The Chengdu Motor Show 2019 kicked off from September 5 to 14 in Chengdu, the Chinese city of spicy and delicious hot pot, with the presence of more than 1,600 automobiles by over 130 auto brands from countries and regions around the globe. Among the participants at the trade show, besides luxury brands like Lamborghini, Aston Martin and Rolls Royce, was Xpeng, an emerging Chinese EV startup that was founded in 2014 by He Xiaopeng and co-founders Henry Xia (Xia Heng) and Yang Chunlei.
Headquartered in Guangzhou, Xpeng is a Chinese automobile manufacturer that designs and makes smart vehicles that are integrated with Internet, AI and autonomous driving technologies. The company rolled out its first car, the G3 SUV, in 2018 and subsequently kicked off the delivery of its G3 2020 Edition SUV at the Chengdu trade show, less than two months after the initial presentation of this new high-performance iteration of its G3 series.
“The delivery of the G3 2020 marks another milestone for the best-selling G3 series. We are very glad to showcase the latest model in the series at the Chengdu Motor Show,” said Henry Xia, Co-founder and Vice President of Xpeng Motors.
Pandaily had the opportunity to have a sit-down interview with Xia to talk about the overall EV industry in China, the challenges, players and risks faced by Xpeng in it, and the future Xpeng is headed towards.
G3 (2020) Delivery
Q: What does the delivery of the G3 (2020) mean for Xpeng?
Xia: After the launch of Xpeng’s G3 2020 Edition, this is the first time we’re participating in an international motor show of this size. We’d like to demonstrate and show everyone some of the newest updates we’re bringing to the new model, for example the overall quality and software upgrades. Second, this is the first time we’re participating in the Chengdu motor show. As you might’ve heard, car sales across the general southwest region of China has been great. And Xpeng has recently opened 5 additional offline retail locations, so our participation in the motor show this time is sort of another way for us to convey to our customers our conviction to provide better services to them.
Current Chinese EV Industry
Q: Government subsidies for new energy vehicles are diminishing and EV market is narrowing. how will Xpeng respond to this?
Xia: To begin, Xpeng’s customers are primarily personal users, not business ones. So even though the subsidies for new energy vehicles are experiencing a downward decline, we’re actually seeing more and more consumers turning towards new energy vehicles. A lot of these consumers are ditching manufacturers like Tesla, and turning towards makers like Xpeng who have a new DNA for making smart EVs and have core advantages in autonomous driving and smart connectivity. Xpeng’s car delivery volumes from January to July still ranked first among the emerging players of the EV industry. We’re also the top choice among personal users in the EV market. Therefore, following the increase of more and more users learning more about new energy vehicles, we believe that after getting through this harsh winter period, we’ll definitely embrace the dawn of spring for smart vehicles.
Q: What is Xpeng’s advantage compared to local Chinese competitors?
Xia: Well, like you said earlier, the EV market isn’t very big in China. Against a backdrop like this, I don’t think we’re really competing against the others like Tesla or NIO. We’re all trying to expand this market and make the cake bigger overall, then do we have a fighting chance to do more. For Xpeng, we’re focused on strengthening two areas, one is our car quality and our core competencies. Our vehicles passed the collision examinations according to the 2018 national standards with flying colors, ranking us first among all the EV participants. You can also see that our G3 (2020) secured a IP68 rating across the whole battery panel. These are all the small details we’ve been polishing for quality assurance. As we continue to strengthen our core competencies, Xpeng’s autonomous driving system has been leading the whole EV industry in China whether it’s with regards to performance or success rate. Especially our auto-parking system, whether it’s detection accuracy, speed, performance, Xpeng scored the highest across all parameters compared to other players in China.
Today we also brought our P7 Model today to the exhibit powered by our second-generation smart car system. Whether it’s computing power or detection ability, new Xpeng models will all deliver an unprecedented autonomous driving experience. Therefore, our smart car system is undoubtedly one of our major competencies that we’ll continue to sharpen and improve.
We can see that in the upcoming intelligent era, the transformation of a company isn’t as simple as it sounds. Take former giants like Nokia for example, it did not manage to transform its business as successfully as Apple. Throughout the transition period from PC to mobile devices, Intel may have been the chip giant back then, but it failed to seize its opportunity in the era of mobile phones and lost to Qualcomm. We can see that in this era where drastic changes can take place following the roll out of new products, it’s very difficult for traditional car manufacturers to transform its core DNA due to all sorts of limiting factors such as its focus on gasoline powered cars.
