A former Tesla engineer, now head of autonomous driving at China’s Chery, on July 4 shared her outlook on Chinese automakers’ future capacity to scale autonomous driving technology, as Tesla leads the way with its mass data and sophisticated artificial intelligence models.

Domestic companies are roughly 1.5 to 2 years behind Tesla in developing “end-to-end neural network” technology for autonomous driving. The recent release of Tesla’s Full Self-Driving (FSD) software v12 marked “a great leap forward” in applicability and user experience (our translation) according to Gu Junli, chief executive of Chery-affiliated ZDrive.ai, and a former senior staff machine learning engineer at Tesla, speaking at this year’s World Artificial Intelligence Conference (WAIC) in Shanghai.

Gu said she expects Chinese players to partially replace modules of advanced driver assistance systems (ADAS) with data-driven, rather than rule-based, neural networks by 2025. This shift comes as car companies ramp up efforts to collect fresh, multiformat data to improve models with more computing power. However, there would not be a single large neural net, where the core capability of Tesla’s latest software is built, for production cars until 2026-2027 in China, Gu added. Tesla in April announced its FSD users had traveled a cumulative 1.2 billion miles.

Recent figures from the community-run FSD Community tracker show Tesla’s remarkable progress in refining its autonomous driving features. The latest FSD v12.3.6 version can drive 372 miles (599 kilometers) between critical disengagements, compared with just a few miles it reportedly achieved two years ago, according to crowdsourced data released by the website in May. Tesla chief executive Elon Musk later forecasted on X “a major improvement in MPI (miles per intervention)” with the release of the FSD v12.5 in late June.

“This means the system has met the requirements for most users on normal daily commutes,” said Gu.

Several Chinese early movers are working to achieve a partial end-to-end pipeline for enabling their advanced driving features, hoping to gradually transition to fully end-to-end algorithms. On July 5, Li Auto revealed details about what it called “China’s first single one model” behind its Navigation on ADAS (NOA) functions. The Chinese electric vehicle startup claimed this model would use raw sensor input to generate vehicle motion plans. However, unlike Tesla’s solution of “basically photons in and controls out,” as described by Musk, it still relies on pre-defined, explicitly coded rules to produce control actions as output.

Meanwhile, other peers, such as Xpeng Motors and Huawei, have been taking partial end-to-end approaches, using separate neural networks for multiple tasks such as perception, planning, and action, while many are still struggling to improve results. According to a recent survey compiled by China’s Gaogong Industry Institute, Chinese users typically take the controls at least 1-2 times per 100 kilometers (62 miles) as their cars’ ADAS functions do not react appropriately in urban scenarios. Tesla may find issues in localizing its ADAS software due to China’s complicated traffic conditions, said Xpeng’s head of autonomous driving, TechNode reported.

Gu mentioned Chery’s plan to launch the advanced city NOA function for some premium models in the first quarter of next year, while its single deep learning network could go live in 2026. The Chinese auto major, which sold nearly 1.9 million cars last year, plans to integrate Level 2 ADAS systems into as many as 500,000 new cars sold this year, including 150,000 units for overseas markets. Based in the eastern Chinese city of Wuhu, Chery had a relatively late start in autonomous driving, with ZDrive.ai being set up early last year.  

Despite Tesla’s leading position with its training wheels finally taken off, Gu envisioned that Chinese companies would contribute to a wider and more personalized adoption of self-driving technology worldwide. State-owned Chery in April reached a joint venture deal with Spain’s EV Motors to produce cars at a former Nissan plant in Barcelona later this year, Reuters reported. Meanwhile, customers from some overseas markets could access Xpeng’s XNGP ADAS capabilities as early as next year, president Brian Gu told investors during an earnings call in May.

READ MORE: Chinese companies take on Tesla’s Full Self-Driving with non-lidar approach, end-to-end AI

As Tesla’s most advanced driver assistance software (ADAS) is becoming an immediate threat due to its impending arrival in China, major Chinese electric vehicle makers and auto tech companies are hurrying to pivot their strategies towards a more pragmatic yet challenging approach to developing similar offerings. Although Tesla’s rivals have for years been looking to cut out expensive components and master the newest artificial intelligence models, the game seems to be different this time.

Both NIO and Xpeng Motors are now embracing the so-called computer vision approach, championed by Tesla, hoping their upcoming models will achieve human-like downtown driving in cities via the use of fitted cameras and radar, rather than more expensive laser sensor units. Sinpro.ai, a supplier to NIO of ultra-high-resolution four-dimensional (4D) imaging radar, said it is prepared for delivery later this year with an annual capacity of 800,000 units. Tesla has reportedly replaced radar sensors on some models after years of attempting to remove them.

“It will be a difficult task for Tesla’s Full Self-Driving (FSD) software to deal with scenarios in China where it is common that a large number of electric scooters are usually ahead in the same lane with motor vehicles,” Li Liyun, vice president of autonomous driving at Xpeng, wrote on June 27 on Chinese Twitter-like microblogging platform Weibo. Xpeng is planning to remove lidar from its upcoming sedan, scheduled for launch later this year, local media has reported.

Xpeng and NIO are also following Tesla’s suit by transitioning to an “end-to-end” autonomous driving method after using modular-based neural networks that are heavily reliant on explicit coding. Meanwhile, more traditional automakers are turning to domestic tech companies for help, such as Huawei and DJI, to catch up with the latest AI trend. Despite big challenges pressuring the industry, some early movers have the potential to compete with the US pioneer, Liu Guanghao, partner at Shanghai-based venture capital firm Befor Capital, told TechNode.

READ MORE: China opens door wider to Tesla as local giants disrupt the EV sector with AI-defined vehicles

Vision-based approach

A break from previous strategies of using expensive chips and sensors to enable ADAS capabilities, the latest approach centers on reducing the cost of components in hopes of making more room for further price cuts. Many now have their eyes on the use of radar, ditched by Tesla in 2021 due to limitations in identifying stationary objects with low image resolution, as some parts makers now said it is coming close to lidar in terms of performance – but at a lower price tag.

“There is more overlap between lidar and our sixth-generation radar systems as we significantly improve the resolution,” Juergen Brandl, Head of Market China, Business Area Autonomous Mobility at Continental Group, told TechNode. “Radar could soon see through [objects] but lidar has some problems with the distance especially in difficult situations like fog and rain.” The German firm’s newest front-facing radar boasts a detection distance of 280 and 140 meters (174 and 87 miles) for vehicles and slow-walking pedestrians, respectively.

Advanced radar solutions like this also create three-dimensional point cloud datasets like lidars, helping automakers and developers move towards fully end-to-end models with raw data collection from multiple sensors to train their self-driving systems. “We can play a big role in the development of Level 2 plus ADAS systems in China,” Brandl said, adding that the company’s product is below the price of a lidar unit with “very good“ output in terms of point cloud data.

Some disagree however, saying the technology is still at an early stage. Production of Continental’s latest-gen radar started early this year and the company began delivering the world’s first 4D radar in 2021, which detects an object’s vertical information in addition to distance, direction, and relative velocity, generating more dense point clouds than a contentional radar. Meanwhile, major Chinese lidar makers have consistently enhanced the performance of their products and lowered the prices to just over RMB 1,000 ($137.6) per unit in recent years.

The key is whether 3D/4D radar could prove to be a more “cost competitive” option compared with lidar, said Liu. “I believe both [radar and lidar] have their special advantages and disadvantages,” Brandl said. ”I think time or the market will tell whether we need both of them or one solution only.”

Either way, prospects for early players are bright. Momenta, a self-driving car company backed by General Motors and Toyota, expects the bill of materials, or total cost of components, for the City NOA (Navigation on ADAS) function to be slashed to RMB 4,000-5,000 from the current RMB 7,000-10,000 in the next two years. The intent is to survive an unprecedented price war in China that has been ongoing for more than a year.

End-to-end AI

Chinese carmakers used to brag about their coverage of cities where their assisted driving software is said to enable cars to handle on-ramp to off-ramp driving, automatic highway lane changing, and congested streets. However, many are now pivoting their focus to provide a more human-like driving experience and a full end-to-end AI model is now seen as key to winning the battle.

Described by Tesla chief executive Elon Musk as “basically photons in and controls out,” such end-to-end neural networks play an integral role in a vehicle’s decision-making process, taking raw sensor data as input and producing control actions as output. This contrasts with the conventional approaches that see each functionality, from perception to planning and action, developed individually using rule-based designs, which are often inadequate  in addressing the vast number of scenarios that occur on the road, a team of researchers said in a recent report.

The result is that people still feel their cars pilot themselves inhumanly even when kitted out with some of the most cutting-edge ADAS on the market, partly because human driving behavior tends to be consistent rather than discrete. It is very difficult for the current AV (autonomous vehicle) stack to make coherent, long-term decisions, said Wu Xinzhou, Nvidia’s vice president of automotive at its annual developer conference GTC in March.

Recent surveys have shown automakers that customers are generally dissatisfied with existing ADAS functions. Nearly half of respondents take the controls 1-2 times per 100 kilometers (62 miles) as the city NOA functions do not react appropriately, while others make more frequent interventions, according to a recent survey compiled by China’s Gaogong Industry Institute. “When the driver has to interfere pretty often, then you cannot say this is autonomous driving,” said Brandl.

Xpeng is aiming for less than one intervention per 1,000 kilometers in major traffic areas in China, CEO He Xiaopeng announced early this year, without giving a timeframe. This was followed by a new software update for its XNGP ADAS in May enhanced by the first end-to-end AI model for production vehicles in China, according to the EV maker. NIO reshuffled its autonomous driving department recently, rolling up its perception as well as planning and control teams into a single group with a focus on new AI models, Chinese media outlet LatePost reported on June 19.

It requires huge amounts of data, for example, millions of video clips, to train AI systems, as well as deep pockets and access to AI chips. Musk told investors in April that his company will increase the number of Nvidia’s flagship AI processors it uses from 35,000 to 85,000 by the end of this year. He wrote in a post on X earlier that month that the investment in training computers, gigantic data pipelines, and video storage will be well over $10 billion cumulatively this year.

Such major investment and effort is not something all companies can handle however. “It would be so hard for most traditional automakers to do this by themselves. The best way is to pick a supplier,” Liu said.

The entry of Tesla’s FSD into China may feel like a new challenge therefore, but it may also coincide with a new era of partnerships around self-driving technologies.

The European Union announced on Wednesday it has taken a case-by-case approach to deciding how much tariffs could increase on Chinese electric vehicles. In a move that surprised many industry professionals, the preliminary duties set to hit Chinese EV imports will rise from the general 10% basis on all of them to between 27% and 48%, with SAIC and those deemed incompliant with EU standards facing the hardest hit. The tariff hikes are relatively moderate for the likes of BYD and Geely, which have either committed to growing deep roots within the EU or have already done so in the past.

Broadly speaking, the additional duties are still in line with what many analysts had expected, despite the possibility of a massive but temporary plunge in China’s EV exports to Europe. Chinese battery EVs are priced in general around 80-100% higher in Europe than in their domestic market, creating room for price adjustments, said Jefferies analysts led by Johnson Wan. There could be very limited benefit for major European players, as the high-volume EV segment would remain intensely competitive with subdued margins, said Patrick Hummel, Head of European Autos Research at UBS.

Although Bernstein analysts expect the provisional tariffs to be a serious turn-off to smaller Chinese brands, prompting them to focus on other export markets, bigger Chinese players are likely to step up their localization efforts. Paul Gong, UBS’s head of China Autos Research, also wrote in a note to clients, “Localization of production may become an increasingly appealing option over longer run compared to direct shipping from China for exporters to take shelter from trade conflicts and geopolitical tensions.”

Below, we take a look at what the key Chinese players have been doing in Europe and their respective prospects in a continent home to some of the world’s most important automakers.

BYD

China’s top EV maker is widely considered the least affected by the newly announced tariffs, with the strength to still break even on an import model thanks to its significant cost advantage versus peers. BYD’s EVs would still be priced lower than the similar models launched by European rivals, even if the company raises prices by 17.4% to fully pass on the additional tariff to customers, although the measure could effectively prevent its dominance in destination markets.

The leading Chinese player would also have a 25% cost advantage over European counterparts even after localizing the production of its popular sedan in the region, according to UBS’s previous findings. Set to be the first major Chinese automaker with a production base in Europe, BYD expects its Hungary plant to begin operation before 2026, with an annual capacity of 150,000 units. Although exports to Europe only account for a single digit percentage of its total sales, it aims to “be in a leading position” in the regional market by 2030.

SAIC

China’s biggest car manufacturer got relatively unfavorable treatment, and analysts expect the measures will significantly curb its competitiveness in Europe. The European Commission will impose tariffs of nearly 50% on EVs from the Chinese state-owned automaker, along with those deemed to be the least compliant with the nine-month anti-subsidy investigation announced last September. The company, which owns the iconic MG brand of British origin, said earlier it had “fully cooperated” with the investigation and hinted that the EU regulators misused their investigative powers in order to view sensitive business information related to its supply chain.

SAIC responded on Thursday by saying, “As SAIC MG’s sales in Europe continue to grow, we are planning to introduce China’s new energy vehicle (NEV) technologies and green factories to the continent” (our translation). The firm also called for more cooperation between China and the EU. China’s top car exporter to Europe, with shipments of nearly 243,000 units to the region last year, revealed plans last July to build a manufacturing facility plant on the continent.

Geely, Chery, and Dongfeng

Volvo parent Geely was among the three Chinese companies selected for further scrutiny and saw a relatively moderate tariff increase of 20%, another individually calculated duty rate. The impact is likely to be very marginal to China’s third biggest car exporter, thanks to its ownership of Volvo and the currently limited scale of its own brands in the region. Geely’s EV brand Zeekr said on Tuesday it is looking to establish a presence in six to eight European countries by year-end.

