China EV upstart Xpeng pushes back profit goal

Having previously aimed to break even by late 2023 or early 2024, the Guangzhou-based automaker now expects to turn an operating profit in 2025, chief executive officer He Xiaopeng told Bloomberg News. — Reuters

BEIJING: Chinese electric vehicle maker Xpeng Inc has pushed back its profit goal until 2025, after a horror year in which its shares plunged 80% and it delivered less than half its annual sales target.

Having previously aimed to break even by late 2023 or early 2024, the Guangzhou-based automaker now expects to turn an operating profit in 2025, chief executive officer He Xiaopeng told Bloomberg News.

To achieve that goal, He is making a bold bet on full self-driving, a technology even Elon Musk’s electric car pioneer Tesla Inc hasn’t been able to perfect despite years of work.

He is aiming to snare at least 20% of what he calls the “all-intelligent vehicle” market, referring to cars “infinitely close to Level 4 autonomous driving” where the vehicle can handle complex urban situations.

At Level 4, while a human driver can take control of the car, they’d also be able to, in theory, nap while riding in the vehicle.

While no mass-produced passenger cars currently available meet that definition, He said rapid developments in technology will see the market grow to around five million vehicles a year in five years. Grabbing a fifth of the market would require Xpeng to make one million cars a year, vastly more than the 120,757 it shipped in 2022 – which also fell well short of its 250,000 target.

“Our top priority now is scale,” He said in an interview at Xpeng’s Guangzhou headquarters, adding it may not be possible for a “small but beautiful” automaker with revenue of less than 100 billion yuan (US$15bil or RM63bil) to survive in China in five years’ time.

Xpeng hasn’t reported full-year results yet, but posted revenue of just 21.7 billion yuan (RM13.64bil) for the first three quarters of 2022.

Xpeng was one of the hardest hit automakers during China’s Covid restrictions and lockdowns last year because its only factory and many key suppliers are based around Guangdong province and Shanghai, two areas that were most affected by the curbs. Guangzhou is the capital of Guangdong.

The company has also been caught in a price war triggered by Tesla, earlier this month slashing the prices of some models by as much as 12.5%.

All that sent Xpeng’s US-listed shares tumbling in 2022. Once valued at almost US$50bil (RM212bil) – or more than US giant Ford Motor Co at the time – the company’s market value has plunged to just US$8.7bil (RM37bil).

As part of its planned comeback, Xpeng is restructuring the company’s management team, improving its planning capability and making operations more client focused, He said. The carmaker will also simplify its product offering. While it has only four models, Xpeng was criticised for its confusing array of electric motor, battery, software, and interior configurations within each model.

The number of suppliers will also be reduced, He said.

When its latest model, the G9 sports utility vehicle, went on sale in September, Xpeng came under fire for its complicated configuration and pricing system, for example.

It had six variants based on the type of motors, the driving range and some intelligent features, along with more optional features customers needed to pay for, such as the music system, autonomous driving features and fast charging batteries, and was forced to revamp the strategy in just two days.

“I myself will play a stronger role and do more,” said He, adding it may take a few years for an organisational restructure that started at the end of last year to pay dividends.

As part of the changes, the company will streamline its design and manufacturing to three platforms to improve efficiency and control costs. — Bloomberg

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Xpeng , EV , earnings , shares , self-driving , Tesla , pricewar


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