Xpeng is a team deeply focused on R&D. 60% of our employees are part of the R&D department, 40% of which are working on the R&D of internet integration. This is far greater than other traditional EV manufacturers. We have close to a thousand people working on developing our smart car system. This is unimaginable to traditional car makers.
To sum up, I believe at this current juncture, all the players in this industry should take baby steps and work together to expand this market first. As a startup, Xpeng should continue to remain focused on raising our vehicle qualities and core competencies.
Q: Why did Xpeng start with SUVs and not sedans?
Xia: Compared to other car models like sedans, SUVs can be sold at a premium. For EVs, the cars come with additional features including smart driving systems, so R&D costs can be rather high. So to offset that, SUVs are a good choice to begin with. At the same time we’re also rolling out different models too, for example our P7 sports sedan, which is entering its final test and production stages. In the future, we’ll be rolling out different car types to satisfy various demands as well.
Q: What is Xpeng’s future strategy?
Xia: For the time being, Xpeng will remain focused on the domestic Chinese market. We’d like to establish a deeper footprint in the domestic market first before shifting our focus to foreign markets.
Xpeng VS Tesla
Q: Has foreign brands like Tesla impacted Xpeng?
Xia: The way I see it, the EV industry is still relatively small in China. EVs account for much less than 10% of the total number of new cars sold in China. I believe only when Xpeng sales numbers go over 10% of the total number of new cars sold will this industry experience a skyrocketing growth. For example, if total new cars sold is 20 million, then EVs would have to account for at least 2 million before this could occur. I’m talking about personal users here. Before this, I think that all the players in the field are really more like educators and pioneers.
For average consumers, when they see a new product, they need to be educated first about it. This was the same for smartphones and traditional gas-powered cars. Only after being educated and coming to terms with the products will consumers begin to accept and explore new brands.
So even though Tesla has amassed a massive fan base in China after coming here, it has also done more by educating people about EVs. I believe that once the EV market grows to a massive size, there’s no way one player will be able to handle it all. After all, cars aren’t like search engines. It’s not feasible to have one single giant in the field. Consumers all have different tastes, demands, budgets and more. This is why I believe the industry will benefit by having many players and these companies will be able to secure their own space in this market.
Furthermore, EV is really a software-focused market. Throughout software development, localization is absolutely crucial. A lot of the autonomous R&D that Tesla conducts is based on California and US traffic regulations. But China has a very different driving environment whether it’s traffic regulations, preferences, roads, etc. This is why a Chinese localization team would have an edge over a foreign team.
In conclusion, I believe Tesla’s breakthrough into China’s EV market is more advantageous to us than anything.
Q: Will OTA upgrades affect regular car usage?
Xia: We test our OTA upgrades extensively first before rolling them out to users. So before the OTA upgrades even reach consumers, these updates will all have been tested on our test vehicles hundreds or even thousands of times already. So for now, there won’t be any disruptions to regular car usages when OTA upgrades are sent over to individual vehicles. But of course upgrades would have to be done under certain conditions. For example, you won’t be able to drive and upgrade the system at the same time.
Q: consumers are Mostly concerned about battery quality. How is Xpeng Planning to address these concerns?
Xia: Xpeng has been offering services on par with the highest quality standards stipulated in the industry to its customers. Our battery packs are all rigorously tested in our labs and fall in line with the strictest battery regulations. Before we delivered our G3 Models, our test drive distance exceeded over 5 million kilometers. We were mostly doing battery-related tests to examine its quality. With an battery safety rating of IP68 across all of our battery panels, Xpeng has reached the highest battery standards in China. So, when it comes to something as critical as the battery, we take things very seriously to assure that it’s safe to use and that it’s up to the highest quality standards.
Q: Anything else you’d like to tell our readers?
Xia: The Chinese market is constantly changing. Young adults in China are more willing to try out new products and get in touch with new brands. There will be more influential products in the future that may affect consumers around the globe. I hope that in the future, young adults will embrace the world with an open mind and that the world will understand and respect Chinese and oriental culture more, to allow Chinese products to be better distributed across the world and vice versa.
The above interview was conducted in Chinese and wholly transcribed into English with necessary changes made for fluency only.