Chery, as well as its state-controlled peers such as Dongfeng and Chang’an, faces an extra 21% charge in a category for those cooperating with the probe but not sampled. Jaguar Land Rover’s Chinese manufacturing partner in April reached a joint venture deal with Spain’s EV Motors to produce cars at a former Nissan plant in Barcelona later this year, Reuters reported previously. Meanwhile, Dongfeng’s Voyah brand, previously planning to enter Germany, France, and Italy, has for now been selling EVs mainly in Nordic countries.

NIO, Xpeng Motors, and Leapmotor

Like their bigger peers, Chinese EV makers NIO, Xpeng Motors, and Leapmotor are also set for extra charges of 21%. NIO, which currently sells four models from more than €60,000 ($64,361) in Europe, higher than most domestic competitors, said on Wednesday its commitment to the regional market remains unwavering and it will continue to explore new opportunities within the EU despite protectionism.

The company is still looking to introduce its lower-priced vehicles, including an upcoming third brand codenamed Firefly, in Europe, but the plan is now being adjusted based on the current situation. Delivery of the first model, a well-designed boutique car, will begin in the first half of 2025 in China at a price cheaper than the BMW Mini, CEO William Li recently told investors during an earnings call.

Zhejiang-based Leapmotor, which has Stellantis as its largest shareholder, is also making pivots. Chief executive Carlos Tavares said on Thursday the European auto giant will shift the output of some Leapmotor products to Europe due to the tariff hikes, having reportedly explored the potential of building EVs jointly in Italy. A similar scenario could unfold for Xpeng Motors and its European ally Volkswagen. President Brian Gu last September revealed plans to enter Germany, Britain, and France, with Italy also being included earlier this year.

Major Chinese automakers reported higher electric vehicle sales for May than in April, boosted by new government subsidies and the continued use of discounts to lure cost-conscious shoppers. Notably, NIO and Geely’s Zeekr were among the top-performing companies in the market, reporting their best-ever monthly deliveries.

Why it matters: The latest sales figures marked a swift turnaround for Chinese auto majors as they have been mostly grappling with weak consumer sentiment and intensifying competition in recent months.

• Demand was mainly boosted by China’s new subsidies encouraging consumers to trade in their old, less eco-friendly vehicles for new more energy-efficient ones. Meanwhile, several regional trade events have garnered more consumer attention than usual and boosted the appetite for new models, such as the recent Beijing Auto Show, wrote the China Passenger Car Association (CPCA) on May 29.

Details: Both NIO and Zeekr witnessed triple-digit growth year-on-year in May, with monthly deliveries reaching a record high.

• NIO said on June 1 that it surpassed the 20,000 vehicle sales limit last month for the second time since its inception, with its delivery numbers up 31.5% from April. The growth was driven by additional cash rebates totaling RMB 1 billion ($138 million), offered by the company in the name of car trade-ins since April 1, as well as a more than 25% price cut on its battery leasing program in March.
• Zeekr’s May deliveries reached 18,616, up 16% in a month, thanks to strong demand for its redesigned 001 shooting brake, of which sales surpassed 10,000 units for two months since delivery began on March 1. The Geely affiliate on May 10 became the fourth Chinese EV maker to go public in the US. Sales at its parent company also picked up momentum to 58,673 units over the month.
• Meanwhile, Li Auto saw its best-ever monthly sales this year in May, buoyed by a recent price reduction of up to RMB 30,000 on its existing vehicle lineup and the strong demand for the L6, which went on sale in mid-April. The company said the L6 accounted for more than 15,000 units out of its total deliveries in May and that it expected the number to surpass 20,000 units in June.
• Sales of Huawei-backed EVs took a slight hit in May while the Chinese tech giant was busy launching the redesigned versions of its existing Aito cars with partner Seres. Huawei’s Harmony Intelligent Mobility Alliance (HIMA), which currently consists of Aito and Luxeed series models, reported combined deliveries of 30,578 units last month, up 3.2% from April, with no breakdown.
• State-owned manufacturers Chery and GAC’s Aion also reported strong May sales, as both companies introduced big discounts in a move to respond to Beijing’s call to boost consumption. Chery on May 9 began selling the Sterra ET crossover at a competitive starting price of RMB 189,800.
• Xiaomi reported a 22.3% improvement in deliveries from April and aims to deliver more than 10,000 units starting in June.

Context: Retail sales of new energy passenger vehicles, which include all-electrics and plug-in hybrids, increased 27% year-on-year and 2% month-on-month to roughly 574,000 units during May 1-26 in China, when passenger car sales fell slightly to 1.2 million units, the CPCA figures showed.

• BYD, by far the dominant player in the market, on May 4 began offering subsidies of up to RMB 8,000 to consumers trading in their old cars. The auto giant on May 28 rolled out two new models with a driving range of 2,100 kilometers (1,305 miles), enabled by its latest plug-in hybrid technology.

Sales of Chinese electric vehicle makers Li Auto and Huawei-backed Aito dropped sharply in April as rivals Zeekr and NIO managed to post major improvements, in the latest indication of how competition in the country could be impacted by price cuts and new model launches. 

Why it matters: The latest sales figures in April showed the world’s largest EV market is slowly recovering from a sales slump due to an economic downturn and inclement weather early this year. Some potential EV buyers are still waiting on the sidelines for possible stimulus measures and for new cars shown at this year’s Beijing Auto Show to make it to market, experts say. 

READ MORE: Global carmakers take on Chinese giants in EV showdown at Beijing Auto Show 2024

Details: GAC’s Aion, Li Auto, and Huawei-backed Aito – which are among the biggest Chinese EV makers – all reported double-digit declines in EV deliveries in April from a month earlier. Huawei saw sales of Aito-branded EVs fall 21% last month, with monthly deliveries of the redesigned M7 falling to 10,896 units from its peak of nearly 30,000 units. Aion and Li Auto delivered 28,113 and 25,787 EVs in April, 13.6% and 11% fewer than a month earlier, respectively. 

• All three EV makers have launched new cars and ushered in steep price cuts for their existing models in order to maintain demand throughout 2024. Huawei said on Monday it had secured 11,000 reservations with non-refundable deposits for the Aito and Luxeed lineups over the recent five-day Labor Day holiday, while there were more than 41,000 pre-orders for Li Auto’s L6 range-extended hybrids between April 18 and May 5. GAC is currently putting the redesigned versions of its Aion V and Hyper HT battery crossovers on display in its showrooms nationwide. 
• In the meantime, Zeekr achieved record deliveries of 16,089 vehicles in April, up 24% month-on-month and 99% from a year earlier, mostly driven by a strong performance for its revamped 001 shooting brakes. NIO also saw sales hitting 15,620 vehicles, up from 11,866 a month earlier, as the company’s multiple sales pushes started to pay off. The EV startup has been offering a RMB 10,000 ($1,386) price reduction for those who trade in their old, gas-powered vehicles for a NIO car since the beginning of April. 
• While bringing attention to its rivals such as Zeekr and NIO for their similar offerings, Xiaomi posted impressive April sales to officially start its career as an electric car maker. The smartphone giant handed over 7,058 SU7 battery sedans to customers in its first delivery month and secured nearly 89,000 reservations with non-refundable deposits as of April 30. Chief executive Lei Jun expects the company to achieve an annual delivery target of 100,000 cars this year, with its production ramp-up already underway at its Beijing factory. 
• Xpeng Motors saw a slight recovery in April sales, delivering nearly 2,000 units of its first multi-purpose vehicle and bringing the total deliveries of the RMB 359,800 van to almost 10,000 units in the four months since its launch. The Volkswagen-backed EV maker has been under pressure from larger rivals, and declined to give detailed figures for the rest of its models. Sales of its G9, G6, and P7 models dipped to less than 1,700 units in March, figures compiled by Chinese auto service platform Dongchedi showed.

Context: China’s new energy vehicle sales in April are expected to be on par with March at roughly 720,000 units, partly because wait-and-see sentiment has grown among Chinese customers, the China Passenger Car Association said in an April 25 post.

READ MORE: ​ Explainer: How a new round of price cuts are reshaping China’s EV market ​

Tesla claimed on its Chinese app on Monday that it would be rolling out its full self-driving (FSD) system “very soon” rather than the previously stated “a bit later” (our translation). The development comes as the US automaker reportedly received tentative approval from Chinese authorities to deploy its advanced driver assistance systems (ADAS) in the world’s most competitive electric vehicle market following a surprise visit to Beijing by chief executive Elon Musk. 

Local customers have expressed mixed views about the potentially game-changing technology finally coming to their country, although many Tesla owners and loyal fans welcomed the long-overdue launch on social media. The technology may not yet work well in Chinese urban driving scenarios, despite costing RMB 64,000 ($8,838); most competitors such as Xiaomi promise to offer similar functions free of charge, Li Yang, a Model 3 owner in Shanghai, told TechNode on Tuesday.

Major Chinese EV players Huawei and Xpeng Motors, who specialize in autonomous driving, have responded in a relaxed way to what is seen by many as a major win for their US rival. 

“We are confident that Huawei’s intelligent driving system is the best in the world,” Richard Yu, Chief Executive of Huawei’s Consumer Business Group, said at a press event last week as the company introduced the redesigned Aito M5 crossover. Aware of Tesla’s release last month of the no-longer-in-beta FSD software, Yu said the company has closely studied its competitor’s technology by taking test rides in San Francisco, among other US cities. 

A long-awaited battle: Experts told TechNode that the US and China have been in a neck-and-neck race to develop “end-to-end neural network” technology, seen by experts as the biggest difference between Tesla’s FSD v12 software and earlier versions.

• Tesla chief executive Elon Musk stated publicly in November that its most updated, end-to-end FSD uses machine learning rather than rules crafted by programmers to absorb driving behaviors from large datasets. The approach reduces the carmaker’s reliance on coding, expensive sensors, and high-precision maps for exact road information.
• “It is more of a 1,000 flowers blooming type of situation here in China, while the US market is guarded by a sole player,” Paul Gong, head of China autos research at UBS, told reporters on Monday in Beijing, referencing a Chinese idiom. Both the US and China are at the forefront of the technological trend, followed by Europe and the rest of Asia, Gong added.
• Although Tesla has huge amounts of data, Chinese firms have the potential to quickly catch up by ramping up their test fleets, according to Song Chaozhong, CEO of Chinese self-driving car startup eCHIEV. Song cautioned that real, “human-like” autonomous cars are still far away, despite the technology likely being a positive driver for vehicle sales. 

A booming segment: Analysts expect Tesla’s imminent launch of the FSD software in China to not only help restore Beijing’s image among foreign investors in general, but also help China extend its lead in the adoption of driver-assist technologies worldwide, and enhance its reputation as a rising powerhouse of next generation cars. 

• China has become a source of innovative engineering for global automakers, as they are now leveraging the capabilities of Chinese companies to design global vehicle offerings, Gong said when asked his view of this year’s Beijing Auto Show. He added China’s push to open its industries to greater foreign investment and competition has been “underestimated.”
• Tech-literate Chinese EV makers are poised for explosive growth thanks to growing interest from Chinese consumers in intelligent driving features, as Elon Musk earlier predicted a “ChatGPT moment” was coming for his company. Huawei on April 24 estimated that more than 500,000 cars on Chinese roads will feature its advanced driving system by year-end. 
• Xpeng is scheduled to launch its affordable brand MONA in June with the first model expected to feature an autonomous driving system without the integration of lidar and aiming for annual sales of 100,000 units. Global shipments of vehicles with ADAS features, known as Level 2 plus autonomy, could more than double to 4.5 million units this year, with China leading the game, research firm Canalys wrote in December.

Context: Tesla’s China breakthrough comes after US Secretary of State Anthony Blinken on April 25 called on China to provide a level playing field for American businesses during his second visit to China in less than a year, Reuters reported. 

• The US automaker has reached a deal with Baidu to localize its driver assistance solution with map and geographical information from the Chinese tech giant, according to Bloomberg.

Global carmakers from Volkswagen to Toyota are introducing new models at the Beijing Auto Show 2024 with the help of Chinese tech companies in an effort to defend market share amid a major shift to electric vehicles led by local car giants. 

The biannual trade event, which on Thursday witnessed a return to pre-pandemic attendance levels after a brief pause in 2022, also represents another landmark moment for the Chinese EV sector where domestic players are once again on the offensive with an array of new models. A similar event in Shanghai a year ago reportedly prompted the industry’s legacy players to either increase their efforts or rethink their brands in order to adapt to the changes.

Below, TechNode provides a summary of some of the biggest releases from both international and Chinese automakers, including BYD, GAC, Geely, Honda, Toyota, and Volkswagen. There are also some notable updates from younger players such as Xiaomi, NIO, and Xpeng, which might give a clue as to where the most competitive EV market in the world is heading. 

BYD

China’s biggest EV maker on Thursday unveiled a higher-end variant of its Qin vehicle, the top-selling compact sedan in the country last year. The new car is scheduled for launch in the second quarter with an expected price tag of RMB 120,000 ($16,560). The Qin L measures 4.8 meters in length and spans a 2,790-millimeter-long wheelbase, placing it between the Qin Plus and the Han in terms of size. It features the company’s next-generation plug-in hybrid platform DM-i 5.0, which could suggest an improvement in range and fuel efficiency. The company also introduced the Seal 06, a plug-in hybrid EV under the Ocean lineup which is about the same size as the Qin L but loaded with more stylish design language to attract younger customers. 

