Author: Su Qin

On October 1st, the top 5 new energy vehicle manufacturers released their sales data for September, as usual. The biggest change in September was the continued overall decline of XPeng Motors for three quarters, which has fallen to fifth place, marking the end of the top 5 new energy vehicle manufacturers. It’s worth noting that NETA, which surpassed XPeng and became the champion of new energy vehicle sales in July, had sales exceeding 18,000 vehicles in September, nearly twice that of XPeng during the same period. So what happened to XPeng Motors?

Magic spell of gross margin

In the market, XPeng is under pressure not only from NETA and Zero-run catching up but also from a wide-ranging public opinion. This includes concerns about the high opening but low performance of deliveries this year, “return goods-gate” incident of XPeng G9, falling stock prices, and other factors that have made the surrounding environment very unfavorable to the company’s development.

The fourth quarter of last year was a highlight for XPeng Motors, with deliveries reaching 41,751 vehicles. In the first quarter of this year, the number fell to 34,561, a decrease of more than 7,000 compared to the previous quarter. Despite the stimulus of automobile consumer policies in the second quarter, XPeng Motors’ sales did not ease, with deliveries of only 34,422 vehicles, a slight drop compared to the previous quarter. However, in August and September, XPeng Motors delivered less than 10,000 vehicles, and sales were somewhat disappointing.

Moreover, the low gross margin is also a major pain point for XPeng. The interim report for 2022 from XPeng Motors showed that the company not only has a large loss, but also a relatively large loss in revenue growth. XPeng Motors explained that the increase in battery costs has partially offset the revenue increase brought about by sales price adjustments.

Looking at the three major players in the “XPeng, Xpeng, and Li Auto” alliance, only XPeng is taking the “cost-effective” route. This has also led to lower gross margins compared to the other two automakers, leaving a limited cost space for XPeng to compress in terms of product pricing.

Speaking of “cost-effectiveness,” we have to mention NETA and Zero-run, the dark horses that surpassed XPeng this year. The data shows that NETA’s total deliveries from January to September 2022 reached 109,784 vehicles, surpassing XPeng to become the sales champion of new energy vehicle manufacturers. Zero-run delivered 87,602 vehicles from January to September 2022, ranking third.

Looking at the development history of these two companies, “XPeng, Xpeng, and Li Auto” relies on innovation and market understanding, while NETA and Zero-run combine innovation with capital, leaving them with greater development space. However, the former has to consider digesting inventory before launching new models, otherwise it will be difficult to develop new models in the next wave. In addition, the elimination rate of new energy vehicles is relatively high, so if inventory is too large, the risk of debt will be very high.From the specific data, the ideal gross profit margin is higher than XPeng Motors. The ideal gross profit margin for the first half of this year was 22.09%, while XPeng’s gross profit margin for the first half of this year was 11.6%, and the gross profit margin for the second quarter was 10.9%.

The decline in gross profit margin is good news for users but means losses for car companies. High profits ensure that car companies have funding support for research and development and sales. However, deliberately maintaining a high gross profit margin may not be a wise move for the fast-growing new energy market. For leading new forces such as XPeng, the top priority is to strengthen their systems, dig deeper into their moats, and make positive preparations for the next stage of the competition.

“Intelligence” is the cornerstone of survival

As a representative of new forces in the automobile industry, “intelligence” is a label shared by “Weltmeister” and other new car companies, but there are significant differences in the market among the three.

NIO provides “caring” services for car owners, winning high-end premiums. The ideal range solves the user’s “mileage worry” and provides a “dad’s car,” targeting the high-end market. In contrast, XPeng has insisted on fully self-developed technology from the very beginning and has always emphasized its “black technology” in electrification and intelligence.

According to XPeng’s financial report from August this year, since 2018, XPeng has invested more than CNY 11 billion in research and development. Recently, Guangdong XPeng Automobile Technology Co., Ltd. has had changes in its business information, increasing from CNY 20 billion to CNY 30 billion, a 50% increase.

The magnitude of the increase in capital injection shows XPeng’s determination to continue to “burn money” on technology.

XPeng has certainly done an excellent job in self-developing technology.

In 2019, XPeng G3 had xpilot2.5 automatic driving assistance function;

In 2020, XPeng P7 equipped with high-speed automatic driving and 360-degree sensors for xpilot 3.0 achieved mass production;

In 2021, xpilot 3.5 will have high-speed automatic driving and parking capabilities in the parking lot, as well as the ability to change lanes independently;

In 2022, XPeng G9, equipped with the xpilot 4.0 driver assistance system, will be launched.

Not only that, on June 27th this year, He XPeng himself conducted a “test” and gave candid comments on the shortcomings of his own NGP, such as “does not turn right when it should” and “in fact, I think this logic is wrong”. He implied that there is room for improvement. Of course, compared to other similar products, XPeng’s intelligence is still commendable.

