Chinese EV maker Xpeng unveils capex blitz as it sees no let-up in market bloodbath
Chinese electric vehicle (EV) maker Xpeng will spend a record 3.5 billion yuan (US$486 million) in 2024 on capital expenditure designed to develop intelligent cars, as more than 200 EV makers in the country jostle for attention in the world's biggest automotive market.
He Xiaopeng, founder and chief executive of his eponymous electric car maker, told employees on Sunday that 4,000 new people will be hired this year to enhance competitiveness, even as the market braces for more bloodletting.
"It will be the first year that the EV competition enters into a new phase of bloodbath," he told the Guangzhou-based carmaker's employees in a letter that was obtained by the Post. "Xpeng has been striving to survive fierce competition right from the beginning and has accumulated sufficient experience. I believe we will eventually triumph if we keep up the hard work."
Do you have questions about the biggest topics and trends from around the world? Get the answers with SCMP Knowledge, our new platform of curated content with explainers, FAQs, analyses and infographics brought to you by our award-winning team.
The letter goes on to say that 30 new models will be launched by the company over the next three years. Xpeng confirmed the contents of the letter.
An Xpeng Inc. G9 electric vehicle at the Shanghai Auto Show on April 24, 2023. Photo: Bloomberg alt=An Xpeng Inc. G9 electric vehicle at the Shanghai Auto Show on April 24, 2023. Photo: Bloomberg>
According to calculations made by media outlet China Business News in September, at least 15 EV start-ups, with a combined annual production capacity of 10 million units, had either collapsed or were on the brink of insolvency as fierce price-cutting in a bid for market share, drove participants out of the industry. This compares with the 8.9 million EVs sold in mainland China last year. Still, the estimated manufacturing capacity of the sector is an imposing 20 million.
While the growth pace has been frenetic so far - last year's sales grew by 37 per cent year on year, signs of a slowdown are worrying carmakers with Fitch Ratings predicting sales will expand by only 20 per cent in the current year.
China is the world's largest automotive and EV market, with sales of battery-powered cars accounting for about 60 per cent of the global total, as the government pushes ahead with its ambition to achieve carbon neutrality by 2060.
The ambitious plan by Xpeng, one of China's top electric car makers, adds to evidence that the mainland EV market, already facing overcapacity, is set to see a shakeout this year as some small and underachieving players are forced to down their shutters.
"Only big players with products and technologies affordable to consumers can survive the cutthroat market," said Cao Hua, a partner at Shanghai private-equity firm Unity Asset Management. "Xpeng, as one of the market leaders, is under pressure to strengthen research and development capability as well as improve sales."
The letter said two new platforms will commence production later in the year. One will focus on developing and building mass-market electric cars priced at about 150,000 yuan, while the other will target premium models, sporting a price tag of more than 300,000 yuan.
Founded in 2014, Xpeng, along with Shanghai-headquartered Nio, and Beijing-based Li Auto, are viewed as China's response to Tesla, since all of them assemble smart EVs featuring autonomous driving technology, digital cockpits and high-performance batteries.
Of the three, only Li Auto has turned a profit, because its high-end sport-utility vehicles are popular with China's affluent consumers.
Xpeng's Navigation Guided Pilot (X NGP) software offers its cars limited autonomous-driving capability, and it can navigate the streets of China's top cities, such as Beijing and Shanghai. It is similar to Tesla's Full Self-Driving (FSD) system. The FSD has not been approved by Chinese authorities and is not available in Tesla vehicles sold in the country.
The CEO said artificial intelligence is a key area of investment, designed to make its EVs more efficient, convenient, and accessible.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.
Copyright (c) 2024. South China Morning Post Publishers Ltd. All rights reserved.