GAC

Aion, the third best-selling EV brand in China last year after BYD and Tesla, showcased its first global model, replete with modern technologies and angular styling, as its state-owned parent beefs up its strategy to woo customers worldwide. GAC said its all-new Aion V, scheduled for launch in July, will maintain a driving range of over 750 kilometers (466 miles) even when the mercury dips to -30 degrees Celsius, and offers a large interior space comparable to the likes of the BMW X5. The all-electric sports utility vehicle, which incorporates traditional Chinese dragons into its design, can navigate varied urban environments worldwide with features such as lane switching by utilizing advanced artificial intelligence algorithms to process sensor data instead of high-precision maps, the company said.

Geely

Volvo’s parent showed its ambition to become a disruptive force in the global automotive industry with the debut of what it described as the world’s first production model with two sliding doors and front swivel seats. Geely has taken a radical approach to how EVs are put together, giving the 4.7 meter-long Zeekr Mix an extended wheelbase of three meters achieved through a more compact electric motor, shorter front overhangs, and repositioning of the air conditioning system, among other components. This, along with the front seats that can rotate 270 degrees, would allow kids to play or families to dine together in a 1.5 square meter interior flat space. The five-seater multi-purpose vehicle, offering a 1.5 meter width opening area for passengers, targets three-generation Chinese families, especially those with elders and pregnant mothers.

Honda

Japan’s Honda on Thursday began selling its second all-electric model with time-limited discounts in China in the company’s latest effort to boost sales. The move comes after entrenched rivals such as BYD and Tesla recently rolled out more price cuts amid slowing growth. The e:NP2 SUV has a driving range of 545 km at a price tag of RMB 159,800, providing buyers with a RMB 30,000 reduction compared to its original plan, according to Li Jin, a deputy general manager of Honda’s China joint venture with GAC. Honda also debuted the Ye, a new series of all-electrics with technologies sourced from Huawei and iFlyTek among other Chinese tech firms, as part of its plan to sell only EVs in China by 2035.

Toyota

Toyota said on Thursday it will integrate lidar sensors into its two upcoming models under the “Beyond Zero” (bZ) all-electric series, as the world’s top-selling automaker looks to provide consumers with the same level of assisted driving technology as Huawei and Xiaomi. The bZ3x and the bZ3c compact crossovers will be able to automatically change lanes, and enter and exit Chinese highways when they go on sale within the next 12 months. Toyota also announced it is exploring the uses of generative AI in collaboration with Tencent, as Chinese consumers expect their future vehicles to be more capable and personalized. This follows reports that the Japanese giant is using Huawei components to enable autonomous driving functions on its China-made EVs. 

Volkswagen 

Germany’s biggest carmaker participated in Auto Beijing 2024 with major global debuts including the ID.Code concept – which offers a glimpse into its upcoming, China-specific all-electric lineup ID.UX – as well as the Audi Q6L e-tron, the first production model based on its PPE electric platform. The coupe-styled ID.Code will be equipped for highly autonomous driving and come with a sophisticated AI assistant with contributions from local designers, as Volkswagen plans to introduce the first model under the new series later this year. In addition to partnerships with Xpeng and Horizon Robotics, the automaker confirmed it is working with Chinese tech giants including DJI, as its latest Tiguan L SUV now features an advanced driver assistance system (ADAS) sourced from the drone maker.  

Xiaomi, NIO, and Xpeng

Xiaomi was the center of attention on Thursday when the Chinese smartphone giant said it had secured 75,723 reservations with non-refundable deposits for the SU7, its first EV, with a competitive price range between RMB 215,900 and RMB 299,900. Chief executive Lei Jun expects monthly delivery to exceed 10,000 units in June and the company is set to reach a milestone with 100,000 EV deliveries by this year, which would be a record speed for any Chinese EV brand. The 55-year-old entrepreneur is an icon in the Chinese tech and auto industries, with his visits to rivals’ booths becoming one of the hottest topics at this year’s Beijing Auto show.

Xpeng Motors could take on its major frenemy with the mainstream brand MONA, short for ‘Made of New AI,’ CEO He Xiaopeng told reporters during a press conference. 

Meanwhile, one of NIO‘s new affordable brands, called ONVO, is scheduled for launch in the second quarter of this year. The luxury EV maker on Thursday launched a redesigned version of its ET7 sedan with a starting price of RMB 428,000, which is RMB 20,000 lower than its original version launched three years ago.

READ MORE: Huawei, Xiaomi, and Geely’s new EVs have details leaked on Chinese government site

Major Chinese automakers, including Geely and Changan, have strategically introduced big discounts to their car prices or new variants of existing models despite posting a pickup in March deliveries, in a defensive move after Xiaomi’s first car reached nearly 90,000 pre-orders in just 24 hours. 

Xiaomi’s smash hit: The initial success of Xiaomi’s first EV, rolled out on March 28 with a lower-than-expected price tag, is having a knock-on effect on most other automakers which are being forced to take immediate action in order to hold on to their market shares. 

• The reservation-to-order conversion rate of the electronics brand’s SU7 has currently reached more than 35%, according to Sun Shaojun, founder of consumer behavior research agency CarFans. 
• Around 40% of Xiaomi customers canceled their pre-orders partly due to an expected long waiting time for vehicle delivery, Sun said in a Tuesday post on WeChat. Some were also frustrated by awkward sales-service interactions at overcrowded Xiaomi stores in major cities, Sun added, as the Chinese smartphone giant is gradually expanding its sales network for car retail. 
• Nevertheless, this is equal to a volume of at least 31,000 non-refundable orders in just four days, still an impressive performance for a new entrant and one that sees it surpass the early sales figures of Aito, a rising player launched by Xiaomi’s long-time rival Huawei.

March sales, discounts: Sales of Geely’s new energy vehicles (NEVs) rose 65% year-on-year and 34% month-on-month to 44,791 units in March, of which roughly 13,000 were Zeekr-branded battery EVs, partly driven by the strong sales of its refreshed 001 sports wagons, delivery of which began on March 1. 

• Geely on Monday launched a new rear-drive Zeekr 007 sedan, turning a bundle of add-ons into standard features including a large head-up display unit and heated and ventilated seats, at a price tag that is RMB 6,000 ($829) cheaper than Xiaomi’s SU7. 
• This comes after a similar move by Changan which two days earlier introduced a new entry-level variant of its Avatr 12, lowering the starting price of the premium sedan by 12% to RMB 265,800. Avatr’s deliveries more than doubled to 5,016 units last month. 
• Meanwhile, Huawei-backed Aito, which sells both battery EVs (BEVs) and plug-in hybrid EVs (PHEVs), edged out rival Li Auto for a third month in March with 31,727 deliveries compared to Li Auto’s 28,984, buoyed by strong demand for both the M7 and M9 crossover. 
• Aito claimed the M9 was the top-seller in the RMB 500,000-plus price segment in China last month, a title Li Auto had previously aimed for (and failed to reach) with its Mega van. Still, the EV brand, co-launched by Huawei and Seres, on Monday slashed the starting price of its best-selling five-seater by 8% to RMB 229,800. 
• NIO and Xpeng Motors deliveries also jumped significantly through March, and yet both are either slashing prices or using other promotions to lure customers. NIO’s ET5 and Xpeng’s P7i sedans compete in the same price segment as the Xiaomi SU7. 
• NIO said on Monday it will offer a reduction of RMB 10,000 for those who replaced their gasoline cars with a new EV. Xpeng’s G9 crossover now costs RMB 20,000 cheaper than its original list price, following a more than RMB 10,000 price reduction across its lineups a month earlier. 

READ MORE: Explainer: How a new round of price cuts are reshaping China’s EV market

Context: The March sales figures – which showed a rebound from the annual Chinese New Year holiday slump – also indicated a stronger growth momentum for PHEVs than BEVs with a growing number of carmakers pivoting to more affordable PHEVs as they look to expand NEV sales in China’s vast majority of underdeveloped regions.

• PHEVs accounted for more than half of BYD’s sales and enjoyed a higher growth rate than BEVs over the first three months of this year, according to a regulatory filing posted on Monday (in Chinese). The country’s biggest EV maker was followed by the likes of Geely, Aito, and Li Auto, all preferring a broader product portfolio to purely BEVs.
• Ouyang Minggao, an academic at the Chinese Academy of Science, said last month that PHEVs could grab substantial market share from internal combustion engine cars in the coming years, especially in the entry-level price segment, and expected more widespread adoption of BEVs over the next decade.
• EV adoption in China’s lower-tier cities and rural regions is slower than in the country’s more developed areas. A growing number of EV owners from lower-tier cities said they will go back to conventional automobiles for their next purchase due to a lack of charging infrastructure, according to an annual report by consultancy McKinsey released on March 12. 

READ MORE: Chinese officials reaffirm commitment to EV ambitions and promise raft of support measures amid industry doubts

China’s Zeekr and Xpeng Motors will begin delivering their electric vehicles to Thailand later this year while eyeing expansion to other Southeast Asian countries, as they seek further overseas growth amid slowing opportunities at home.

Why it matters: The news comes after Chinese car brands’ combined market share reportedly swelled by six points to 11% in Thailand in 2023, thanks to growing demand driven by favorable subsidies and tax breaks for EV purchases. 

• Southeast Asia’s largest car producer and exporter, Thailand has also become a strategic location for Chinese automakers wishing to diversify their operations and reduce geopolitical risks, according to researchers from the Global Policy Institute.  
• EVs accounted for around 10% of car sales in Thailand last year, and the government has aimed to increase that percentage to around 30% of its annual production of 2.5 million by 2030, making the country a regional manufacturing hub for EVs. 

Debut in Bangkok: Xpeng named on Monday three major dealer groups to sell and service its EVs for Southeast Asia: Neo Mobility Asia for Thailand, Premium Automobiles for Singapore, and Bermaz Auto for Malaysia. 

• The Volkswagen-backed EV maker announced the partnerships ahead of the opening of a major auto show in Bangkok, with plans to start delivering a right-hand drive version of its G6 crossover in the three countries in the third quarter of 2024. 
• In the meantime, Zeekr has put forward a similar timeline for its compact crossover X and multi-purpose vehicle 009, with plans to open its first store in Bangkok later this year. The company began Thai pre-sales on Monday. 
• The Geely-owned brand said it will expand its retail network with distributors in Chiang Mai, Phuket, and Pattaya by year-end. It has also signed contracts with car dealers in Laos, Myanmar, and the Philippines, Reuters reported on March 12. 

Local production ramp-up: Chinese automakers are making deeper inroads in Thailand by setting up plants in the country, as the Thai authorities required the firms to offset imports with local production at a ratio of 1:2 starting from 2026, in order to qualify for government subsidies. 

• BYD told investors last month that its $491 million car plant will begin operations in Rayong later this year, with an annual output of 150,000 units for both Thailand and the wider Southeast Asia region. The EV giant captured 4% of the country’s auto market with sales in 2023 of about 30,000 EVs. 
• Aion’s first overseas plant is set to begin production in July. The EV maker, an affiliate of China’s GAC Group, said on Jan. 31 (in Chinese) it will invest 2.3 billion baht ($63.2 million) in the project for an annual output of 50,000 units, not long after it started exports to the country in September. 
• Changan also hopes to begin exporting EVs from Thailand to nearby ASEAN countries and beyond next year, as it builds up capacity at a $241.7 million facility with a maximum output of 100,000 vehicles annually in Rayong. Rivals such as SAIC, Great Wall Motor, and Hozon Auto are also making their EVs locally. 

Chinese electric vehicle makers are taking a ferocious price war to a new level as BYD and its peers kicked off 2024 with dozens of redesigned models that boast improved specifications at lower price tags. 

For conventional carmakers, the situation is different from previous stages of the battle, as their Chinese counterparts claimed for the first time that “electric is cheaper than gas,” meaning their EVs now reach or even surpass price parity with similar combustion engine models. This milestone was supposed to take place as early as 2026, according to forecasts from BloombergNEF. Its ahead-of-schedule arrival is ushering a new phase for China’s car industry.

The world’s biggest EV market is being reshaped by a seemingly endless price war that has been going on for a year, and 2024 will likely be a defining moment for those faced with flagging sales, persistent losses, and cash flow pressure, analysts say. The following explainer looks at the causes and implications associated with the recent price cuts by automakers in China, as well as what we might expect in the future. 

The good: reduced costs, innovation

Among the key reasons for the price reductions is the plunging cost of raw materials for EV batteries, as the spot price of battery-grade lithium carbonate fell from more than RMB 500,000 ($69,450) per ton to just over RMB 100,000 throughout the last year. Jefferies analysts calculated that Chinese EV makers saw their gross profit margin recover by 2.3% in the third quarter of 2023 with average lithium prices falling by RMB 200,000. 

A vertically integrated supply chain stretching from batteries to chips has also granted EV leaders BYD and Tesla the ability to achieve economies of scale and innovate products rapidly. BYD, which has had strong “pricing power” especially in the price segment between RMB 100,000 and RMB 200,000, will embrace a proactive approach to competition, chairman Wang Chuanfu told investors during an earnings call last March (our translation). 

Analysts expect the downward trend in lithium prices to continue, as vast amounts of capital were poured into new mines in China following the price rise in 2022, resulting in a severely imbalanced market. Lithium prices could come in as low as RMB 90,000 a ton in the fourth quarter of this year, creating more room for most companies to make price adjustments, Jefferies strategists said in a Jan. 10 note. Meanwhile, EV makers such as Xpeng Motors are likely to improve vehicle margins “to some extent” thanks to innovations in fields such as automated driving. 

The bad: overcapacity, slowing growth

On the other hand, however, Chinese EV makers have been under pressure to boost sales volumes as they grapple with a clear capacity glut and slowing growth against the backdrop of weak momentum and insufficient demand. 