Recently, He XPeng stated that he test drove the R&D version of the next ota of P5 urban NGP and highly praised it: driving for a full hour with 0 takeovers, smooth and safe, feeling reliable and not nervous. He truly experienced the convenience of high-level intelligent assistant driving when going to and from work for the first time. He also mentioned that they will launch this function in some cities in the first half of next year, including on MAX models such as G9, and work hard to launch the enhanced xngp function in major cities in the second half of next year.

It must be said that XPeng’s next version of the urban NGP is very impressive, and he is also responsible for the technology control.

G9’s debut was not a success. Although it occupied the hot search, many consumers criticized it as “high-end and low-priced,” leading to a continuous decline in XPeng’s stock price.

From a technical point of view, XPeng G9 is the first mass-produced model in China equipped with an 800V high-voltage Sic platform, and its charging efficiency is better than that of models with a 400V platform. The G9 4C version only takes 15 minutes from 10 to 80% charge, and when paired with XPeng S4’s ultra-fast charging pile, it can charge for 5 minutes and travel 200km.

At the same time, the new intelligent assistant driving system is also a major highlight of the G9. The high-end version of XPeng G9 will be equipped with the second-generation XNGP intelligent assistant driving system. Based on this system, XPeng G9 can achieve full coverage of various daily driving scenarios such as high-speed, urban expressways/main roads/auxiliary roads, and parking lots. He XPeng considers it as the “first intelligent driving system covering all scenarios in the industry.”Because there are too many models and versions, the G9 has three sub-series after G9, namely G, E, and X, with different optional configurations, which also makes it difficult for consumers to choose when buying a car. In addition, configurations such as wireless charging for phones, 5D music cockpit, 800V super fast charging, millimeter-wave radar, and advanced cameras need to be selected.

On September 23, He XPeng said in an interview: “At present, XPeng has cooperated with several battery suppliers, including EVE Energy and Zhongchuanxinhang. CATL is no longer the largest supplier.” This statement has also been questioned by the market.

This shows that XPeng’s battery safety level has decreased from “PPB” to “PPM”, which seems to be contradictory to the statement that XPeng G9 has become the “best SUV under 500,000”. Netizens expressed various opinions, saying “I only see that the price is a luxury benchmark” and “the promotional selling points are not standard configurations, and blowing the configurations to the sky requires additional money.” Within 24 hours of opening pre-orders, the number of orders for XPeng G9 exceeded 20,000, but there were also many cases of cancellation of orders.

Faced with consumer dissatisfaction, XPeng also said in an interview with industry media that “we will immediately rectify and re-evaluate the pricing within 48 hours to ensure that everyone is satisfied.”

While XPeng Automobile is trying to make up for its “mistakes,” Ideal seizes the opportunity to “take advantage.” The Ideal L8, originally scheduled to be released in November, was released on September 30 with a price below 400,000 yuan. Its positioning coincides with XPeng G9, which inevitably invites comparisons. On that day, Li Xiang, CEO of Ideal Automobile, also praised a car blogger’s poll on Weibo, which showed that 80% of people thought XPeng G9 was better than expected.

For XPeng G9, the delivery time will start from Q4, while the Ideal L8, L7, and L9 will inevitably form a siege against XPeng G9. If the sales of XPeng G9 do not meet expectations, the development of XPeng Automobile will be hindered for a long time.

Electric power has something to say:

As expected, XPeng Automobile’s growth in annual deliveries this year is expected to increase by about 33%. Although it is still in a growth trend, compared with other new forces, especially NETA Zhiling and Zero Running, XPeng can be said to be falling behind.

So, is XPeng not working hard enough?We can see that He XPeng is still vigorously promoting XPeng, and the product manager of the new force is becoming more and more popular. With He XPeng’s effort, the attention paid to XPeng will not be reduced. However, although CEO He is working hard, the XPeng team seems to be less efficient and always encounters some hiccups. For example, the price reduction of G9 after its launch was unheard of before, and such a bleak start has also cast uncertainty on the future of G9.

The problem of XPeng’s product definition, which erupted from the price reduction of G9, is actually a chronic disease of XPeng. From the earliest G3 to G3i, and then to about 20 models of P7, as well as P5 with laser radars installed off-center, they have caused controversy in the industry.

Compared with products of the same level such as NIO ES6, XPeng G3i and P5 have certain advantages in attention. However, their actual performance is always inferior, and the product power problem, including product definition, has become a key issue. It’s hard to imagine that XPeng has a super product manager like He XPeng, but the product problems of XPeng are not small, which is truly puzzling.

At the age of eight, XPeng has already won the preliminary race. How to win the more competitive elimination race is a question that XPeng still needs to optimize internally. If it is successfully resolved, XPeng will officially establish itself in the field of automotive industry. Otherwise, XPeng’s future may be in jeopardy.

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.