Author: Zhang Yi
The old nest was once home to mud-swallows, but now they have risen to the top as phoenixes on the branches. The rising new forces, represented by Xiao Li, who grew up in a skeptical and even negative voice, are still struggling with their own difficulties without turning into phoenixes. However, compared with NIO’s luxurious positioning with plenty of money, XPeng Motors has lagged behind in the “black horse” status of the family SUV market sold with popular ideas.
In terms of sales, as of the first three quarters of this year, XPeng Motors has sold 98,600 vehicles, while the annual sales target is 250,000 vehicles, and currently only about 40% of the target has been completed. In October, XPeng Motors sold only 5,101 vehicles, almost half of September’s 8,468.
According to the XPeng’s financial report for the first half of the year, the revenue for XPeng Motors for the first half of the year was RMB 14.891 billion, and the net loss reached RMB 4.402 billion, with a gross profit margin of 11.55%, while during the same period, the ideal gross profit margin reached 22.09%.
In the capital market, as of October 28, XPeng Motors’ stock price in the US market was $6.89 per share, which has evaporated 90% of its market value compared to its peak. The Hong Kong stock market is similarly not optimistic. As of October 28, XPeng Motors’ Hong Kong stock price was HKD 26 per share, which has lost 76% of its market value compared to its peak.
The situation is already critical. However, on September 21, the release of G9, a heavy vehicle model that XPeng Motors used to increase its gross profit, not only failed to relieve the urgent situation, but also exposed the internal organizational problems of XPeng Motors as well as the external market issues, pushing XPeng Motors to the forefront of public opinion at once.
CentralizationAll the long-standing problems piled up together, which eventually pushed He XPeng to take action. On October 21st, XPeng Motors released a company-wide email announcing the establishment of five virtual committees and three product matrix organizations, collectively known as the “53 Movement,” marking the largest organizational restructuring in the history of the company.
The five virtual committees include the Strategic Committee, Production and Regulations Committee, Technical Planning Committee, Production and Marketing Balance Committee, and OTA Committee. The three product matrix organizations consist of the E platform product matrix, F platform product matrix, and H platform product matrix (as shown in the following figure).
For XPeng Motors, the “53 Movement” is a major revamp that brings about significant changes. It is understood that previously, XPeng Motors suffered from severe departmentalism and organizational chaos, with ambiguous responsibilities plaguing the company. It has previously occurred that customers were bombarded with no less than 14 calls from different departments of XPeng Motors after they encountered problems while using the supercharging station, turning efficient after-sales service into malicious harassment.
Through the “53 Movement,” XPeng Motors has linked all its business lines, clarified responsibilities, and improved operational efficiency. Most importantly, He XPeng has taken control of the important business lines of strategy, production and regulations, technology, and products, completing centralization of power.
Despite the negative impact of the G9 incident on XPeng Motors, it forced the company to undertake self-revolution and allowed He XPeng to gain the opportunity to deeply control the company through organizational restructuring.
Throughout the incident, He XPeng, as the boss, suffered a great deal but also benefited the most. On the other hand, his responsibilities have also increased.
Pushing Oneself to the Limit# Reflection on He XPeng’s Management Experience
As He XPeng’s role diversifies at XPeng Motors, he is burdened with increasing management responsibilities. However, he has expressed that he doesn’t enjoy management and is not suited for it.
Looking back at He XPeng’s past, we can see a glimpse of why that is. In 1999, He XPeng graduated from the Computer Science major at South China University of Technology and later worked at the branch of Asiainfo Technology (China) Co., Ltd., where he served as a technical manager, test manager, and project manager.
The rest is history: He XPeng founded UC Web in collaboration with Liang Jie in 2004 and was responsible for product strategy. In 2006, Yu Yongfu joined UC Web as Chairman and CEO, freeing He XPeng to play an even more aggressive role as product manager.
Until 2014 when UC was acquired by Alibaba and He XPeng became the President of Alibaba Mobile Business Group and Chairman of Alibaba Games, he had not accumulated enough experience managing a large enterprise.
After joining Alibaba’s senior management team, however, He XPeng lost the spotlight as UC was not the core business of Alibaba, a move that He XPeng himself explained: “You can’t enter the company’s business and territory without in pull.” Naturally, his management skills during this period did not improve substantially.
This also explains why after investing in XPeng Motors in 2014, He XPeng has been searching for a suitable CEO for the company, even after officially joining the company in 2017. It’s because He XPeng himself doesn’t enjoy management and lack the necessary management experience and skills.Not only that, with his professional background in IT and years of experience as a product manager, XPeng He unconsciously brought in a “technologically biased” attitude. This can be seen from XPeng’s first production car G3.
As cars become more connected, they are gradually transforming from vehicles that transport people or goods to intelligent mobile spaces that connect everything. XPeng He sensed this change early on and believed that cars should follow the path of smartphones. Taking pictures is an essential part of this.
