Xpeng CEO He Xiaopeng expects a shakeout in China’s fiercely competitive EV market. VCG (via Getty Images)
The billionaire co-founder of Xpeng says China’s EV industry may have little choice but to face a potential fight to the death. But no matter who wins, the West could lose.
Last year, the country was crowned the world’s biggest car exporter despite punitive trade tariffs, as Chinese automakers seek profitable growth in the West.
Unfortunately for auto executives like Xpeng’s He Xiaopeng, they pushed too hard and too fast, potentially allowing China to overwhelm foreign markets with a flood of cheap EVs. This brought about a sudden realization.
Currently, trade investigations in Europe could reduce exports at a critical juncture.
“This year marks the beginning of a fierce competition that may end in ‘bloodshed’,” Xpeng’s co-founders said in a staff letter obtained by CNBC on Sunday after the Lunar New Year holiday.
Some say China’s persistently low deposit rates and extensive capital controls have pushed it into a deflationary spiral caused by overindebtedness in its real estate sector, a key driver of the economy and a popular investment base. We are in a situation that experts believe.
In a bid to stimulate flagging consumer confidence, Elon Musk lit the fuse early last year, sparking a widespread price war across China’s EV industry. This war has been raging for months now.
In January, Xpeng car sales fell to just 8,250 units, compared to a steady pace of 20,000 units sold per month in the final quarter of 2023.
The decline proved to be indicative of the breadth of China’s EV and plug-in hybrid market, as demand fell nearly 40% compared to December and the first month-on-month decline since August.
To regain momentum, CEO He told Xpeng staff that the company aims to hire thousands more engineers and launch 30 models over the next three years.
Investing in VW
In what no doubt seems like very shrewd timing in retrospect, the company’s co-founder and CEO negotiated new financial support from Tesla rival Volkswagen Group in November. Ta.
In exchange for selling a 5% stake in his company worth about $700 million to VW, he wanted the company to co-develop several new electric vehicles and offer VW a non-voting seat on its board of directors. All I had to do was promise.
The automakers that survive the shakeout in China’s EV market — and VW’s investment suggests Xpeng is likely to be one of them — will probably be the ones that survive the shakeout in China’s EV market, as Musk recently warned. It could be consolidated into a small number of national champions who can “destroy” the competition.
For Xpeng’s He, it could be sweet revenge. In 2019, Musk accused Chinese EV makers of “blatantly copying Tesla’s design, technology, and even business model.”