Xpeng: a Chinese rival to Tesla

Do you remember Xpeng, the company which was accused of copying Tesla's design back in 2018? Well they kept going, and they are doing rather well. Here is why.

Who’s Xpeng?

Xpeng is one of the leading EV (Electric Vehicle) company in China. Their goal is to “transform smart electric vehicles with technology and data to shape the mobility experience of the future.” Indeed, this is roughly the same idea as Tesla or NIO.

Shares of the company jumped 33% following their 3rd quarter results, reaching $44.73, before settling back to around $42 at the time of writing.

Their vision is simple: to set a benchmark for autonomous driving in China. They want to offer the “most advanced assisted self-driving”, a vision making them a solid competitor to Tesla. All of their in-house innovation efforts are orientated towards this goal, as they are convinced that superior technology will be the key to success. 43% of their almost 4’000 employees are entirely dedicated to R&D, showing us that the company walks the talk. “Our commitment to innovation through end-to-end in-house R&D and data-driven capabilities is the cornerstone of our business”, said Brian Gu, Xpeng’s vice-chairman and president.

 

Products and tech

The company currently offers 2 models of vehicles and is working on a third one to be launched in the first half of 2021. There are three version of the P7, which is the more sport-type car, with prices ranging from $35’000 to $39’000. Their compact SUV, the G3, is even less expensive with a price ranging from $22’000 to $25’000. Now that’s some inexpensive electric cars considering that Tesla is more towards the $50’000 range and up. 98% of the sold P7 models support their XPILOT advance driver assistance system. The latest version of the software includes autonomous driving on highways and hand-free parking.

 

shutterstock_1851835924

On the left : the G3 model; on the right: the P7 model

 

They will soon make the latest upgrade of their semi-self-driving functions called the Navigation Guide Pilot (NGP) available, which will enable self-driving on highways – entering and getting off the road as well as switching lanes. The service has a particularly great relevance for China’s often crowded highways. It is also quite similar to Tesla’s Navigate on Autopilot (NOA), the most advanced system we have so far.

The measure of success? Simple. They want users’ action to be no more than one digit for every 1’000 km. This means that the driver shall have to take control of the vehicle less than ten times for every 1'000km. That's not much driving to be honest. 

The next development in sight is autonomous following, enabling cars to follow each other without being left behind. As for city roads, the technology we have is not yet sufficiently leveraged to accurately see traffic lights and merging lanes, but they are working on it. (For the curious ones, some tech making it possible was mentioned in this article).

 

 

3rd quarter results and stock

Their third quarter revenue – first report ever as a public company – were very promising. The total number of vehicles sold was 8’578, which is 266% the amount for the same period last year and 166% more than Q2 2020. The biggest success seems to be the P7 Sedan model, which sold 6’210 times vs the shy 325 in the last quarter.

Revenues amounted to $293.1 million, which is about 342% more than the previous year for the same quarter. Taking this growth into account, the fourth and last quarter of 2020 is expected to show a 244% increase over last year, with the expectation to sell around 10’000 vehicles.

 

xpeng-motors-xpeng-p7-china-2020-13-min-compressedP7 model (Source: Electrive)

 

They were also able to show their first gross profit, which was 3.2% for Q3, vs. negative 10.8% for the same period last year and negative 5.6% for Q2 2020. "The robust results we achieved in the third quarter, from delivery numbers, production ramp-up, and advancement in R&D, to expansion plans for the new factory and overseas business, reflect the strong market appeal of our products, the resonance of our strategy, and our ability to adeptly execute our operational plan," said Dr. Brian Gu, Vice Chairman & President of XPeng. "Achieving our first positive gross profit also underscores our growth and our ability to realize economies of scale."

As for the stock, it surged to $44.73 soon after the 3rd quarter announcement, before settling back to around $42 at the time of writing. It received a target price for the year of $43 from JP Morgan and Chase.

xpeng motors 6 november 2020.png

 

Competition and market

The Chinese EV market is boiling, with not only Xpeng but also bigger competitors like NIO or LI. Xpeng is worth around $31 billion, NIO $65 billion and LI $27 billion, which makes a $120 billion EV market in China. To compare with the US, the Detroit Three – which refers to the 3 biggest automobile manufacturers, which are Ford Motors, General Motors and Flat Chrysler Automobiles – are worth $110 billion combined. Yes, Tesla is almost at a 387 billion market cap, but does this even make any sense at all? Arguable. 

We often hear more about NIO, which could make us believe that they are the absolute leader in the Chinese EV market, but we need to not that it is the only one who has a 1-year trading history which can show a return of 1’000%, whereas LI and Xpeng only started trading this summer.

The Chinese government also pledge to help with the switch to more responsible mobility. In China, when the government is on your side, things can go really fast as we’ve seen in many domains. The Chinese government recently issued a new roadmap for their new energy vehicle sector, which aims to make EV, hybrid and fuel cells vehicles 20% of the total market by 2025 (that’s not so far away).

 

Let us see how it develops. One things remain certain though: having one’s eyes exclusively focused on the US market for EV innovations would be a mistake.

Sources: 

Why Shares of XPeng Are Surging Today, in the Motley Fool

Wondering How High XPeng and NIO Stocks Can Go? You’re Not Alone, in Barron's

Xpeng shares surge on first results, promises China’s best assisted self-driving solution, in Technode

Tesla rival Xpeng is differentiating itself in the electric car market, in Yahoo Finance

Chinese Electric Vehicle Startup Xpeng Reports Solid Sales Growth in October, in Caixin GlobalXpeng's website

XPEV Stock Price: $43 Target By JPMorgan, in Pulse 2.0

Youtube Video: Tesla Model 3 vs. Xpeng P7, on Youtube

EV Startup Xpeng Motors Reports Strong Q3 Sales, its First Quarter as a Publicly Traded Company, in Future Car

 

 

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