The Chinese EV market is entering a tumultuous stage. The government is withdrawing the subsidies that once made EVs an enticing purchase. The field is oversaturated, and people are still wary of the whole new energy dream that they are being sold on every corner. Yesterday’s EV superstars like NIO are struggling to survive barely meeting their sales targets, and everyone is vigilantly waiting for Tesla to open their Shanghai gigafactory, possibly crippling the rest of the competition. However, one startup seems to be doing fine even in this hostile environment. XPeng motors somehow steered clear of sales shortages and quality issues that haunt some of their counterparts. The XPeng G3 is certified as the safest EV in China, according to the lates C-NCAP test, while also boasting the longest driving range in its class at 520km on one charge. Ironically, the only negative press the company received recently had to do with customers who were angry that the manufacturer updates their flagship product too often.
We sat down with Brian Gu, president and vice-chairman of XPeng Motors, to learn more about the company and his vision for the future of EVs.
What are your impressions?
Well, it’s a very easy vehicle to drive. I love it. It’s a smaller car, smaller than my family car was. But at the same time it’s very light and nimble. I love the interaction with the car. I don’t touch anything, just keep my hands on the wheel and use my voice to send commands to the vehicle. If I want to navigate, listen to music, change the temperature, open a window, a door, etc, I just use my voice. That’s something very new, I’ve never done that in other cars. Not to mention the drivability is also great, it accelerates well, even though it’s not a sports car. But it accelerates really fast for an EV. Plus the autonomous driving features, I can use them to park in our garage. I also love to use the ACC (Adaptive cruise control) and LCC (Lane Centering Control) on the highways, which saves a lot of effort.
As someone who drives a XPeng and who is surely familiar with other EV brands in the market like NIO and WM Motor, what do you think distinguishes your car from others?
I think you should put the XPeng brand in the context of the overall car market. Obviously there are very strong foreign brands and some emerging local brands that, however, have been around for dozens of years and then you have new car companies similar to XPeng like NIO like WM Motor, maybe others too in the future. As a new car brand, we are pretty small in terms of the market share. You don’t see our car as often on the streets as some other cars. But what people are not taking into account is that XPeng vehicles emphasize smart driving and autonomous driving. Moreover, a lot of young people identify with the design and look. It’s the kind of car they would want to drive.
I don’t know how Chinese young people feel about your brand, but I know that in the west most people would regard XPeng as merely an affordable Chinese version of Tesla. How do you plan to get rid of that label?
First, I think Tesla is a great role model. And I feel like a lot of EV startups, both in China and abroad, take inspiration from Tesla. In fact a lot of the experiences and features in our car were inspired by Tesla. And it’s not just us, but also a lot of other brands emerging in the sector. However, we have a clear focus on providing the best China consumer experience. We designed the autoparking feature for Chinese parking scenarios. All the autonomous driving features and voice commands are very much designed and optimized for Chinese customers. That’s not something Tesla can do. There are a lot of differences when you actually get into the car and start driving, because you can see that a lot of our R&D was focused on the Chinese consumer. In the long run we want to pursue a technology driven product path, similar to Tesla, we want to focus on autonomous driving, focus on optimized intelligent vehicle control, and on top of that we want to also design beautiful cars.
Do you have any mid-term or long-term plans to expand internationally?
In the short run, we will focus on China. It’s a big enough market, it’s growing rapidly and it’s a place where we can really establish ourselves, given our focus on the local consumer. But I think in the long run you cannot just stay a local player, you’ve got to have a broader perspective. I cannot point at a timetable now, but at some point we would have to broaden our horizons and seek opportunities. Adjacent markets like Southeast Asia, or even developed markets like the US, all of them require different strategies.
I’ve seen some statistics saying that EV’s already take up almost 30% of new vehicle sales in China. When do you think EV’s will completely take over?
First of all, when it comes to electric cars, they take up less than 5% of new vehicle sales. There was a big jump in the first half of the year over the last year, but I think the estimate is still around 4.7%. So there’s still a long way to go until EV’s take over the market. I think in 5-6 years, around 2025 we might reach 30-50% penetration, that’s already a big number. To completely take over we will probably need 10 years. But to completely get rid of gas cars on the roads we’ll need much more time. It’s a huge growth market with plenty of opportunities.
Just 10 years ago seeing an EV on the street would shock me, but now they are everywhere. When do you think we’ll start seeing first autonomous driving vehicles on the streets?
It depends on the level of autonomous driving. We are soon launching our new product, the P7, which is capable of Level 3 autonomous driving. Level 3 and 3.5 are pushing for more autonomy, but still require you to sit in front of a steering wheel. That will probably be the predominant form for the next few years. To reach Level 4, that doesn’t require a driver in the front seat, we might need another 10 years. As for level 5, it is still in the very distant future, since to reach that level we would need to rid the streets of traditional cars completely.
You mentioned that you’ll be releasing the P7 next year. Do you have any other plans or are you going to focus on the existing two models for now?
As a car company you have to have a multi year development plan, because vehicle development takes anywhere from 2.5 to 4.5 years. So we cannot say “ok, we’ll just start developing a new car next year”, we won’t have enough time. We are in the process of evaluating what’s after the P7, we have a project in progress right now. And even after that, we have another product that is still in its conceptual stage. This is the model that we have to follow on the yearly basis.
Will the P7 be targeting the same mid-range market as the G3?
I think you could broadly say that it’s still in the middle market, if you define the middle market as anything between 100,000 yuan to 300,000 yuan. But the P7 is a bigger and longer car with a bigger wheel base. It has advanced smart driving and autonomous driving features. We think it will be our flagship product. And it will definitely be considered premium compared to the G3.
Do you expect it to outperform the G3? Say, based on preorders.
The mid segment is somewhat price sensitive. The higher the price point, the smaller the market. The G3 definitely targets a much wider segment. But we do have high hopes for the P7, given the feedback and comments we received after the launch at the Shanghai Auto Show in April. But in terms of total sales, it will hardly outrun the G3.
How satisfied are you with the performance of the G3? And seeing your competitors like NIO go through hard times, do you have any concerns about your own future?
We don’t have any concerns about our product. So far the product has performed beautifully, we’re getting a lot of good feedback. Our customers really feel the difference in terms of features and smartness. As for the peers, NIO had some battery issues for example, they had to recall a batch cars, WM Motor also had quality issues. We are trying to avoid these pitfalls. We are very focused on our quality, on our supply chain, to make sure the quality of the parts is to our standard. We also try to hone in on the areas that can allow us to differentiate ourselves, which is intelligence and autonomous driving.
But recently some of your customers were angered by the fact that you released the new version of the G3 when most of them hadn’t even received their previous version. Was that a big problem or do you think consumers just need to get used to the speed with which technology develops nowadays?
I think it’s a very interesting debate. As a new type of a vehicle manufacturer, we are evolving much faster than traditional players, our products are being upgraded both on the software and the hardware sides. The rapid evolution is going to continue. But I think it does teach us how we should be managing that process to really understand our users and their perspectives. We actually had a lot of updates this year but mostly on the software side. The hardware received only small incremental upgrades. That didn’t generate any reactions. But when people see a significant upgrade on the batteries and the range it does make people feel like the new car is different. So the question is, are we introducing big changes too fast? We need to manage those changes. It’s a new lesson and new area for companies like us. I’m sure other EV startups will face similar problems. But it does let us train our consumer response and crisis management teams and ultimately helps us implement improved cycle management and deal better with technology upgrade cycles.