Tesla China price cuts push rival Xpeng to cut costs

by The Insights

Chinese electric vehicle maker Xpeng Inc. hopes drastic reductions in manufacturing costs will propel the eight-year-old company to profitability, co-chairman Brian Gu told reporters at the Shanghai International Auto Show, which opens to the general public on April 20.

The Guangzhou-based company plans to cut its powertrain costs, including battery cells, by 25 percent and save 50 percent on smart driving features by the end of 2024, Gu said. Currently, the two account for more than half of the cost of building Xpeng electric vehicles, he added.

Last year, disappointing sales forced Xpeng to push back its profitability schedule to 2025.

But battery materials are getting cheaper, Gu said, driving savings this year and next. The company is also trying to reduce its use of laser-based radars, chips, sensors and cameras in its automated driving functions.

The company is also betting that a new design and manufacturing architecture, which it calls SEPA2.0, will help increase efficiency and reduce costs, company CEO He Xiaopeng said Sunday during a briefing. a launch event.

Xpeng will showcase its first model developed on the new platform, a mid-size sport utility vehicle to rival the Tesla Model Y, when the show opens to media on April 18. It doesn’t say how much it will cost, but Gu said the company will focus on developing core products with a price range of 150,000 yuan ($21,800) to 350,000 yuan. The company could launch another model by the end of this year.

“The industry is getting a lot more competitive and there are a lot more role models,” Gu said. Not so long ago, electric vehicle buyers were a smaller and wealthier group, he said, but as that has changed, it requires “focusing on offering attractive products to an affordable price”.

A price war sparked by U.S. automaker Tesla Inc. earlier this year has put pressure on automakers in the world’s biggest market. About 20% of passenger cars on the market saw their prices fall by more than 10,000 yuan ($1,500) in the first quarter, according to data compiled by research provider China Auto Market.

Xpeng said its smart driving technology is “much better suited to the Chinese market” than Tesla’s, Gu said, pointing out that technology originally developed in the United States does not work with high-definition maps and lacks local development and testing.

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