Only 20 out of 77 car manufacturers in China ran at more than 60% of their maximum operating capacity last year with numbers from the rest coming in under industry-competitive levels, according to public records. Tina Zhou, chief executive of auto parts trading platform Gasgoo, commented on social media on Dec. 17, citing this overcapacity as a major reason for the industry-wide price war over the past year. In January, the Chinese government said it would take “forceful measures to prevent superfluous projects” related to EV manufacturing, Reuters reported. 

Although China’s leadership in EV is seen as a bright spot in a faltering global economy and amid a domestic economic downturn, experts have painted a picture of a resilient but slowing market, flagging more price cuts to come as sluggish consumption abounds. Bernstein expects China’s EV sales growth to be “still impressive” but slower at 25% for 2024 compared to 35% last year, with a combined total of approximately 185 new EV models set to go on sale this year. 

“Consumers are getting spoiled by deep discounts and believe they will eventually negotiate a better price even for those new cars coming to the market,” Bernstein analysts wrote in a Jan. 10 note. 

Could it get ugly?

The unprecedented battle for the world’s biggest and most competitive EV market has pressured international auto majors from Ford to Toyota to scale back their operations since last year, with their market share (Tesla excluded) declining from 51.6% to 38.3% during 2021-2023. Citic Securities on Feb. 22 forecast (in Chinese) that number to drop to below 20% over the long term, with only German luxury carmakers able to maintain their presence. 

Meanwhile, a new wave of consolidation and some reshuffling is underway among Chinese EV makers as repeated price cuts allow the bigger ones to grab more market share and put their smaller rivals under financial pressure. The top 10 players could together claim a combined 85% of the market in 2024, driving smaller players out of business, Changan Automobile chairman Zhu Huarong, a delegate of the National People’s Congress, told Chinese reporters on Tuesday on the sidelines of the Two Sessions meetings in Beijing.

Not everyone agrees. NIO founder and chief executive William Li told TechNode during a media event in December that the company is preparing for a long drawn-out fight, while UBS envisioned China could be big enough to allow 10-12 domestic carmakers to sell significant volumes with different success stories by 2030 in the best-case scenario. 

Either way, it could be an almighty battle – it will be thrilling to see who emerges victorious.

Sales of major Chinese electric vehicle makers including BYD and Geely fell by nearly half in February from a month prior, hit by the week-long Chinese New Year holiday and a prolonged cold snap, as well as ongoing economic uncertainty. 

Why it matters: The slump largely reflects the increasingly fragile position of smaller EV makers, already struggling to maintain reasonable sales volumes while larger rivals compete for market share with new models on offer for lower prices. 

• Consolidation within the world’s biggest EV market is expected to accelerate as competition intensifies and growth slows. Li Auto president Ma Donghui told investors last week that the top three brands could together claim 70% of the segment in which an EV is priced from RMB 200,000 ($27,780) by the end of this year. 

Details: BYD on March 1 reported its lowest sales since June 2022, with 122,311 vehicles sold last month, a 39.2% fall from January. New energy vehicle (NEV) sales of rival Geely, including battery EVs and plug-in hybrids, dropped 49% month-on-month to 33,508 units. 

• Great Wall Motor saw a bigger decline from a month earlier than its rivals as the auto major sold 12,253 EVs in February, a drop of 51%, while sales of Aion, a subsidiary of China’s GAC Group, were 33.2% lower than a month before. 
• Jefferies analysts attributed the decline to a seasonal demand lull in the just past Lunar New Year holiday, which reduced working days and dampened buying interest, accompanied by an unexpected cold snap that swept through most of China. 
• Smaller EV makers were hit harder than large ones, as monthly sales of both Leapmotor and Hozon Auto fell below 7,000 units, while February deliveries of Xpeng Motors and Voyah were down roughly half to 4,545 and 3,182 units respectively. 
• Most automakers have either launched cheaper new models or offered big incentives to drive sales in recent weeks. BYD kicked off 2024 with the launch of at least eight lower-cost version cars over the past two weeks, forcing rivals including Geely, Changan, and Leapmotor to follow suit.
• Huawei-backed EV maker Aito and Nasdaq-listed Li Auto, are among few carmakers to enter 2024 in decent shape, each delivering over 20,000 units last month. General Motors’ joint venture Wuling and NIO saw deliveries drop 18.4% and 19.1% from January respectively. 

Context: Analysts expected NEV sales to bounce back in March following recent price cuts by China’s major automakers, as store traffic returns to pre-Lunar New Year levels, according to a March 1 note from Jefferies, citing a Chinese dealership. 

• Overall, NEV sales in China declined 29.5% month-on-month to roughly 668,000 units in January, in part due to a high base in December when most automakers made a year-end sales push, according to figures from the China Passenger Car Association. 
• The industry group warned that numbers would drop in February to their lowest level of the year as the market entered a traditionally low season. It remains to be seen whether March will witness a sales rebound.

The Chinese electric vehicle segment briefly lost momentum in January as a majority of automakers reported a significant sales drop on Thursday during the traditional low season, a contrast to December when big promotions and exciting discounts gave a short-term sales boost at year-end. 

Why it matters: The decline was especially marked for BYD, which accounted for nearly a third of the country’s green energy vehicle sales last year. The biggest Chinese EV maker maintained its leading position with sales of more than 201,000 units last month, although that number represented a 41% decrease compared to December. 

• Geely and Huawei-backed Aito are among the few bright spots that have bucked the trend with their new models, becoming potential challengers to BYD’s dominance. Meanwhile, international carmakers such as Volkswagen and General Motors posted decent sales with local partner SAIC, showcasing their efforts to play catch-up. 

Ups: Geely posted its best-ever month with sales of 65,826 fully electric and plug-in hybrid vehicles last month, roughly 5,400 units more than in December and nearly six times greater than what Volvo’s parent achieved a year ago. This growth was partly due to strong sales of its Galaxy and Lynk & Co brands, which sold 19,223 and 28,176 units over the month, respectively. 

• Aito also delivered a record 32,973 cars in January. That is in line with the company’s outlook and stands in stark contrast to the same month last year when it reported deliveries of only 4,475 vehicles. The brand, launched by Huawei and its manufacturing partner Seres, said on Thursday (in Chinese) that it has secured 140,000 non-refundable orders for its redesigned M7. 
• Avatr, another Huawei-backed and Changan-owned EV brand, also posted improved sales volume for January buoyed by the positive demand for its second model launched in November. However, an ongoing shortage of Huawei’s key components may add uncertainty to the outlook of the premium brand and its peers, as reported by Reuters. 

Downs: On the other hand, China’s US-listed EV trio are the ones under pressure by reporting their lowest monthly deliveries since June, as they engage in a relentless price war with larger tech and auto forces. Both Li Auto and NIO slashed prices on current lineups last month as they prepare to launch revamped models in March, potentially causing some customers to postpone purchases. 

• Sales of Aion, which has sold a large proportion of its vehicles to ride-hailing fleets, also dropped 46% month-on-month to 24,947 units in January. The EV maker, affiliated with state-owned automaker GAC, is now ramping up efforts to go abroad, as sales in the overseas markets reached the threshold of 3,000 units for the first time last month. 
• Deliveries of Great Wall Motor and Deepal, another Changan subsidiary, also decreased by 16.2% and 7.1% to 24,988 and 17,042 units respectively, from December. Meanwhile, IM Motors, a premium EV brand launched by China’s SAIC, saw a bigger drop with its January number more than halved from a month earlier to 5,305 units.

Context: China’s sales of new energy vehicles, mainly all-electrics and plug-in hybrids, increased 92% year-on-year from Jan.1-28 partly due to the year-ago low base effect marked by a wave of Covid cases after Beijing dismantled pandemic controls in December 2022. However, that number was 24% down compared with December when most automakers made a year-end sales push, figures from the China Passenger Car Association (CPCA) showed.

Top Chinese automakers BYD and Geely on Monday reported record sales of electric vehicles in 2023 on the back of year-end momentum from their home turf and strong shipments to overseas markets, as China’s booming industry ramped up its push for global expansion.

Why it matters: The latest sales figures come at a time when China is set to surpass Japan to become the world’s largest car exporter, according to estimates by the China Association of Automobile Manufacturers (CAAM)  as reported by Nikkei, buoyed by a growing demand for green energy vehicles worldwide.

• Exports of new energy vehicles, mainly all-electrics and plug-in hybrids, grew 83.5% year-on-year to almost 1.1 million from January to November, while internal combustion engine vehicles remain the major export commodity, accounting for 75% of China’s total car shipments abroad, according to CAAM.

Details: BYD posted record sales at more than 3.02 million EVs in 2023, marking 62% growth from a year ago and putting the Chinese carmaker in pole position to retain its title of the biggest-selling EV brand in the country. In particular, exports surged 334% to 242,765 units compared with the previous year, with the company now having established its footprint in more than 70 countries.

• Sales of SAIC-GM-Wuling, General Motors’ minicar joint venture in China, also reached a record high of 1.4 million units, of which 211,512 were overseas exports, representing a 9% year-on-year growth. The automaker currently sells its budget models including Mini EVs in Southeast Asian countries such as Thailand, Vietnam, and Indonesia. 
• Geely said its EV sales rose 48% year-on-year and were also record-breaking last year, at 487,461 units, including 274,101 gas-powered and green energy vehicles abroad. Its premium EV brand Zeekr delivered 118,685 units over the year, up 65% year-on-year but missing its delivery goal of 140,000 units set earlier this year. 
• GAC’s EV unit Aion was also around 20,000 units short of its annual delivery target of 500,000 EVs, closely followed by Changan Automobile at more than 470,000 units. Huawei’s manufacturing partner said overseas shipments grew 35.4% to roughly 230,000 units, as construction of its overseas production base started in Thailand last month. 
• Li Auto maintained its solid momentum throughout the year as it reported deliveries of 50,353 plug-in hybrid crossovers in December, bringing the company’s total deliveries for the year to 376,030. Young EV makers such as NIO and Xpeng Motors are catching up with annual deliveries of 160,038 and 141,601, respectively. 
• SAIC-Volkswagen, the joint venture of the Wolfsburg-based automaker and China’s state-owned automaker, said it became the most visible player among its peers with sales of almost 110,000 units of its China-made ID family electric models. The German automaker in July reportedly cut the price of its ID.3 hatchback by more than 20% to RMB 125,900 ($17,500).

Context: CAAM expected car sales in China to reach the threshold of 30 million units for the first time in 2023 and that number will be further increased to 31 million in 2024, Caixin reported. NEV sales are set to total 9.4 million units in 2023, up 37% from a year earlier. The growth rate could slow to 22% in 2024, however, as the domestic EV market is maturing.

Xiaomi held its most significant media event of the year in Beijing on Thursday: the debut of its first electric car. With a size comparable to the BMW 5 Series and a shape similar to the Porsche Taycan, the four-door sedan boasts some of the Chinese car market’s highest specifications, as cut-throat competition from maturing rivals rises.

The sleek, gadget-full all-electric sedan is aiming to become a top choice for China’s increasingly tech-savvy consumers, and certainly aroused widespread curiosity judging by the more than 46 million people who logged on for the three-hour-long unveiling on the country’s Twitter-like site Weibo. Yet from journalists and insiders alike, the reaction was mixed. 

From the event, TechNode has selected some of the car’s highlights. 

Main specs

The high-performance SU7 can sprint from 0 to 100 km/h (62 mph) in 2.78 seconds, as it climbs to a top speed of 265 km/h. It is claimed to be the world’s most aerodynamic production car with a drag coefficient (Cd) of 0.195. By comparison, the Taycan Turo can hit 260 km/h and Tesla’s Model S has a Cd of 0.208. It also comes just a month after rival Huawei launched the Luxeed S7 sedan at 0.203Cd. 

Xiaomi said it uses two 9,100-ton mega casting press machines to produce the front and rear underbody pieces, giving the car a torsional stiffness of 51,000 Nm/degree, nearly twice the number of the Ford F-150 Raptor and higher than any other car on the road. The technology, first adopted by Tesla, has since been embraced by Chinese EV makers from Geely-affiliated Zeekr to Huawei-backed Aito.

Vehicle autonomy

Xiaomi’s chief executive Lei Jun presented aspects of the company’s self-driving initiative for public viewing, highlighting that the premium version of the SU7 will incorporate two Nvidia Drive Orin processing chips plus a laser sensor unit on the car’s roof to carry out certain partially autonomous driving functions. Xiaomi also showed a short video of the car drawing into a tight garage space autonomously.

The Chinese tech company has set a goal for its advanced driver assistance software to be available to drivers in 100 major Chinese cities by the end of the next year, according to Lei. Huawei and Xpeng Motors are for now the leaders of this booming market, with established carmakers from BYD to Great Wall Motor trying to catch up.

Smart cabin

The SU7 will be the latest Chinese car model powered by Qualcomm’s smart cockpit computing platform SA8295, after the Zeekr 001 FR and its sibling Jiyue 01, and its infotainment system will turn on in just 1.5 seconds. It is also integrated seamlessly into the Xiaomi ecosystem with the adoption of the company’s self-developed operating system, the HyperOS, which takes only 30 minutes or so to carry out important updates, according to the company. 

CEO Lei said the SU7 would create the same smooth experience that anybody with a Mi Phone is used to, as various apps are pushed from their phones to a 16.1-inch in-car dashboard once they sit in the car. Other devices, from tablets to home appliances, also seamlessly work with the vehicle, an integration trend led by auto and tech majors such as Huawei, Geely, and NIO.

Conclusion

Xiaomi will have to pick an appropriate price tag, given it starts with a somewhat broad, unclear positioning, said You Xi, a seasoned economic and financial writer and co-founder of Chinese online media platform Communication Planet. “It remains challenging for the company to extend its brand into EVs,” You added, citing similar offerings from multiple competitors among his reasons (our translation).

