Xiaopeng wants to "gamble" again.

100,000-word article: The Unexpected Rise of MPV Models in the Chinese Auto Market

Author: Chai Xuchen

Surprisingly, the last few months of this year have seen the rise of MPV models in the domestic car market, which used to be relatively unpopular. This trend has also extended to the 2023 Guangzhou Auto Show.

Models such as the "million-level" Volvo EM90, the 2024 Landtu Dreamer, GAC Trumpchi E8, Wei Pai Gaoshan, Lexus LM 500h, Hechuang V09, Buick's limited edition Century Yunshuiyin, Tengshi D9 Founder Edition, and Volkswagen ID.Buzz have all taken the stage to compete.

However, the most eye-catching presence is the pre-launch appearance of the all-electric MPV models - Xiaopeng X9 and Ideal's "locomotive head" MEGA. Not only did they attract a large crowd at the exhibition booth, but they also caught the attention of industry leaders such as Mercedes-Benz and Buick.

In the eyes of most people, MPV models, which are not mainstream, are more closely associated with commercial use and have limited relevance to daily commuting and household scenarios. Moreover, the large size of over 5 meters in length makes them more challenging to drive and reduces driving pleasure. According to data, MPVs only accounted for a modest 5.7% market share in the first ten months of this year.

Industry insiders point out that MPVs are an extension of the mid-to-large-sized high-end SUV market. After the success of the G9 and G6 models, Xiaopeng aims to enter the high-end market again with the X9, priced at only 400,000 yuan, and challenge popular models like Ideal's L series.

In a post-show interview, Huang Honglin, the General Manager of Xiaopeng's Product Marketing, candidly told Wall Street News that the MPV market appears niche because there hasn't been a disruptive product yet, and Xiaopeng aims to be that disruptor. Chairman He Xiaopeng has high expectations for the X9, hoping it will become the leader in the all-electric MPV market, surpassing even Ideal's MEGA.

Xiaopeng's confidence is not unfounded, as he was equally confident when the G9 was launched last year. Fortunately, the X9, with the lessons learned from the past, has a more cautious and focused positioning, firmly targeting family users.

Huang Honglin also stated that Xiaopeng's sales in the second half of the year have been steadily increasing, thanks to a clearer product strategy, which is one of the most important lessons learned from last year's turmoil.

Therefore, although Xiaopeng has equipped the X9 with rear-wheel steering, the "ultimate intelligent driving architecture" XBrain, the all-domain 800V platform, and debuted black technology such as "XOS Tianji" smart cabin, these decisions were made after careful consideration of the needs of family scenarios.

On the other hand, as the first model of the X series, the "X" logo also hints at Xiaopeng's intention to establish a new high-end product line and become an important contributor to the company's profit margin recovery. With its cutting-edge technology, the X9 is poised to play a significant role in the second half of the company's plan.

It can be said that the debut of the X9 is an important validation of Xiaopeng's self-transformation over the past year. Although Xiaopeng has already shown signs of recovery in the third-quarter report, the success of the X9 will still determine whether it can fulfill its mission of rebirth and set the tone for future positive cycles. And in the midst of the competition, there are also strong competitors such as Ideal MEGA and Volvo EM90, who have their eyes on the high-end pure electric MPV market. How will Xiaopeng drive this new flagship named "X" to break through the waves again?

The following is a transcript of the conversation between Wall Street News and Xiaopeng Automotive's Vice President of Marketing, Yi Han, and General Manager of Product Marketing, Huang Honglin (edited):

Q: What is Xiaopeng's sales expectation for the X9?

Huang Honglin: Many people have asked me this question. The sales expectation is actually very simple. He Xiaopeng has also said that he wants to become the number one pure electric MPV. No matter how much others sell, I will still be the first. We have prepared for production and marketing according to this standard.

Q: When will the deliveries start?

Huang Honglin: Bulk deliveries will start in January next year, not just a few at a time.

Q: What is the expected user profile for the X9 during the product development process?

Yi Han: When we were developing the X9, we found that in many cities, especially in large families with many second or third children, including elderly people, the demand for six or seven-seater vehicles emerged more than a year ago.

In addition to age and city-level distribution, in terms of the family's car usage attributes, the positioning of the X9 is for self-driving, not the traditional MPV that requires a driver.

So He Xiaopeng spent a third of the time focusing on the third row and the trunk. The research on this product is precisely because we have grasped the consumer insights and differentiated ourselves from the majority of MPVs on the market.

Q: What is the proportion of new user purchases and upgrades in the MPV market?

Huang Honglin: First of all, in terms of the characteristics of MPVs, the proportion of new purchases and upgrades for this vehicle is definitely relatively high, not only in the field of intelligent electric vehicles, but also in the traditional fuel vehicle field.

For pure electric vehicle users, the proportion of new purchases and upgrades is also higher than that of the same level. So our expectation for new purchases and upgrades for the X9 is also very high, higher than the P7 and G6 models.

Q: MPVs only account for 4%-5% of the entire passenger car market. Is the market share that Xiaopeng's pure electric MPV currently faces not enough?

Huang Honglin: In fact, in 2014, when He Xiaopeng decided to do the pure electric vehicle business, this market was almost non-existent. We believe that there are still no good products to break through the current MPV market.

After deciding to make MPV products, we considered industry predecessors, such as the Jike 009 and the Tengshi D9. They have iterated a part of the original commercial MPV market with new energy forms and intelligent direction.

In addition to commercial MPVs, there is also the market for family MPVs. Traditional models such as the Odyssey and the Serena also have opportunities. We are seizing their market through the iteration of new energy and intelligence.

