XPeng won a key battle

Author | Wang Xiaojun

Editor | Zhou Zhiyu

In the past, XPeng was always portrayed as a "tech geek" with little marketing; since this year, XPeng Motors Chairman He Xiaopeng has learned from Lei Jun, frequently appearing in live broadcasts or going to factories to "tighten screws," creating a consumer-friendly entrepreneur image.

Behind He Xiaopeng's image transformation is XPeng's metamorphosis. Over the past two years, XPeng has climbed out of the low point it faced two years ago in terms of organization, supply chain, and channels. In the past three months, XPeng has successively launched models such as MONA M03 and P7+, all of which have "exploded in orders."

After this series of efforts, XPeng has also reached a sales milestone—delivering 30,895 new cars in November, a year-on-year increase of 54%.

He Xiaopeng confidently stated that next year, they will launch four models to the market, each expected to be a hit.

According to expectations from multiple institutions, XPeng may reach sales of 400,000 units by 2025. This also means it will cross the "death line," laying the foundation for its subsequent sprint towards becoming an industry giant.

However, the industry's competition is far from over; the market competition next year will be even more brutal. XPeng still needs to overcome numerous challenges in delivery, marketing, and other areas to ensure steady progress. Thirty thousand units is the current high point and also a new starting point for the future; XPeng still has many mountains to climb.

Positive Cycle

Currently, XPeng is still thriving.

At the end of November, in a certain shopping mall in Beijing, the XPeng Motors store, which is not large, displayed four of XPeng's main selling models: XPeng P7+, XPeng MONA M03, XPeng X9, and XPeng G6.

Among them, there were consumers trying out the MONA M03 and P7+ display cars in both the front and rear seats, with staff explaining around these two cars.

In the second half of this year, the two new cars were successively launched and delivered, with the MONA M03 breaking 30,000 orders within 48 hours of its launch, and the XPeng P7+ breaking 30,000 orders on the night of its launch. Consequently, XPeng's financial situation has also significantly improved; in the third quarter, XPeng delivered its best performance ever, with revenue exceeding 10 billion, and profit margins rebounding to 15.3%.

He Xiaopeng has also held several celebration banquets. At the celebration banquet after the MONA M03 launch, President Wang Fengying was particularly happy that day and even drank her first glass of wine. After the XPeng P7+ release, He Xiaopeng and several executives took employees out for barbecue, beer, and red envelopes, discussing increasing production capacity.

XPeng's current revitalization began with the transformation brewed from its low point.

In September 2022, XPeng's flagship model G9, which was highly anticipated, was launched but failed due to overly chaotic SKUs and excessively high pricing, leading XPeng into a period of stagnation.

At that time, He Xiaopeng also fell into a slump; looking back, he said he was afraid of flying, as the business class was less crowded and he could easily be recognized, and one could sense everyone's concerns about XPeng in his words Before this, He Xiaopeng, who transformed from an investor to the helm of the company, had spent a considerable amount of time focusing on flying cars. After that, He Xiaopeng devoted himself entirely to automobiles. This point also became the starting point for XPeng's transformation.

The first change was in the organizational aspect. In early 2023, XPeng officially announced the joining of the "Iron Lady" of the automotive industry, Wang Fengying. Since then, Wang Fengying's reforms have left a mark on XPeng's supply chain, sales, marketing, and other areas. Especially in terms of cost reduction in the supply chain, He Xiaopeng has repeatedly acknowledged Wang Fengying's expertise.

A broader organizational change also occurred among the executives. In September 2023, He Xiaopeng re-entered the G9 in Dunhuang. At that time, he directly wrote the changes in executives on a PPT, stating, "Of the 12 executives who appeared in the financial report a year ago, only 2 are still in office."

Organizational changes often bring about significant transformations in various aspects, and another focus of XPeng's transformation is cost reduction.

In 2023, XPeng partnered with Volkswagen, which allowed the technology accumulated by XPeng, which had always prided itself on being "high-tech," to be recognized by a talent scout, thus opening a second curve beyond selling cars. After studying the G9, Volkswagen evaluated the vehicle as having "very solid technology, but not particularly excellent cost."

Subsequently, XPeng began comprehensive cost reduction, aiming to achieve a BOM cost reduction of over 50% for autonomous driving by 2024, and a 25% reduction in the cost of the vehicle's power and hardware systems. Later, many of the executive changes at XPeng involved personnel managing the supply chain.

The effects of transformation are never immediately apparent.

In 2023, although the XPeng G6 had played the role of "the hope of the whole village" for several months, this period was not very long, and after hitting the ceiling of 20,000 monthly sales, it quickly began to decline.

However, at that time, He Xiaopeng was no longer as frustrated as he had been the previous year; he displayed the calmness of a serial entrepreneur, frequently telling the market, "XPeng will enter a positive cycle in the second half of 2024."