The smartphone giant plans to introduce two variants of the SU7 to “contemporary elites with taste in lifestyle and technology” in China over the next few months, said Lei. Some experts have predicted the premium version of the car, with an estimated driving range of 800 kilometers (497 miles), could cost consumers at least RMB 300,000 ($41,124).

Volkswagen’s software unit Cariad and Chinese auto tech startup Horizon Robotics expect to recruit 300 employees by the end of this month for a newly established joint venture called Carizon, in an effort to meet growing local demand for advanced driving technology. 

Why it matters: The hiring spree marks the German auto major’s latest effort to develop its own in-vehicle software following an announcement last year of a $2.3 billion investment deal for a 60% stake in the JV in partnership with Horizon. 

Details: The two companies have not officially provided details of the recruitment plan, but Horizon’s co-founder and technology chief Huang Chang, leading a team of more than 100 engineers, has reportedly joined the JV. 

• Su Jing, a former head of Huawei’s autonomous driving team who has been on board at Horizon since earlier this year, will lead the development of advanced driving systems based on Horizon’s next-generation computing solution Journey 6. 
• Beijing-headquartered Carizon was officially set up on Nov. 20 with a registered capital of RMB 6.8 ($940 million), with VW and Horizon taking 60% and 40% stakes in the entity respectively, according to Chinese corporate data site Tianyancha.
• The JV will focus on rolling out automated driving technology powered by Horizon’s Journey series processors and integrated into VW’s upcoming battery EVs in China, according to an announcement dated Dec. 8. 
• VW and Horizon are on track to deliver their first collaborative development effort as early as 2025, Cariad China’s chief executive Chang Qing told Chinese reporters last month. This will allow VW vehicles to function independently on Chinese highways and certain urban streets, a feature popular with Chinese consumers.

Context: VW has made a series of moves to step up the pace of its software development for the Chinese market, including a $700 million deal for a 5% stake in Chinese EV maker Xpeng Motors unveiled in July.

• The German carmaker is also forming a JV with China’s ThunderSoft to improve its infotainment systems and car cockpits, Reuters reported in April, while partnering with smartphone maker Vivo on a similar effort.
• VW sold roughly 2.3 million cars in China for the first nine months of 2023, recording a year-on-year decline of 3%, of which roughly 117,100 units were EVs, up 3.9% from a year ago. It delivered 341,100 EVs in Europe over the same period, an increase of 60.9% from last year.
• Horizon said in April it has shipped more than 3 million computing solutions for over 120 car models from prominent Chinese automakers ranging from BYD to Geely. Self-driving startups such as Pony.ai and Qcraft are developing assisted driving technology based on its processors.
• US chip powerhouse Nvidia is also ramping up its self-driving car efforts in China with plans to expand its workforce locally after recently hiring Wu Xinzhou, a former vice president at Xpeng Motors, TechNode has reported.
• Speaking to Chinese media outlet LatePost in July, Wu said that foreign companies would need to establish research and development teams of “at least several hundred people” locally to be able to compete with Chinese carmakers and self-driving car companies (our translation).

Major Chinese electric vehicle makers from BYD to Xpeng Motors have collectively posted strong delivery figures in November as they attempt to hit their annual targets and as competition shows no signs of subsiding in the world’s biggest auto market. 

Why it matters: Jefferies analysts wrote in a Dec. 1 note that they estimated sales of China’s new energy vehicles (NEVs), mostly all-electrics and plug-in hybrids, to reach 1 million units in November with a solid month-on-month growth rate of 10% from a high base. 

• However, analysts warned of an intensified price war as 2023 comes to a close, as major EV brands including BYD and Li Auto have either cut prices or increased the royalties for customers since late November to boost year-end sales. 

Details: BYD on Dec. 1 revealed monthly sales figures of its premium Fangchengbao and Yangwang marques for the first time following their launches earlier this year, announcing it handed over 626 and 408 units to customers, respectively. Delivery of the RMB 1 million ($150,000) Yangwang U8 and the Bao 5, with a price range of RMB 289,800 to RMB 352,800, began in late September and November separately. Overall, the EV giant outsold its October figures by 70 units in November. 

• Geely’s NEV sales increased 4.7% month-on-month to 65,034 units last month thanks to a wide product portfolio under a multi-brand strategy. Volvo’s parent said it delivered 13,770 units under the Galaxy marque and 13,104 Zeekr-branded battery EVs, while sales of its Lynk & Co 08 extended-range hybrid EV surpassed the 10,000 mark over the month. The numbers of GAC’s Aion and Great Wall Motor rose 0.15% and 0.23% from a month previously, respectively. 
• Huawei-backed Aito posted its best-ever month by delivering 18,827 units, which is nearly 50% higher than its deliveries in October and surpassed the top end of the guidance provided by Huawei’s head of consumer business group a week ago. The number is expected to exceed 23,000 this month and to hit 30,000 in January, as the EV maker said it has secured more than 100,000 non-refundable orders for the revamped M7 crossover over the last two months or so.
• Growth momentum has been sustained for both Li Auto and Xpeng Motors which once again reported record-setting deliveries of 41,030 and 20,041 vehicles last month respectively. Li Auto’s founder Li Xiang said it is aiming for deliveries of 50,000 EVs this month, while Xpeng on Nov. 15 forecasted the fourth quarter delivery of up to 63,500 units. NIO‘s November delivery of 15,959 vehicles is basically flat from the previous month. 

Context: China’s NEV sales were partly boosted by the opening of the annual Auto Guangzhou show on Nov. 17 with dozens of debuts of all-new cars, as major players try to enhance their presence among a crowded field. 

• More than 5.9 million NEVs were sold during the first ten months of this year, representing a year-on-year growth of 34.2% and accounting for 34.1% of total car sales in China, according to figures from the China Passenger Car Association. 
• Miao Wei, former minister of Industry and Information Technology, expects the NEV penetration rate to exceed 50% of all new car sales as early as 2025. That would be 10 years ahead of Beijing’s schedule. Miao made the comment on Nov. 29 during this year’s China Automotive Industry Forum, reported media outlet The Paper.

As automakers continue their struggle amid an unrelenting price war in China, both established brands and startups are showcasing their latest products at the Auto Guangzhou 2023 show in a bid to take pole position ahead of what promises to be another year of tight competition. 

Traditionally one of the country’s largest car shows, this year’s Auto Guangzhou offers a glimpse of how intense competition in China has been, and how successful it has been at flushing out weaker foreign marques as domestic rivals fall over one another in a mad rush to crack the market. 

“Joint car manufacturers are faced with unprecedented challenges against the backdrop of the current situation,” said Wen Dali, a deputy general manager of GAC-Toyota, a joint venture between the Japanese automaker and its Chinese partner (our translation). More than 20% of the JV’s new car sales over the next three years in China are set to be new energy vehicles, mostly battery-run electric vehicles (BEVs) and plug-in hybrid EVs (PHEVs), Wen added at a press event on Friday. 

Here’s a quick roundup of some of the highlights from the Guangzhou International Automobile Exhibition, which kicked off on Friday in the capital of China’s Guangdong province. 

BYD – Sea Lion 07

The BYD Ocean family of electric cars on Friday welcomed a new sibling and its latest answer to the Tesla Model Y, the Sea Lion 07, crafted by Wolfgang Josef Egger, BYD’s design chief and a former head designer at Audi Group. 

The mid-size crossover boasts distinctive design elements with its muscular fenders, bold air inlets, and clean character lines on all four corners, while the high shoulder lines and the dual, through-type waistlines give the vehicle a sporty vibe. The features are intended to make the car look unique from miles away, Fan Jihan, a deputy director of BYD said on Friday during the show.

Slightly larger than Tesla’s Model Y at 4.8 meters in length and with a 2,900-millimeter-long wheelbase, the top-end all-electric car is expected to have a driving range of more than 700 kilometers (435 miles), compared with the 688 km claimed by the long-range version of its US rival. Scheduled for official launch later this year, it will be equipped with BYD’s latest advanced driver assistance system (ADAS), according to the company.

Geely – Zeekr 007 

This year’s Auto Guangzhou saw the debut of the long-awaited Zeekr 007, the first electric sedan under the premium marque of auto major Geely. 

The latest model from Stefan Sielaff, formerly a head of design at Bentley, the 4.9-meter-long all-electric vehicle comes with 1,711 high-intensity lamp beads powered by 75 automotive chips. This enables the car’s LED headlights to display a dazzling, customized lighting sequence with animation about 90 inches wide, showcasing some of the most advanced lighting technology by a Chinese carmaker. 

Meanwhile, the Zeekr 007 features an 800-volt battery system, which offers a driving range of up to 870 km on a full charge and can travel another 610 km on 15 minutes’ extra charge. Zeeker claims it to be the quickest accelerating road car of the same class ever made, going from 0 to 100 km/h (62 mph) in 2.84 seconds, while also being one of the earliest models to use Qualcomm’s latest 5-nanometer cockpit chip 8295. 

The company aims to begin delivering the car in January at a lower-than-expected pre-sale starting price of RMB 224,900 ($31,059). 

Xpeng Motors – X9

Xpeng on Friday was on its home court when it unveiled details of its first flagship multi-purpose vehicle (MPV) the X9, which the Guangzhou-headquartered electric vehicle maker expects will stand out from existing offerings with superior comfort and top-notch performance. 

With a competitive pre-sale starting price of RMB 388,000 ($53,544), the seven-seater has a claimed interior space of 7.7 square meters, which makes it 12% bigger than the Toyota Alphard, a worldwide top-seller in the chauffeur-driven luxury people mover category, according to chief executive He Xiaopeng. 

The family van is also said to have the best third-row seats on the market that can be adjusted for recline to a desired angle of nearly 180 degrees and folded down flat to increase cargo capacity. Meanwhile, the luggage compartment offers space for seven suitcases. 

The Xpeng X9 is claimed to be the world’s first MPV equipped with rear-wheel steering as a standard configuration, which reduces the car’s turning diameter to an industry record of 10.8 meters (35.4 feet), making it easy to maneuver. 

Li Auto – Mega

Li Auto has finally made available the details of its long-anticipated MPV, the Mega, with an exterior echoing the bullet-style look of China’s high-speed trains. The seven-seater van boasts the world’s fastest charging speed among electric vehicles of all kinds, capable of traveling up to 500 km on 12 minutes of charge powered by CATL’s next-iteration Qilin batteries. 

It has a drag coefficient (Cd) of 0.215, which the company claimed is the lowest Cd rating for an MPV, while it will consume 15.9 kilowatts (kWh) of electricity for every 100 km of travel, also among the lowest in the industry. 

The company, which has delivered more than 500,000 plug-in hybrid SUVs as of September, confirmed plans to build 300 supercharging stations in China by year-end. Pre-sales of the Mega started on Friday with a price tag of around RMB 600,000 ($82,800) and delivery scheduled for February 2024.

READ MORE: Chinese carmakers showed up big time at Auto Shanghai 2023

Xpeng Motors said on Nov. 3 that it will offer some existing owners of its P5 sedan discounts on new purchases after hundreds of customers accused it of failing to deliver promised advanced driver assistance features, which were supposed to be available across the country. 

Why it matters: The complaints, which went viral on Chinese social media last week, mounted after Xpeng on Oct. 24 unveiled plans to roll out its latest advanced driver assistance system (ADAS), the XNGP, nationwide by next year. The company said it will be applicable to existing models including the G6, G9, and P7i, without mentioning the P5. 

Details: Xpeng said in a statement issued on Nov. 3 that it will offer an RMB 20,000 ($2,747) coupon for people who have subscribed to Xpilot, its previous generation driver-assist software, along with their purchases of the premium version of the P5 sedan. The benefit could be used for a new purchase of one of Xpeng’s most popular models, including the G6, G9, P7i, or its upcoming X9 van. 

• The announcement comes after more than 700 P5 owners recently published an open letter, obtained by National Business Daily, asking the company for an explanation as to why its partially autonomous feature for urban driving has remained unavailable to them in most domestic cities, despite the company’s promises.
• Xpeng further explained that the availability of its previous-generation ADAS feature “relies heavily on” high-definition maps, which has reportedly required automakers to secure approval for using mapping data in their vehicles, partly resulting in slow progress in adoption (our translation). 
• The EV startup released the so-called City Navigation Guided Pilot (NGP) function first to Xpilot users in the city of Guangzhou last September and has since expanded the adoption to five major cities including Beijing, Shanghai, and Shenzhen. 
• “We will strive for more new features and improved user experience, despite many challenges,” Xpeng said in the statement, adding that more functions will be available to P5 owners through over-the-air updates next year, including steering assist and more music streaming apps. 

Context: Xpeng began delivery of the P5 electric sedan back in October 2021, with its premium versions featuring two lidar sensors to facilitate more reliable automated driving functions at a price range of between RMB 199,900 and RMB 223,900 ($27,453-$30,749). It sold 19,618 units of the car over the last 12 months, according to figures from the auto services portal Dongchedi.

• The automaker is shifting to a more affordable approach for autonomous driving, which will reduce its reliance on technologies such as lidar and HD maps as part of a plan to roll out its XNGP system in 50 domestic cities by December. 
• The Xpilot system, formerly Xpeng’s rival to Tesla’s Autopilot system as reported by CNBC, is unavailable for driving scenarios without the support of HD maps, according to a Q&A document published by the company last November.

Chinese electric vehicle makers Xpeng Motors and Aito on Wednesday posted record-breaking figures for monthly deliveries, as the pace of adoption of self-driving technology accelerates among local customers despite slowing growth in China’s electric vehicle segment as a whole. 

Strong orders for Huawei, Xpeng, and DJI’s city NOA (Navigation on ADAS) products mark the start of the commercialization of smart driving, Jefferies analysts wrote in an Oct. 24 note. They added that Chinese automakers are becoming more willing to “test the waters” with chips by Huawei on some of their vehicles.

