Author | Yun Ge
Can “Intelligence” Really Work for XPeng Motors When Capital Market Fails?
Going back in time to June two years ago, He XPeng, Li Bin, and Li Xiang gathered together to “recall hardships and seek change”. A month later, Ideal and XPeng successively went public and set off a frenzy in the capital market. For a time, “UXiaoLi” became a learning model for traditional car companies.
However, this situation quietly changed this fall.
Recently, the stock prices of three new automakers have been continuously falling and hitting new lows. As of the US market closing on October 20th, Ideal Motors, XPeng Motors, and NIO all fell by 10%. XPeng Motors’ stock price fell to $7.94, a decrease of 85.9% from the end of 2021 at $56.45, and the latest market value is only $6.843 billion.
Different from NIO’s high-end market positioning with user experience as the priority, and Ideal’s positioning in solving electric vehicle range anxiety, XPeng Motors has been attacking the market with the banner of “intelligence” since its establishment. After years of continuous accumulation and exploration, XPeng Motors has become the vanguard of “car intelligence” in the wave. Especially in terms of intelligent cockpit and intelligent driving assistance system.
With consecutive traffic accidents, sandwiched by competitors in the market, and constantly high R&D costs, XPeng Motors, which has been facing a series of bad news, has entered into a new predicament.
With the popularity of new energy vehicles, more and more automakers are entering the new energy vehicle market, including not only many traditional car companies but also various “big shots” from different fields, such as Xiaomi, Huawei, Apple, and Evergrande, that have stepped into the car-making industry across industries.In the current highly competitive market of new energy vehicles, any company that is serious about developing cars deserves encouragement. There is always a deeper logic behind each round of market adjustment. In the tide of the times, each time a company responds to a downturn is an opportunity for growth. We hope that every well-intentioned reminder from the outside can help XPeng Motors to move forward more steadily and better.
Double Blow
The announcement of sales by new energy vehicle manufacturers always attracts industry attention.
In the first half of this year, XPeng Motors became the best-selling newcomer in the market, with sales of 68,983 vehicles. Its revenue in the second quarter reached CNY 7.436 billion, a year-on-year increase of 97.7%. However, sales began to decline from August. Official data shows that in August 2022, XPeng Motors delivered 9,578 vehicles, a month-on-month decrease of 16.9%. In September, the delivery volume dropped to 8,468, a double-digit decline from the same period last year and the previous month.
The decline in delivery volume led directly to the capital market. Compared with the beginning of the year, XPeng Motors’ stock price has fallen by 80%, and its market value has evaporated by more than CNY 200 billion. As of October 24, XPeng’s stock price plummeted by 12.76%, hitting a historic low. Its stock price has fallen by 85% so far this year, and its market value has plummeted by almost 90% from its peak.
As the investment environment changes, the investment market has shifted from storytelling to focusing on real conditions and paying more attention to corporate profitability.
The decline in sales volume and the fluctuations in the capital market have dimmed the halo of XPeng Motors, the “top tier of new energy vehicle manufacturers,” and also placed it in a crisis of operation.
Data shows that XPeng Motors had a net loss of CNY 4.402 billion in the first half of 2022. Based on its sales of 68,900 vehicles from January to June, it means that the company loses more than CNY 63,000 for every car sold.
Currently, the domestic new energy vehicle industry has entered an era of “battle among titans”. On the one hand, traditional automakers are transforming into new energy vehicles; on the other hand, internet and technology giants are independently developing or cooperating in the manufacturing of new energy vehicles.### The dilemma of “smart” technology
As the flagship model of XPeng Motors, the XPeng P7 initially broke through the monopoly of joint venture mid-to-high-end car market, but with the emergence of competitive models such as the BYD Han, the NIO ES8, and the Changan Uni-K, the P7’s performance has lagged behind. XPeng Motors is facing pressure from multiple rivals including Aiways, NIO, Li Auto, and WM Motor, which has forced the company to directly face the challenge.
XPeng Motors was first successful in attracting consumers due to its AI-assisted driving technologies such as automatic parking. The popularity of the best-selling XPeng P7 was also directly caused by the push of Navigation Guided Pilot (NGP) and the recently launched XPeng G9 has an advanced AI-assisted driving system.
However, technology can bring both benefits and pitfalls.