Therefore, a 360-degree panoramic camera appeared on the roof of G3, which could be raised to take photos while the user is driving. Although this design was avant-garde, it turned out to be useless with extremely low usage frequency after it was delivered. Therefore, this design that affects the appearance and increases the cost was removed after the release of G3i.
It can be seen that this “technologically biased” attitude can cause XPeng’s cars to seriously deviate from the actual needs of users, ultimately resulting in a situation where the form of the product outweighs its content.
Moreover, XPeng’s cars do have some innate deficiencies in meeting user needs.
As we all know, Libin was the owner of Yiche.com and Li Xiang was the owner of Autohome.com, both of whom had a large amount of user demand data. Although XPeng, Weixiao and Kengzi are all companies under the background of internet enterprises, only XPeng He has no experience in the automotive industry. He doesn’t even know much about cars and is just someone who is crazy and obsessed with internet technology, and is pursuing life values and passion through the new energy vehicle racing track after achieving financial freedom.
Now that the arrow has left the bow, after going all in on making cars, there is no turning back for He XPeng. As the CEO and Chairman of XPeng Motors, he must break free from the comfort zone of the former product manager, get rid of the one-sided wish for technology, and stand on a higher level of management to think about how to make the company more resolute and far-sighted from a strategic perspective.
Of course, when making this role change, he must go through unimaginable pains. But He XPeng has reached the point where he must force himself again.
CEO and Chairman
With the enrichment of XPeng’s product portfolio, market competition becoming increasingly fierce, the adjustment of XPeng’s organizational structure is inevitable, and the G9 incident only accelerated this process. After the “5-3 Campaign” adjustment, XPeng’s operational efficiency will undoubtedly be significantly improved, and the rest will depend on He XPeng as the CEO and Chairman.
In fact, the issues with XPeng Motors’ organizational structure were raised by He XPeng in an internal email sent in February this year, entitled “Make Cars with Hot Blood,” covering issues such as whether the organization is too large and whether external procurement has been carefully evaluated, among other management problems. The campus recruitment in May and the adjustment of the sales management department and network development platform in June were a series of subsequent actions.
Although He XPeng had long been aware of the problem, the conflict caused by the organizational structure had not reached the threshold that XPeng Motors could bear, so He XPeng, who recognized that he is not good at management and does not like it, has yet to pursue radical reform in the organizational structure until the G9 incident completely surpassed that threshold.
Once the threshold is exceeded, it is time for XPeng Motors to change. All the changes in organizational structure or system are ultimately resolved by people. The fundamental problem with XPeng’s organizational structure stems from this.Many employees who have resigned from XPeng Motors have complained about the multitude of factions within the company, causing severe internal friction. There is one faction of XPeng Motors veterans, one faction of employees hired from phone companies like Huawei and Xiaomi, another faction of UC former employees of founder He XPeng, and yet another faction of people poached from traditional car enterprises. With different backgrounds and beliefs, these factions naturally created a splintered organization within XPeng Motors’ centralized structure, resulting in a situation where the party is suppressing dissidents and only the views of the leadership are tolerated.
However, now that the company’s business lines have been straightened out, the small cliques that formed within the company have gradually been disbanded. With clear job responsibilities and consistent work goals, it has become easier for He XPeng to unite his various business lines.
Furthermore, for a young company like XPeng Motors, which has grown from just over 5,000 employees to about 15,000 in the past year and constantly poaches talents from other companies, it is easy for employees to continue to act based on the concepts formed in their previous employment, even in the absence of a fully established corporate culture that integrates every employee’s thoughts and emotions. This creates a chaotic situation.
The significance of He XPeng regaining his power lies here.
In the turbulent situation of XPeng Motors, if it is to avoid capsizing, it is necessary to ensure unity from top to bottom. At this point, He XPeng, who is at the center of a somewhat authoritarian organizational structure, is more likely to put individual will and thoughts into the minds of the collective, so as to form a corporate culture with a distinctive He XPeng character. “Ideology” must be uniform in order to improve efficiency and get out of this predicament as soon as possible.
After eight years of hard work, XPeng Motors has reached a turning point in its development. Regardless of He XPeng’s management preferences or suitability, if XPeng Motors is to avoid a downturn, He XPeng has no choice but to move forward head-on.
The Voice of Electric Power
Based on He XPeng’s extremely limited management experience, although he claims he is not good at management, he hasn’t really been focused on management, so we can’t currently say that he cannot manage or that his management skills are poor.After He XPeng gained further control over XPeng Motors, the future of the company almost entirely depended on him. Under high pressure, it remains to be seen whether He XPeng’s amazing managerial ability can shine through.
However, it is precisely because of this that the future of XPeng Motors appears even more unpredictable.
Today, He XPeng is the absolute center of XPeng Motors internally, and the focus of public opinion externally. The path of XPeng Motors’ future depends entirely on He XPeng.
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.