Finally, in the second half of 2024, two new cars were launched in succession, and the lessons learned from the failure of the G9 were reflected in these two vehicles: simpler SKUs and more competitive pricing.

The effects of cost reduction also became evident, as the competitive pricing of the MONA M03 and P7+ combined with XPeng's gross margin indicated the success of cost reduction.

Additionally, an important change in 2024 was the intuitive transformation in XPeng's marketing.

It can be said that He Xiaopeng learned a lot from his "big brother" Lei Jun. For example, telling emotional stories at press conferences, setting the venue at the founder's alma mater, emphasizing aesthetics in vehicle marketing, and having the legal department frequently online to dispel rumors.

He Xiaopeng himself also frequently appeared on social media, discussing capacity improvements at the factory, promoting vehicle range achievements on the road, and often appearing alongside Lei Jun, which allowed XPeng to benefit from some of Lei Jun's traffic dividends.

Fortunately, the effects were also very evident. XPeng seized its strengths in intelligent driving and extended its advantages in other areas, setting competitive prices, thereby achieving growth in scale, and thus initiating a positive cycle

New Challenges

Although XPeng's sales have reached a new level, the industry's competition has not ceased. For XPeng, which currently sells models in the mainstream market, the challenges ahead continue.

In the past few years, XPeng has not been without its blockbuster models. From the P7 to the G6, XPeng has occasionally managed to create products that resonate with consumers thanks to its technological strength, but due to a lack of systematic capabilities, it has faced setbacks in delivery and other issues.

These problems have improved somewhat, but they still hinder XPeng.

Learning from the lessons of the G6, XPeng made many preparations for delivery when launching new cars this year. The MONA M03 delivered over 10,000 units in its first month on the market, and the XPeng P7+ rolled off its 10,000th unit just 20 days after its launch.

However, this is far from enough. Compared to the rapidly increasing orders, XPeng's preparations have been somewhat conservative, resulting in a delivery speed that did not meet expectations.

At the launch event for the XPeng P7+, He Xiaopeng apologized for the backlog of orders and revealed that in the past few months, XPeng has increased production capacity three times, with plans to increase it by 30%-40% in November and December. XPeng's sales personnel indicated that the current delivery cycle for both the MONA M03 and the XPeng P7+ is over 10 weeks.

Moreover, XPeng plans to launch a new model or a facelifted version every quarter next year, which opens up possibilities for XPeng's overall scale but also presents challenges for its overall delivery.

After all, the G6 has proven that delivery can directly impact a car's sales cycle. A long-standing issue for XPeng has been that the sales lifecycle of its blockbuster models is too short, necessitating the continuous launch of new cars to boost sales, which in turn accelerates cash burn.

Therefore, whether the MONA M03 and XPeng P7+ can transition from bestsellers to regular sellers is particularly important for XPeng.

He Xiaopeng has also expressed his determination to strengthen delivery capabilities to the outside world. Recently, dressed in a white work uniform, He Xiaopeng has been active in his own factory, hoping to show users XPeng's commitment to delivery.

Additionally, while XPeng has raised the banner of "technology equality," bringing advanced intelligent driving into the mainstream market and gaining favor from many young consumers, strong competitors like BYD and Aion are also quickly catching up in terms of intelligence. XPeng needs to strengthen new selling points and quickly make consumers understand them, which is not easy.

Another challenge lies in the fact that as XPeng lowers its prices, it will find it increasingly difficult to achieve product premium through intelligence, enhance profit margins, and elevate its brand.

The MONA M03 has brought XPeng's model prices down to the range of 100,000 to 150,000 yuan, and because of this model's addition, XPeng's average revenue per vehicle in the third quarter has dropped to 190,000 yuan.

The further price drop is also unfavorable for XPeng's future models aiming for higher price points. This means that XPeng will still need to rely on technology, management, and scale to achieve cost reductions in order to maintain a relatively good gross margin level.

These are all new challenges that lie ahead.

XPeng is still striving to keep itself afloat. However, as companies like BYD demand suppliers to lower prices, it indicates that next year's market will be even more competitive. Whether XPeng can successfully achieve its goal of profitability by the end of next year remains uncertain Currently, the elimination competition in the automotive industry has become more diverse. Some companies that are at a disadvantage in the competition have reached the brink of collapse, while more companies are taking precautions, choosing strong partners, or starting to integrate various brands based on large groups to further reduce costs and respond to environmental changes. For smaller players like XPeng, the situation has also become more uncertain.

He Xiaopeng's expectation for the future is to sell 1 million units annually. In other words, a monthly sales of 30,000 is the current new high, but it is only the starting point for the future. XPeng still needs to overcome one integer milestone after another to potentially secure a final position