Subscribe

Xpeng Motors – Racing to the Top in a Market Full of Copycats
COVID-19 and China
Ready? Go! Image credit: Pexel.

When Xpeng Motors (小鹏汽车) was founded in 2014, since then, the company’s founder, He Xiaopeng, has made no secret of the fact that he’s heavily inspired by Tesla.

After developing the Chinese web browser ‘UCWeb’ and selling it to Alibaba in 2014, He began looking for possible investments in the new energy vehicle (NEV) industry.

There were various grounds for this investment decision, such as the Chinese government’s move to subsidize electric vehicle (EV) purchases to promote the industry. However, the most significant motive was that, in 2014, Elon Musk made more than 200 Tesla patents publicly available.

“One of the reasons Xpeng was founded was because Elon Musk made Tesla’s patents available. It was so exciting,” He said in an interview in 2018 with Quartz.

The company completed its series B funding in 2018 and launched its first production model, the Xpeng G3, at the 2018 Consumer Electronics Show in Las Vegas. Currently, Xpeng manufactures its G3 and recently, it has launched the P7 and G3 2020 models, after completing series C funding in late 2019.

When Xpeng launched its G3, the company also made it known that it has been tearing apart Tesla cars, such as the Model S, to aid in the development of its own cars. After the launch of the G3, many spotted similarities between the vehicle and Tesla’s Model X.

Observers pointed to the slim LED headlights, the windscreen that blends into a sunroof, and the large central control monitor. Moreover, just like Tesla, Xpeng is developing a charging network and sells G3 through its own stores.

The major difference between the two brands is their price, which makes Xpeng quite attractive to consumers. While Tesla’s Model X costs about USD 100 thousand, Xpeng’s G3 only costs about USD 25 thousand.

However, it seems like copying the EV models and making them available at a low price isn’t enough to achieve success. The Chinese EV market is full of Tesla copycats, making the competition extremely fierce.

Xpeng announced in January that it had delivered a total of 16,608 units of its G3 in 2019, according to information disclosed by the firm to Chinese automotive market researcher firm, AC Automotive (AC汽车). This number is way below the company's primary goal of selling 40,000 units by the end of 2019.

In the same year, the rivals WM Motors (威马汽车) and NIO (蔚来, NIO: NYSE) delivered 15,587 and 16,112 units, respectively.

All these rivals are manufacturing almost identical copies of Tesla EVs and addressing a very thin slice from the consumer market – last year EV sales in China made up 4 percent of overall passenger vehicle sales of 23.7 million units.

Although the Chinese government is working on increasing EV sales, it is uncertain if there will be enough room for startups like Xpeng to grow. By 2025, China’s policy makers want annual sales of new energy vehicles (NEV) – including pure-battery electrics, plug-in hybrids and fuel-cell cars – to reach 7 million units. This number is the equivalent of about 20 percent of China’s total automobile market.

However, market watchers are almost sure that even this amount would barely be enough to sustain the profitability of a few dozen NEV companies.

In addition, the market is not only full of Chinese EV producers. There’s the swarm of global giants, from Tesla to Volkswagen AG to Ford Motor, all planning to flood the market with locally produced EVs.

Given these market conditions, more established local EV brands, such as BYD, BAIC and SAIC, are likely to withstand the competition. These brands have a track record spanning years, with a lineup including cars and buses, and an existing customer base.

“Only companies that have solid technology reserves can stand out amid the competition,’’ said Wang Chuanfu, founder and chairman of BYD to Bloomberg. “By owning core technologies, we can see further and deeper.’’

Therefore, to overcome all these challenges and to become China’s Tesla, Xpeng needs to secure its funding for the coming years.

Editor: Luke Sheehan
ANALYST
See Also

Communicate Directly with the Author!

Ask the author questions about the copied text

Research Reports
Editor's Picks