Why it matters: The latest figures highlight a brutal price war that has been continuing for months in the market, and the struggle automakers are facing in having to choose between lower prices or losing market share. 

• Xpeng in June unveiled the G6, its crossover answer to Tesla’s Model Y, at a price tag 20% lower than its US rival in China. Aito’s all-new M7 sports utility vehicle now costs RMB 40,000 ($5,468) less than the version launched a year ago.

Riding the self-driving boom: Xpeng Motors handed over 20,002 electric cars to customers in October, crossing the 20,000 unit milestone, nearly a threefold increase from a year ago and  31% growth from September. 

• Aito also reported a record delivery number of 12,700 units last month. The Huawei-backed brand does not report its delivery figures consistently, but its Shanghai-listed manufacturer Seres posted sales of 40,389 EVs for the first nine months of the year. 
• The two companies appear to have taken an early lead in an emerging battlefield for partially autonomous technology among consumer carmakers. More than half of the orders of Aito’s redesigned M7 SUV were placed for versions with Huawei’s Advanced Driving System, Chinese media outlet Caixin reported on Oct. 7, citing company insiders. 
• The Max versions of Xpeng’s G6 crossover, which features the company’s XNGP assisted driving technology, accounted for 70% of total orders in the first month after the launch, chief executive He Xiaopeng said in August. Both companies said their vehicles would be able to travel autonomously most of the time in dozens of major Chinese cities by the end of the year. 

EV startups: Li Auto also accomplished a delivery milestone last month, distributing 40,422 vehicles, making its year-to-date deliveries 284,647 units, the highest among the country’s nascent EV startups. The company has upped its goal to 50,000 units for the remaining two months of the year, CEO Li Xiang said on Wednesday on the Chinese Twitter-like platform Weibo.

• NIO’s October delivery of 16,074 units represented a 59.8% growth from this time last year and a slight 2.8% increase month over month. The company has delivered 126,067 vehicles as of October this year, still far from the annual goal of 245,000 units revealed by CEO William Li in March. It is now aiming for monthly delivery of more than 20,000 units in the fourth quarter of 2023. 
• Leapmotor’s delivery of 18,202 EVs last month comes after the Zhejiang-based EV maker recently announced a deal with European major Stellantis for a $1.6 billion war chest and turned its negative gross margin into a positive for the past quarter. Rival Hozon delivered 12,085 units, representing a decrease of 32.9% year-on-year and 8.5% month-on-month. 

Established majors: BYD’s growth momentum continued to some extent in October as the company saw sales surpassing 301,000 vehicles with a mild 5.2% rise from a month earlier. Analysts expect China’s biggest EV maker to achieve its annual goal of selling 3 million cars this year, as the company on Monday launched a wagon version of its popular Song SUV and readied to sell its long-anticipated Bao 5 off-roader.

• Sales for Aion declined 19.6% from a month earlier to 41,503 units, as the GAC subsidiary ramps up production of its new models, company insiders told financial media outlet CLS. Changan-affiliated Deepal delivered 15,513 vehicles in October, a 10.7% decrease from September. 
• Zeekr delivered 13,077 vehicles last month, up 29.2% from a year ago and 8.5% from September. On Aug. 11, the two-year-old premium EV brand, set up by Volvo parent Geely, cut the price of its 001 hatchback by up to RMB 37,000 to RMB 269,000 for a limited period until the end of this year. 
• Voyah saw its deliveries grow 21% on a monthly basis in October after the Dongfeng-backed EV maker launched its redesigned Free SUV in August, with the model arriving 15% cheaper than the previous version and equipped with Baidu’s advanced driver-assist system. 

Context: Retail sales of new energy passenger vehicles, including all-electrics and plug-in hybrids, are expected to reach 750,000 units in October, up 34.6% year-on-year and 0.9% month-on-month, according to estimates from the China Passenger Car Association. The past two months, known as “Golden September, Silver October,” are traditionally peak seasons for auto sales in China.

Xpeng Motors teased how it sees the future of electric vehicles on Tuesday with the debut of its first multi-purpose vehicle model and a new timeline for the expansion of its self-driving software, as it faces an unprecedented offensive from major rivals like Huawei in a hotly competitive battleground.

Chief executive He Xiaopeng also revealed that the company has made significant progress in bringing flying cars closer to reality, while showcasing a working prototype of its humanoid robot, in a move reminiscent of Tesla’s introduction of its Optimus bot last September. 

Here are the key highlights from Xpeng’s annual 1024 Tech Day event. 

First MPV 

Navigating within a sharp and narrow turn at low speed on the stage at Tuesday’s event, Xpeng’s X9 is claimed to be the world’s first multi-purpose vehicle model equipped with rear-wheel steering as a standard configuration. This would allow the seven-seater, three-row van to handle “just like” a regular-sized sports utility vehicle, said He (our translation). 

Xpeng’s next-generation smart cabin system, the XOS, will also be available first to the owners of the X9, which is set to be formally launched at the upcoming Guangzhou Motor Show on Nov. 17. Powered by Qualcomm’s five-nanometer 8295 processor, the in-car software will offer a split screen mode, allowing drivers and passengers to run different applications simultaneously side-by-side for efficient multitasking.

Marking Xpeng’s entry into the Chinese MPV segment, the all-electric X9 will have to compete with an increasing number of similar offerings by established makers including BYD’s Denza brand, Great Wall Motor, and Dongfeng’s Voyah marque. Huawei-backed Aito and Li Auto are also set to launch their first MPVs later this year, targeting China’s growing three-generation families with larger interior car spaces.

Self-driving availability

Xpeng has also begun its switch to a more affordable hardware suite by removing some sensors from its incoming X9 model, betting more on cameras and artificial intelligence for its XNGP advanced driver assistance system, according to He. 

The Chinese automaker has updated its self-driving technology with what it described as some of the most advanced occupancy networks in the industry, comprising a deep neural network that reconstructs barriers and vehicles and predicts occupancy in a three-dimensional space for collision avoidance. 

A similar move has allowed Tesla to remove several ultrasonic sensors from its vehicles while enabling high-definition spatial positioning, longer range visibility, and the ability to differentiate between objects with its Full Self-Driving Beta software, which was announced by the US automaker last October. 

CEO He said Xpeng will deploy its XNGP system for urban traffic roads in 50 cities by December and make the functions available to drivers across China and Europe by 2024. It is competing with Huawei, which has quickly emerged as a rising player in the industry and previously announced a nationwide roll-out of similar features by year-end, while rivals BYD and Li Auto are playing catch-up.

Flying cars and robots

Experimenting with different approaches around flying cars, Xpeng also showcased two prototype aircrafts, or electric vertical takeoff and landing vehicles (eVTOLs). One of them boasts a two-in-one design that can fold up its wings and other components into the vehicle body, although He acknowledged that there are still some safety issues to be addressed. 

The 46-year-old serial entrepreneur sees greater potential for the commercial adoption of the other prototype, which is built on a modular system allowing the separation of the flight and automobile components. This model has a spacious interior with five seats while on the road and is powered by an extended-range hybrid engine, which can also recharge its aircraft component as it drives; up in the sky, the model is capable of carrying two passengers in an all-electric mode.

Xpeng further surprised the audience on Tuesday as its humanoid robotic prototype, the PX5, made its first public appearance. The company showcased the robot’s ability to navigate different terrain and pick up hand-held objects such as pens in a video. He envisions a near future where such AI machines could help look around in its factories or even mingle with customers at showrooms, hopefully by this time next year, he added.

Chinese premium electric vehicle brand Denza on Tuesday revealed a cheaper version of its advanced driver assistance system (ADAS) in collaboration with US chipmaker Nvidia, as the BYD affiliate ramps up efforts to compete against leading self-driving players such as Xpeng Motors and Huawei. 

Denza is also eyeing overseas expansion, having established its presence in the China market with year-to-date deliveries of nearly 80,000 EVs as of August. The company expects overseas sales to begin as early as next year, including in Australia, Southeast Asia, the Middle East, and Europe. 

Why it matters: The companies said the launch of the affordable assisted driving technology could reduce the barrier to a transition to intelligent mobility. The system facilitates Denza’s vehicles to navigate most highways in China as well as some busy urban streets in major domestic cities. 

• BYD launched the N7 crossover under the Denza marque in July, with the top-end version powered by Nvidia’s ​​DRIVE Orin processor, which offers 254 trillion operations per second (or TOPS). Now all N7 models can be equipped with Nvidia’s DRIVE Orin chips for automated driving, according to a Wednesday statement. 

Details: The new autonomous driving system will enable on-ramp to off-ramp driving, as well as automatic lane changing on Chinese highways, for Denza’s flagship N7 SUV. It has a price tag of RMB 15,000 ($2,053) and is powered by Nvidia’s DRIVE Orin processor, which can handle up to 84 TOPS. The N7 SUVs that feature the technology will have two lidar sensors removed to reduce costs. 

• The companies say that the higher-end version, priced at RMB 23,000, will allow the vehicles to function by themselves on bustling city streets for the daily commute, using a feature named City NOA (Navigate On Autopilot). Denza’s general manager Zhao Changjiang said the company would release its Highway NOA feature to N7 owners starting in December, followed by an over-the-air update of the City NOA early next year. 
• Tong Liu, vice president and general manager of China auto business at Nvidia, said that he was “impressed” by the efforts made by BYD in developing intelligent cars over the course of their three-year collaboration, calling BYD/Denza a “strong advocate” of commercializing self-driving technology (our translation). BYD’s Dynasty and Ocean lineups are also using Nvidia’s semiconductor. 

Context: Several Chinese auto and tech companies have announced ambitious plans for the adoption of assisted driving technologies for urban driving, akin to Tesla’s full self-driving (FSD) function that has yet to be made available in the country. 

• Volkswagen-backed Xpeng Motors in June launched its City Navigation Guided Pilot feature in Beijing and is on track to expand the capability in at least 50 domestic cities by the end of this year, while Great Wall Motor has set a target of covering 100 cities by 2024.
• In the meantime, Li Auto vehicles will be able to navigate on fixed routes for daily commuters in 100 major Chinese cities by year-end, following weeks of training with its collection of datasets. Rivals Nio and Geely’s Zeekr are also planning to roll out similar features later this year. 
• Huawei is by far the most ambitious company in the field in China, with its head of consumer business Richard Yu stating on Sept. 12 that Huawei’s self-driving system would be applicable nationwide for both highway and urban driving with Aito-branded EVs by December, Caixin reported. 
• BYD has made a series of moves in recent months to enhance its research and development capacity, especially for autonomous driving, including organizational restructuring and talent hiring. More than 80% of the 30,000 fresh graduates recruited by the company this year were research personnel. 

READ MORE: Baidu and Huawei take on global giants with new in-car software offerings at Auto Shanghai 2023

China’s Great Wall Motor (GWM) will bring its next-generation in-car operating system to market next year, and stick to the ambitious goal of rolling out its semi-autonomous driving function nationwide by the end of 2024, according to a press event held on Tuesday. 

The company is undertaking a targeted push to create a scalable and unified software platform for future vehicle models across multiple different brands, a concept that has become mainstream in the years since Tesla entered the market. A significant increase in the number of software updates, aimed at improving the driving experience, is expected from next year, vice president Nicole Wu told TechNode at the event, held in the northern city of Baoding, where the company is headquartered. 

China’s third biggest private automaker by sales volume, GWM had a relatively early start in autonomous driving and in-car technologies. It began testing self-driving cars with the creation of a dedicated division called Haomo.ai in 2019 and became the second Chinese automaker after Xpeng Motors to build a supercomputing center, this January. Now, the company has set up a new artificial intelligence research lab to bring generative AI tools into play in future car models. 

Here are some of the highlights of TechNode’s interview with GWM executives, including vice president Nicole Wu, senior director Jiang Haipeng, director She Shidong, and Yang Jifeng, head of the AI lab. 

Major digital cockpit progress

GWM will roll out an app store and implement it across all brands, as part of its upcoming in-car operating system, Coffee OS 3.0, scheduled for release in the first half of 2024. The store will give users access to common third-party services and infotainment apps fine-tuned for car-friendly usage, as more customers expect a smartphone-like experience in the car. 

By working with smartphone makers such as Huawei and Xiaomi, the new system will allow drivers to use a handset while operating their vehicle. She Shidong added that owners will be able to play video games and watch movies in their cars by connecting gaming consoles, augmented-reality glasses or other devices, with the car dashboard using wireless or bluetooth connections.

By making constant updates of driving and infotainment features possible, the Coffee OS 3.0 is intended to take the in-car experience to a new level. Wu envisions each new GWM model getting a major software update every two to three months. Tesla and Nio released 2.8 and 1.3 software updates per month on average respectively in China during the first half of 2022, according to figures from domestic consultancy Ways. 

Ambitious self-driving goal

GWM has maintained its goal of launching Navigate on HPilot (NOH), a function similar to Tesla’s full self-driving (FSD) technology, to drivers in 100 cities around China by 2024. The software will first be available to owners of its Blue Mountain flagship SUVs in Beijing and Shanghai by next March, according to Jiang. 

This will enable vehicles to change lanes, overtake, and make turns automatically on Chinese city streets without high-precision maps. Jiang added that a set of common middleware plays an important part in creating a platform for assisted driving software that is updateable and scalable at a reasonable cost. 

Chinese auto and tech companies have been competing for a leading position in this space at a time when Tesla’s FSD function has yet to become available in the country. Xpeng’s XNGP advanced driver assistance system is set to be available in 50 major cities by the end of this year, while Li Auto’s EVs will be capable of traveling on fixed routes by themselves after training for weeks in 100 cities. 

