squeezed” this supplier well.
From the financial report, it can also be seen that XPeng Motors’ team has achieved results in scaled operations. The gross profit margin turned positive for the first time in 2020, and by the fourth quarter of 2021, the gross profit margin had reached 12%, proving that the scale effect has gradually become apparent. At the 2021 financial report conference call, XPeng Motors also set a long-term gross profit margin target of over 25%.
Scale advantage is not only reflected in the upstream supply chain level, but also in the downstream consumer end.
The competition of the next stage of smart electric vehicles is not about hardware or algorithm, but about data scale. After XPeng P7 reaches a scale of 100,000 vehicles, XPeng G3 has also reached a scale of 50,000 vehicles. The combined 150,000 smart electric vehicle ownership will make XPeng have the largest scale of auxiliary driving system data and intelligent cockpit experience data. Compared with other manufacturers, XPeng Motors has already taken the lead.
Utilizing this data will improve XPeng Motors‘ position, causing downgraded strikes against other models in future competitions.
The more individuality, the more XPeng Friends
Consumers’ demand for individuality is essentially self-recognition.
In today’s era, consumer demand has never been so diverse, and information reach has never been so rapid. This era’s consumers need new products that can demonstrate their self-expression.
On March 23, when XPeng P7 reached 100,000 production, XPeng launched the P7 562E Black Label Edition, which is a commemorative model for XPeng P7’s mass production of 100,000 vehicles. This model is also a new version launched to meet consumer needs for personalization.
# P7 562E Black Label Edition: a More Personalized and Niche Version
Compared with the regular version of P7, P7 562E Black Label Edition is more distinctive and niche – it is only available on P7 four-wheel drive performance models, equipped with a black night car color, cool black exclusive theme intelligent music cockpit, rear privacy glass, and a series of black decorative kits to create a high-performance vehicle with an all-black theme.
Why did XPeng promote P7 562E Black Label Edition – a hard-to-remember car name?
In fact, it is no longer the era of “good wine also fears deep alleys.” As long as the wine is good enough, not only can the local drunkards come in swarms, but even the wine lovers from thousands of miles away can order remotely until the wine is sold out.
Nowadays, XPeng P7’s sales momentum continues to grow. According to XPeng Automobile’s financial report information, P7’s sales volume continued to grow in the first two months of this year. It is precisely because of this that He XPeng dared to set the flag of monthly sales of 10,000 P7s at the financial analysis meeting.
The process of XPeng P7 growing from being niche to popular is the process of answering many questions. Among them, there must be many difficulties.
However, smart cars have entered the popularization stage, and small tracks have become the main track, which presents an unprecedented opportunity for XPeng Automobile.
After achieving the achievements of producing 100,000 vehicles and selling 10,000 vehicles per month, XPeng Automobile’s task will be to continuously create popular models.
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.