Dilemma 1: Maturity of technology. For most consumers, smart cars are still a novelty. Confusion about the application scope of functions and errors resulting from shortcomings in the technology of intelligent functions can lead to accidents, casting a shadow over sales. Recently, XPeng Motors has suffered a setback due to accidents resulting from its advanced driving assistance systems, some of which have caused casualties, exposing the limitations of the technology. Most car manufacturers use perception devices such as cameras and millimeter-wave radars in the development stage of advanced driving assistance systems. The deviation of these devices in recognizing object signals can directly cause errors in planning and decision-making algorithms, which can result in accidents. In conclusion, finding a balance between technology and safety is the top priority at this stage.Challenge 2: Acceptability of Costs. High R&D costs have always been an issue that intelligent driving cannot avoid. According to XPeng Motors’ financial report, from 2018 to 2021, XPeng Motors’ R&D expenses increased from 1.051 billion yuan to 4.114 billion yuan. In the first quarter of 2022, XPeng Motors’ R&D expenses were 1.22 billion yuan, a growth of 128.2% compared to the same period last year, and in the second quarter, R&D expenses were 1.265 billion yuan, with a year-on-year and month-on-month increase of 46.5% and 3.6%, respectively. To achieve the construction of the smart car business ecosystem, increasing R&D investment is the only choice. The speed of sensor replacement and the continuous increase in chip demand have all increased enterprises’ R&D investment. Limited by laws and technology, XPeng Motor’s intelligent driving function has not been widely commercialized, and small-scale applications cannot achieve price sharing, making it difficult to see returns in the short term. However, this also proves XPeng Motors’ determination to make efforts in the direction of intelligence.
Challenge 3: Regulatory Tolerance. Currently, XPeng Motors’ NGP function in cities depends on high-precision maps. However, geographic information data is a national strategic information resource, and the current laws and policies have many restrictions on the collection, transmission, storage, and use of automatic driving map information, which involves national interests. In 2021, XPeng Motors acquired Turin Tech with a price of 250 million yuan, hoping to meet their own map needs for intelligent functions. However, according to the progress of the qualification review and certification renewal of high-precision maps updated by the Ministry of Natural Resources in 2022, Turin Tech has not passed the Class A surveying and mapping qualification review.
To both carry the banner of intelligence and lead the trend and make consumers willing to pay is a problem that XPeng Motors’ products urgently need to solve.
“Breakthrough” and Innovation
Under the crisis, XPeng Motors took the initiative to seek changes!
In terms of product layout, on September 21st, the XPeng G9 was officially launched, and the final price was announced. The G9 is XPeng Motors’ flagship model, which undertakes the sales responsibility of XPeng Motors.
The XPeng G9 is equipped with two Nvidia Orin intelligent assisted driving chips, providing a computing power of 508 TOPS. There are 31 sensing components around the entire vehicle, including 2 LiDARs, 12 cameras, 5 millimeter-wave radars, and 12 ultrasonic sensors. In terms of intelligent driving functions, it covers more auxiliary driving application scenarios, from leaving the parking space, driving on city roads, to parking in the final parking space.
For example, the NGP function on highways can recognize and respond to vehicles approaching from the side; the AEB active safety function has been mass-produced onboard in a self-developed form; the storage of cloud data and deep learning of artificial intelligence are key technologies that XPeng Motors relies on to maintain its leadership in the field of intelligence.
In response to the low sales and stock prices, XPeng Motors has also taken multiple changes in its organizational structure.
On October 21st, XPeng Motors made major adjustments to its company operations, organizational structure, and product strategy, establishing five major virtual committee organizations to facilitate communication channels across various business lines and improve collaboration efficiency.
CEO of XPeng Motors, He XPeng, said he will comprehensively adjust the organizational structure, establish five major virtual commission organizations and three product matrix organizations, the former responsible for enhancing the communication and collaboration of various business lines, and the latter shouldering the responsibility of opening up the end-to-end product business loop.Insiders revealed that the direct trigger for this organizational restructuring was the issues encountered during the G9 launch. Initially, on the day of the G9 launch, the unclear pricing and configurations, inability to opt for XNGP (autonomous driving assistant) for all models, and monthly subscription plans were heavily criticized. Subsequently, within 48 hours of the G9 launch, XPeng Motors announced the latest scheme which adjusted configurations, prices, and available options. Although G9 has surpassed some competitors in terms of user experience, there were indeed quite a few internal issues. It is gratifying that XPeng Motors promptly recognized and adjusted the problems.
The bottleneck encountered during development forced XPeng Motors to choose a different path and seek new opportunities. P7 is facing a change of generation, while G9 is still on the road. Whether the company can successfully transform remains uncertain, but for XPeng Motors, there is no turning back, and it must face this challenge head-on.
Commentary:
Technology is a long-term strategy, and it’s undeniable that intelligent development is the direction to pursue.
Production capacity is the foundation of XPeng Motors. Since August, XPeng’s self-built factory in Zhaoqing, Guangdong has started parallel production of P7, G3i, and P5 models. In addition, XPeng’s factories in Guangzhou and Wuhan are expected to be operational within the year.
Self-developed full-stack capabilities are the foundation of XPeng Motors. From the beginning of its establishment, XPeng Motors has always adhered to the technical route of full-stack self-development. XPeng Motors’ “full-stack self-development” refers to self-developed modules not only on the vehicle side, such as perception, positioning, planning, and control, but also self-developed data communication and cloud data full-loop.
Intelligent assisted driving is XPeng Motors’ sharpest weapon. XPeng Motors’ parking VPA and NGP (Navigation Guided Pilot) assistive driving function are both industry-leading.
However, at this stage, what XPeng Motors needs to do next may be how to reduce the cost of sensors, further optimize technical solutions, continuously enhance the competitiveness of products in the market, and strive to grasp the company’s product positioning and consumer needs to launch more applicable and intelligent products.
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.