Bring generative AI to vehicles

GWM is also looking to greatly expand its in-car system capabilities through the integration of emerging technologies such as generative AI tools. Its first aim is to use AI to anticipate user preferences and create high-quality infotainment content in some new car models in the fourth quarter of this year.

The company’s newly established AI Lab has been exploring the use of large language models in GWM vehicles. Yang expects significant improvement with the upcoming Coffee OS 3.0, especially in voice recognition and natural language understanding, expecting that the latest operating system will be able to give detailed, relevant responses to users’ queries using AI.

Rival players are all developing ChatGPT-like virtual assistants for use in future car models. Geely is scheduled to launch its RMB 128,000 ($17,600) Galaxy L6 SUV on Saturday with a proprietary AI model that can read children’s picture books. Both GWM and Geely-affiliated Ecarx earlier partnered with Baidu to develop AI assistants based on the latter’s GPT-style large language models.

Tesla has released the long-anticipated, redesigned Model 3 with a sharper appearance and a range of new features in China, although at RMB 259,900 ($35,809), its starting price is higher than expected, according to a poll published on Friday on the Chinese Twitter-like social media platform Weibo.

Why it matters: The US automaker’s pricing strategy for the revamped sedan had attracted enormous attention from Chinese customers prior to its announcement, due to the car’s significant success in the electric vehicle market and Tesla’s recent policy of price cuts in the country.

• Although the launch price is not as low as some were expecting, the revamped Model 3’s arrival has still caused some rival EV makers to announce new deals for Chinese drivers. Xpeng Motors reacted immediately on Friday by offering zero-interest financing for up to 24 months or a price reduction of RMB 10,000 to buyers of its P7i. New owners of the electric sedan, priced from RMB 249,900, will be given a RMB 6,000 Dynaudio audio system for free by the end of this month. 

Details: In a poll conducted on social media site Weibo on Friday, more than 15,000 out of roughly 21,000 respondents said that they would not consider buying the newly-designed Model 3 due to “insufficient budget or an overly expensive price tag” (our translation). 

• Roughly 3,400 participants expressed their intention to purchase the new Tesla as of writing, attracted by a “competitive price or new features.” The poll was released on Friday morning by Chinese internet portal Sina, the parent company of Weibo. 
• The new Model 3 would “have no equal” if it were priced at around RMB 200,000, yet some domestic brands are more attractive at the RMB 260,000 price range, a Weibo user with the handle Kejigangzi in Chinese Pinyin commented in one highly-upvoted response. 
• In an announcement posted by Tesla on its official Weibo account, some internet users spoke critically of the car’s pricing not meeting their expectations, stating that they would be waiting for the price to go down. 
• The EV giant on Friday launched the reworked mainstream premium sedan in rear-wheel drive and all-wheel drive versions, priced from RMB 259,900 and RMB 285,900, respectively, compared with its previous base-version Model 3 at a price tag of RMB 231,900. 
• The revamp comes after Model 3’s initial launch back in 2016, and sees an improvement in driving range from 556 to 567 kilometers (352 miles) for the baseline version. The all-wheel drive version has a driving range of 680 km, reportedly powered by a new Lithium Iron Phosphate (LFP) battery sourced from CATL. 
• The all-new Model 3 gets a 15.4-inch infotainment screen, slightly larger than the 15 inch one seen in the previous version, in addition to an eight inch display for rear passengers. It also introduces new features and equipment such as ambient interior lights and ventilated seats. 
• However, the updated Model 3 removes a physical shifter, replacing it with an automatic system that may ask users to activate gear shifting on the touchscreen, a feature unfamiliar to Chinese EV owners, an analyst who asked not to be named told TechNode. 

Context: Tesla initially began selling locally-made Model 3s in China at a starting price of RMB 355,800 in late 2019. The company shipped 412,805 units of the vehicle from its Shanghai facility during 2020-2022, making it the best-selling premium electric sedan in the world’s biggest EV market, according to figures from the China Passenger Car Association. 

• Tesla sparked an EV price war in China at the beginning of 2023 when it slashed prices across its range. The carmaker announced significant price cuts for the Model 3 and Model Y lineup in China on Jan. 6, with the Model 3’s starting price dropping RMB 36,000 ($5,314) to RMB 229,900, and the Model Y dropping RMB 29,000 to start at RMB 259,900.

READ MORE:  China EV price war: Xpeng, Huawei-backed Aito join Tesla in cutting prices

Xpeng Motors chief executive He Xiaopeng said on Monday that he anticipates annual sales for an upcoming model, co-developed with Didi Chuxing under a new brand, to reach 100,000 units, in an unexpected partnership between the electric vehicle maker and the ride-hailing platform.

Why it matters: The move marks Xpeng Motors’ latest effort to expand its product lineup and extend its brand reach into the fleet market. The alliance is expected to help Xpeng significantly reduce costs and generate economies of scale in the production of highly autonomous cars, said He.

• While the deal will help Xpeng accelerate its EV manufacturing growth and facilitate the development of self-driving technologies with more driving data, it can help Didi monetize its smart auto segment and attract drivers with vehicles suitable for ride-hailing, Bernstein analysts wrote on a Monday note.
•  Nonetheless, doubts were voiced over Xpeng’s ambitious sales goal, citing limited market size and fierce competition. “BYD was the only OEM (Original Equipment Manufacturer) to deliver more than 100,000 units, and the remaining top players all have their own ride-hailing affiliates,” wrote Bernstein analysts.

Details: Speaking to Chinese reporters during a media briefing, CEO He expressed confidence in the forthcoming A-class sedan, scheduled for production next year. He believes the model will enhance Xpeng’s performance, but does not specify a timeframe for his annual sales volume goal. The company delivered 41,435 EVs for the first half of this year with six namesake-branded models on sale.

• The EV startup is currently developing the model with assistance from Didi under a project codenamed Mona. He believes that this could become “a hit product” featuring Xpeng’s self-driving technology at an expected price tag of around RMB 150,000 ($20,594). 
• The compact sedan will also be the first model under a new mainstream sub-brand, which He said will be positioned to target the Chinese consumer EV segment while also facilitating Xpeng’s expansion within the fleet market segment.
• As part of the collaboration, Xpeng will acquire Didi’s smart EV business, which comprises the design, research, and development of EVs with intelligent features. This acquisition will be accomplished through the issuance of approximately HK$5.84 billion ($744 million) worth of new shares to Didi.
• China’s biggest ride-hailing service will become a strategic investor in Xpeng with a stake of 3.25% after the deal,  helping take Xpeng’s newly branded EVs nationwide via its strong shared mobility market, according to a statement. 
• In Hong Kong, Xpeng’s shares surged 10.9% to HK$72.2 on Monday following the announcement. 

Context: The news comes a month after Guangzhou-based Xpeng announced a collaboration with Volkswagen to jointly launch two VW-branded B-class EVs in 2026. B-class vehicles are normally larger than A-class vehicles and have larger engines.

• Xpeng is not the only Chinese EV maker exploring new brand options to reach a wider customer base. Rival Nio has recently made notable progress in the development of two entry-level brands codenamed Alps and Firefly, with both scheduled for launch in 2024. 
• Didi initially had ambitious plans for its carmaking business, assembling a team of 1,700 employees dedicated to working on the project, with the aim of releasing a consumer EV in mid-2023, multiple Chinese media outlets reported. It even launched a battery-electric hatchback tailor-made for ride-hailing in collaboration with BYD in November 2020, Bloomberg reported. 
• However, the ride-hailing giant had been under an 18-month investigation for alleged national security issues which began right after its mega-public listing on the New York Stock Exchange in June 2021. Meanwhile, Chinese authorities have imposed strict regulations on the release of EV production licenses in recent years.

READ MORE: What to expect from Volkswagen and Xpeng’s new partnership

In July, more than 10 Chinese automakers reported deliveries of over 10,000 units of their electric vehicles, signaling a significant shift in China’s car market as newer entrants and previously smaller brands continue to increase their sales. Notably, Nio saw remarkable growth, nearly doubling its figures from the previous month, while Xpeng Motors surpassed the 10,000 threshold following months of lackluster performance. 

Why it matters: The latest ranking of the best-selling EV brands in China reflects the changing landscape in the world’s biggest car market. Although BYD and Tesla are still miles ahead of their competitors, local rivals are capturing market share with new product launches and aggressive price cuts as the sector’s intense battle shows no signs of abating.

Bright spot: On Tuesday, Nio announced that it had exceeded the monthly delivery threshold of 20,000 vehicles for the first time in its nine-year history. The firm’s July deliveries reached 20,462 units, nearly doubling its figures from a month earlier. 

• This achievement follows the company’s decision to implement an RMB 30,000 ($4,199) price cut across its vehicle lineups on June 12. Additionally, Nio began delivering the redesigned versions of its popular ES6 crossovers and ET5 sedans starting late May, when monthly sales hit a record low. 
• Xpeng’s July deliveries of 11,008 units also marked an important milestone, one which the EV maker attributed to a smooth production ramp-up of the G6. The mainstream sports utility vehicle recorded shipment of more than 3,900 units immediately after its launch on June 29. 
• The Guangzhou-based automaker is aiming to deliver at least 15,000 units as early as September and has recently received backing from Germany’s Volkswagen. However, its year-to-date deliveries fell 35% year-on-year to 52,443 units as of July. 

Other results: While BYD maintained its dominant position in July with a new sales record, GAC’s EV arm Aion made progress with its new premium marque, Hyper. Aion sold 45,025 units during the month, with 2,011 of them being the Hyper GT coupe, which it began selling on July 3. 

• Li Auto said it has sold more than 30,000 plug-in hybrids for two consecutive months as July deliveries grew 5% month-on-month to 34,134 units. Great Wall Motor followed closely behind with sales of 28,896 units, representing an 8% increase from the previous month. 
• Leapmotor also posted impressive growth in July sales, with a notable increase of 8% to 14,335 units compared to the previous month. Additionally, the Zhejiang-based automaker is reportedly in discussions with Volkswagen’s Jetta brand regarding the licensing of its technologies. 
• This was followed by Changan’s subsidiary Deepal and Geely’s affiliate Zeekr which delivered 13,172 and 12,039 units last month, up 64% and 14% on a sequential basis, respectively. However, Hozon’s numbers declined for the third month in a row, reaching 10,039 units. 

Context: In addition to Chinese automakers, several global auto majors also revealed some details of their July sales in China.

• Volkswagen’s joint venture with state-owned SAIC reported securing more than 10,000 pre-orders of its ID.3 after the German auto giant slashed the price of the locally-made electric hatchback by RMB 37,000 to RMB 125,900 ($17,523). 
• General Motors announced that it shipped around 10,000 EVs with its local partner SAIC last month, of which 8,692 were Buick EVs. Furthermore, SAIC-GM-Wuling, another venture between SAIC, the US automaker, and Guangxi Automobile Group, sold 35,000 units, up from 31,246 units a month ago.

In a historic development, Volkswagen said on Wednesday it will make electric vehicles in a joint effort with Chinese EV startup Xpeng via a $700 million investment plan. The news sent Xpeng stock rocketing as much as 40% during trading on Nasdaq. 

The move is expected to create a win-win situation that will help the two automakers secure their market shares in a brutally competitive market. However, analysts expect big challenges for the partnership. 

Both Volkswagen and Xpeng are in a relatively weak market position when it comes to EVs and face sluggish sales in the world’s largest EV market. Also, cultural clashes and different mindsets could potentially lead to friction in the partnership. 

TechNode spoke to various analysts on the ground about what lies ahead. While some saw the collaboration as being beneficial to both automakers, most saw challenges in the unprecedented deal between a German auto giant and a rising Chinese EV maker. 

A happy union?

The Volkswagen-Xpeng partnership makes perfect sense as they complement each other’s strengths, according to Yale Zhang, managing director of Shanghai-based consultancy AutoForesight. “Xpeng’s vehicle platform is state-of-the-art compared with rivals, while Volkswagen definitely needs a helping hand in making intelligent EVs,” Zhang said.

Elliot Richards, a correspondent at the Fully Charged Show, believes Volkswagen knows how to build good quality affordable cars and has an advantage in terms of economy of scale, while Xpeng has top-of-the-line software stacks with a more lively, fun, and risk-taking brand image. He expects the collaboration to help both “efficiently grow together” in China by pooling their resources.

Volkswagen could accelerate the launch of new EV models with the latest tech in the Chinese market through the alliance, predicts David Zhang, a visiting professor at Huanghe Science and Technology University. Volkswagen has had a relatively late start in electrification and its ID series lacks competitiveness in China, despite a decent performance in Europe, added Zhang.

Looming challenges

Daniel J. Kollar, head of Automotive & Mobility Practice at business development consultancy Intralink Group, said the problem is that neither has been able to effectively differentiate themselves in the market, so it is unclear whether teaming up will allow them to change that. Both foreign and younger Chinese original equipment manufacturers (OEMs) are having a rough time lately, experiencing trouble with penetrating the mid-tier and entry-level markets and gaining the trust of average Chinese consumers, Kollar added.

Meanwhile, cultural fit will remain a challenge in this collaboration. Pitting a rigid process-oriented culture from Germany against a fast and furious startup culture in China, has the potential for problems, according to Lei Xing, former chief editor at China Auto Review. As Xing put it, “Is VW willing to sacrifice certain things for speed?” 

Tu T. Le, founder of business intelligence firm Sino Auto Insights, also expects culture clashes as VW’s careful checks and balances are challenged by Xpeng’s much faster pace. “Volkswagen will have to let go of its want to centrally control everything and do its best to learn from Xpeng if it truly wants success,” according to Le.

There might also be wounded pride on Volkswagen’s part, as global carmakers that used to enjoy the upper hand are now acquiring technologies from newcomers, rather than licensing to them, AutoForesight’s Zhang stated. “This could become an invisible barrier and lead to tension in day-to-day collaboration,” he added.