Q: Compared with MEGA, what are the key points that make the X9 particularly appealing to users? ** 黄泓霖:** X9 may be more user-friendly for drivers. It comes with rear-wheel steering as standard, and I believe its flexibility is superior to that of the G6. When driving it, you wouldn't think it's a large car approaching 5.3 meters. On the other hand, intelligence is also a strength and core competitiveness of the Xiaopeng brand.

Q: How do you view the head-on competition between the X9 and MEGA this year?

** 黄泓霖:** MEGA is also a very strong product. It's called the "Highway High-Speed Rail," and we call it the "Starship of Tomorrow." In fact, they are quite similar, so the similarity between the two cars is very high, and there will inevitably be overlapping customer groups.

In fact, in the current pure electric MPV track, we feel that there is no very strong product that can make this track wider and broader. Before this, there may only be the extremely popular 009, which sells one to two thousand units per month. But we have the ability and strength to do such things.

I think the X9 and MEGA complement each other. I believe that the two models work together to open up and expand the market for intelligent pure electric seven-seaters, providing better intelligent products in the pure electric MPV and household MPV fields.

Q: Some consumers feel that the starting price of 388,000 yuan for the X9 is a bit high. What is the pricing logic behind it?

** 易寒:** As a company, we also need to consider our own operations. Whether it is a joint venture brand or a foreign brand, we have also looked at the prices of previously released pure electric MPVs. We will definitely be a strong competitor.

So, together with other products, we will expand this market, awaken consumer awareness, provide more diverse choices for users, and make users more familiar and enriched with usage scenarios. This is a great opportunity for the X9 to grow in the market, not just based on price alone. There are many MPVs cheaper than the X9, but how well do they sell? It's not necessarily that low prices can disrupt the market.

** 黄泓霖:** We have equipped the X9 with features such as dual-chamber air suspension + CDC, rear-wheel steering, zero-gravity seats, and seats with a central aisle. In fact, the functionality of the second and third rows, including the one-touch folding function, is available across the entire lineup. These are all real configurations that require cost optimization.

In the future, in a highly competitive landscape, relying on selling cars at a loss is definitely not sustainable. How can we achieve better products and experiences at a lower cost? It is through technological iteration and breakthroughs.

For example, the G6 is equipped with technologies based on the entire Fuyao architecture, such as CAB, integrated die-casting, and XNGP platformization. The platformization rate of the Fuyao can reach over 80%. So, all of these can bring continuous cost reduction and provide users with a better experience.

Through these competitive means, we hope that we can survive and thrive in the future elimination rounds.

Q: The X9 is Xiaopeng's attempt to move towards the high-end market amidst a price war. How does Xiaopeng achieve high-end positioning? ** 黄泓霖:** I think the first point is to grasp the needs of these people. I believe that the reason why other MPV models failed to break into the high-end market before is that they didn't capture the user's needs.

It's not about adding gold bars or tiger skins, it's not about putting up a big billboard at Beijing or Shenzhen airports, or having Liu Dehua endorse it to make it high-end. In Xiaopeng's view, it's not this kind of logic.

We believe that word-of-mouth is more crucial. How does this car actually perform? Will it be recommended to users? We have a very important KPI internally, which is NPS (Net Promoter Score). You may not buy it, but will you recommend your friends to experience and own this car? This is what we need to continuously do. Truly improve the user's word-of-mouth through experience and then gain word-of-mouth spread.

Q: Will Xiaopeng have more cars named "X" in the future? Will "X" become a symbol for high-end products?

Yi Han: You're right.

Q: As a completely new series, will X series continue to follow the nesting doll approach like MEGA?

** 黄泓霖:** First of all, Xiaopeng has never been too focused on nesting dolls. We used to have different designs for different cars in terms of appearance and interior, but now we are gradually converging. From a product perspective, we were too divergent before, which is not good. I think we should converge back a bit.

Q: From last year's low sales to this year's continuous growth, what did Xiaopeng do right?

** 黄泓霖:** From October last year to this year is a complete year. In this process, Xiaopeng has gone through many changes and transformations, which were definitely tortuous and painful.

In my opinion, the most important thing is that there have been significant adjustments and transformations in the product strategy.

For example, for a seven-seater MPV, if it is for both family and commercial use, many functions cannot be very prominent, and if it is for both, it cannot be obtained. So I think we need to be more focused; for example, G6 is also a phenomenal product this year. It has added so many technological architectures, but the cost is still very well controlled. With a price of just over 200,000 yuan, it is actually because it has accurately targeted the needs of small families.

Clear product strategy is a core factor that enables Xiaopeng's sales to continue to rise.

Another factor is cost optimization. For example, not long ago, we launched a new G9 model with a lower price, which actually improved profitability. It's because we removed many things that many users of the old G9 didn't need at all. We used to just stuff everything into it.

So the product strategy must be clear, which has brought us significant changes and is also the basis for us to move forward more steadily.

Yi Han: Xiaopeng's direction of adjustment this year, from the adjustments on P7, G6, and G9, is actually to ensure a positive cycle of gross profit. We are more confident about X9. After it starts delivery in January next year, the financial report will show a continued improvement in the gross profit of the entire product lineup.

Q: What is the proportion of authorized agents and direct stores for Xiaopeng? How do you balance these two types of stores? Yi Han: At the beginning of this year, Xiaopeng had a total of 440 stores nationwide, with approximately 68% being self-operated and 32% being authorized agents.

Currently, we are making some structural adjustments and optimizations, as well as exploring new markets. It is expected that by the end of the year, the total number of stores will reach 500. In terms of proportion, the share of authorized agents will further increase, while the proportion of self-operated stores will decrease.

I believe that regardless of how the proportions are allocated, the underlying intention behind the structural adjustments in the distribution channels is to occupy more competitive markets in the future through better channels and networks. This will be beneficial for Xiaopeng to introduce more models in the future.