Reasons for skepticism

Experts have voiced concern about the sales prospects of the two automakers given a relatively late launch date of two new models.

“By virtue of the investment, VW is hopeful that its EV sales can be turned around with these two new products, but the 2026 launch dates could be too little too late,” said Le. His comments were echoed by Xing: “The tie-up does nothing to guarantee the success of VW badged EVs with Xpeng tech ‘inside.’ Also for the time being, at least until 2026, it does nothing to influence the market performance of Volkswagen and Xpeng as each controls their own destiny.” 

Meanwhile, they do not foresee the tie-up with Volkswagen as having a significant impact on Xpeng’s sales and presence in the market, although licensing its technologies is potentially a recurring revenue stream for Xpeng.

Volkswagen will likely have to shell out a huge amount of money as a transfer fee for accessing Xpeng’s technology, which has been a common practice in such collaborations, said David Zhang. “Chinese auto manufacturers used to pay tens of thousands of RMB per unit to their foreign counterparts for localizing a vehicle model that came from abroad.”

Zhang added that the collaboration with Volkswagen could be a significant endorsement of Xpeng to boost its credibility in the European market. Aware of Xpeng’s recent momentum following the launch of its G6 crossover last month, Le also believes the cooperation with VW could help it more in Europe than in China. “Xpeng is still two or three successful products away from becoming a sales leader in the Chinese market,” added Le.

“The game has changed”

Kollar sees the Volkswagen-Xpeng partnership as the latest sign that the Chinese market is now ready for consolidation, which means more young, domestic EV makers are either going to go bust or be acquired. The best way for foreign OEMs to regain their previous standing and catch up in the EV sector is to become an acquirer of some of the promising players, Kollar predicts.

The tie-up ushers in a new era where foreign legacy automakers now depend upon Chinese EV makers for their technologies and speed to market, noted Lei. In this context, Volkswagen can be seen as playing a “pioneering” role yet again, having been one of the first major foreign car brands to enter China, and has now opened the floodgates for similar deals involving other foreign legacy automakers and local firms in the future. The German giant on Wednesday also announced an extended partnership between its Audi brand and China’s SAIC.

Global brands are recognizing that Chinese EV companies have progressed to the point that foreign companies have something to learn from them, said Stephen Dyer, a co-leader for AlixPartners’s Greater China business. “We can expect to see more Chinese auto players become part of the global community of strategic collaboration going forward.”

Richards added that, “They now need their local partnerships more than ever, but the shoe is on the other foot.” 

READ MORE: Experts bullish on Chinese automakers’ global push as SAIC seeks EU foothold

Audi is considering buying authorization for an electric platform directly from a Chinese electric vehicle company in order to enhance the competitiveness of its electric cars, according to a July 9 report by German media Automobilwoche.

Why it matters: The news has attracted 7.2 million views on China’s Weibo as of writing. BYD, Geely, and Xpeng Motors, with years of experience making cars on their dedicated EV architectures, are seen as among the most likely options by Chinese netizens.

Audi and Chinese electric platform: The Automobilwoche report did not specify which Chinese companies Audi was in talks with. And yet the plan has already been approved by Volkswagen Group CEO Oliver Blume and will be confirmed by Audi’s board this week, according to a Tuesday report by Automotive News Europe.

• The move is expected to accelerate the development and roll-out of Audi’s future electric models in the hope of catching up with rivals, especially in China. A company spokesperson declined to comment when reached by TechNode on Wednesday.
• ​​In September 2021, BYD launched the 3.0 version of its e-Platform, a dedicated battery vehicle architecture, which the Chinese biggest EV manufacturer said would enable a driving range of more than 1,000 kilometers (620 miles) and offer improved driving safety with its combustion-proof “blade battery.”
• Previously, Audi was said to be set to purchase BYD’s DM-i plug-in hybrid drive systems for its A4L sedans, but this was later denied by BYD’s spokesperson Li Yunfei, local media outlet Jiemian reported last November. BYD has been supplying its blade battery packs to Audi’s Chinese manufacturing partner FAW Group for its Hongqi marque since 2021.
• Geely launched its open-source, ground-up EV platform, called Sustainable Experience Architecture (SEA) in September 2020. Multiple EV models have been built upon it since then, including Zeekr’s 001 hatchback, the Smart #1 small SUV, and the Polestar 4. Volvo’s parent is now a partner of Renault in developing hybrid systems, Reuters reported.
• Xpeng Motors in April unveiled its Smart Electric Platform Architecture (SEPA) 2.0 with the debut of its G6 crossover. The platform features an 800-volt battery system, massive aluminum die casts, and assisted driving technology that currently allows vehicles to navigate by themselves on busy streets in China’s first-tier cities.

Context: Audi began selling its Q4 e-tron crossover with partner FAW with a price range between RMB 300,000 and RMB 380,000 ($41,729-$52,857) in China last May. It is built upon Volkswagen’s MEB open vehicle platform, as are Audi’s Q5 e-tron seven-seater and Volkswagen’s ID.6 SUV.

• Sales of Audi declined 15.6% in a year to 136,416 units in China during the first three months of this year, when peers BMW and Mercedes posted around 195,000 and 191,000 units, respectively.
• Volkswagen said on June 29 that a new Audi CEO will be on board from September 1, as it hopes to produce EVs only from 2026. Audi’s current lineup is not “competitive,”, especially in China, Blume told investors on June 21.
• ​​The product offerings from global carmakers are not competitive on the EV and software side, resulting in continued market share loss, while pricing remains under pressure in an environment of overall lackluster demand, UBS analysts wrote in a June 19 note.

Note: This article was first published on TechNode China (in Chinese).

China has been making strides in vehicle electrification for some time, with an eye to digitizing its entire automotive industry. As a key part of this shift, Chinese EV makers are currently competing to produce the most comprehensive assisted driving systems, endeavoring to turn their offerings into key selling points as the market matures.

Here, TechNode takes a look at the assisted driving software of three leading players in the Chinese EV sector.

Xpeng’s NGP advanced driver assistance system

The Advanced Driver Assistance System (ADAS) is the standout feature of Xpeng’s new model, the G6. The car has possibly the most advanced autonomous driving technology in China: with its 31 smart sensors, the G6 outperforms its competitors. Dual forward-facing LiDAR sensors, millimeter-wave radar, cameras, and ultrasonic radar throughout give the vehicle the tools to sense and see all around its body. 

In urban settings, the City NGP (Navigation Guided Pilot) smart navigation-assisted driving tool enables seamless travel along accessible city roads. Once a user inputs a destination and activates the tool, the vehicle maintains its position within its chosen lane, performs necessary lane changes or overtaking maneuvers, merges on and off roads, navigates around stationary vehicles or obstacles, recognizes and passes through traffic light intersections, circumvents loop roads, steers clear of construction zones, and evades pedestrians and non-motorized vehicles, on its way from inputted A to B.

The G6 comes with Lane Centering Control (LCC), a Lidar-based adaptive cruise and lane-centering feature that also enables the car to maintain optimal cruising speed. Linked to Xpeng’s advanced XNet neural network, the system processes 4D information on dynamic targets, including size, distance, position, and speed of vehicles and two-wheelers, as well as 3D information on static targets: lane lines and road edges from above.

Compared to Xpeng’s first-generation visual perception architecture, the XNet employs neural networks to replace manual post-processing, enabling end-to-end algorithm optimization. It boasts enhanced 360-degree perception, covering more than eight lateral lanes, demonstrating superior performance, and improving lane change success rates. Uniquely, this vehicle relies on vision-based recognition and display capabilities, becoming the first in the industry to not rely on mapping. It includes detailed rendering and visual representation of traffic participants and road infrastructure surrounding the vehicle. Drivers can see lane markings and nearby vehicles on the in-car map. XNet also recognizes and displays traversable areas, traffic lights and turn signals, setting a new industry standard. 

On highways, the system can efficiently execute autonomous lane changes, lane selection, and overtaking maneuvers by assessing the surrounding environment and required driving tasks, such as avoiding traffic restrictions and adhering to speed limits. It also provides seamless on and off-ramp transitions while switching between high-speed driving modes, ensuring improved straight-line stability and enhanced cornering.

Li Auto’s City NOA smart driving 

By putting strategic effort into smart software and electric power, Li Auto has made huge strides in smart space (SS) R&D, smart driving, and high-voltage fully electric platforms. With its own large model called Mind GPT, Li Auto will soon begin testing its City NOA smart driving system.

Li Auto’s smart driving system doesn’t depend on high-precision maps, as it utilizes a bird’s eye view (BEV) large model to perceive and comprehend road structure information in real time. The BEV large model has undergone extensive training, enabling it to generate stable road structure data on most roads and intersections in real time. Neural Prior Net (NPN) refers to a set of neural network parameters which are difficult for humans to directly interpret when dealing with complex intersection patterns. The large model effectively deciphers these patterns. Compared to high-precision maps, NPN replaces human rules with network models for better understanding and use of environmental information.

For complicated intersections, it’s essential to conduct advanced intersection NPN feature extraction. On a vehicle’s second approach to an intersection, the previously extracted NPN features are retrieved and combined with the BEV feature layer from the vehicle’s large-scale perception model, resulting in what the company says is an optimal perception outcome. In addition, the “AI driver” must comprehend the traffic light regulations at the intersection, posing another challenge on urban streets. The prevailing method involves devising a rule-based algorithm to interpret traffic lights and road use intentions. Li Auto prefers to rely on a large model to address this issue.

To navigate complex urban roads, Li Auto trained a Traffic Intention Net (TIN) to do away with the need for software to interpret pre-set human traffic regulations or even know the exact position of a traffic light. The system will input video footage into the TIN network model, and it will directly indicate the appropriate vehicle maneuver – turn left or right, go straight, or stop and wait. By analyzing the reactions of a large number of human drivers to signal changes at intersections, the performance of the TIN model is highly refined. To ensure the “AI driver” emulates human drivers’ judgment and driving patterns, Li Auto trained the AI with a huge amount of real driver behavior data, making NOA’s decision-making and planning more human-like, while maintaining safety and adherence to traffic regulations.

NOA is designed to accommodate more than 95% of commuting situations for car owners. While using NOA for commuting, each model will receive continual updates and training. In the latter half of the year, Li Auto plans to introduce the NOA commuting feature and expand urban NOA coverage, with the goal of allowing early adopters to commute using NOA’s navigation-assisted driving.

Huawei Aito’s second-generation autonomous driving system

The M5 smart drive edition released by Huawei’s automotive brand Aito sees the debut of the telecom giant’s second generation autonomous driving system ADS 2.0, which offers a comprehensive fusion perception system made up of various sensors working together to provide 360 degree coverage. This fusion perception system consists of 1 LiDAR, 3 millimeter-wave radars, 11 camera sets, and 12 ultrasonic radars, allowing for distance detection of up to 200 meters. The Aito M5 employs network technology based on fused BEV perception capabilities that can identify objects outside the standard obstacle whitelist. Paired with a road topology inference network, the Aito M5 is designed to drive efficiently with or without a map, equipped to see, understand, and navigate regardless.

The Aito M5 can handle changing light conditions in tunnels and minimize the impact of nighttime glare. It can accurately identify pedestrians, vehicles, and obstacles with ease. On urban roads, the car actively maneuvers around obstructions caused by other vehicles and the company claims it can deal with pedestrians carelessly opening car doors or unexpected cyclists emerging from a blind spot. Even in the most challenging conditions, such as intense glare at night, the Aito M5 can brake at speeds of up to 50 km/h.

With assisted driving capabilities, the M5 can merge onto and off highway ramps with a 98.86% success rate. The reliable long-distance piloting system has an average Miles Per Intervention (MPI) of up to 114 km, rivaling experienced drivers.

The Huawei ADS 2.0 package comes with 19 features as-standard, such as high-speed Lane Centering Control (LCC), urban LCC, and high-speed Navigation-based Cruise Assist (NCA). Additionally, the optional advanced package offers urban NCA, Automated Valet Parking Assist (AVP), and enhanced LCC for urban areas.

Huawei’s Aito is the first car brand to achieve high-speed urban smart driving capabilities without relying on high-precision maps, bringing the assisted driving experience significantly closer to the L3 level of autonomy. According to Huawei’s roadmap, its mapless functionality will be introduced in 15 cities, including Shanghai, Guangzhou, and Shenzhen, during the third quarter of 2023. By the fourth quarter, coverage will encompass 45 cities.

A sophisticated race to autonomy 

The race to launch assisted driving in the Chinese market is well underway. As time goes on, we can expect more car companies and self-driving solution providers to join. China’s Ministry of Industry and Information Technology (MIIT) plans to introduce an updated standard system guide for smart, network-connected vehicles, which will accompany the competition as it intensifies further.

Denza, a luxury car subsidiary of Chinese electric vehicle maker BYD, released its first SUV model N7 on Monday, priced from RMB 301,800 ($41,705). The company said it has received more than 24,000 pre-orders since its public unveiling on April 18.

The N7 is also the first model equipped with BYD’s assisted driving technology and will be capable of navigating on complex urban roads in China early next year, general manager Zhao Chaojiang said during the press conference.

Why it matters: BYD’s latest launch shows its intention to elevate the brand and secure a foothold in the premium market. The budget-friendly automaker is hoping its sub-brand Denza will become a luxury marque, and the launch of the N7 is a crucial step towards achieving this goal.

• The N7 will also be seen as a test of the company’s aspirations and its ability to beat rivals like Tesla, Huawei, and Xpeng when it comes to autonomous driving features.

Intelligent driving: The top-end version of the N7 features a hardware suite of 33 high-precision sensors, including two 8-megapixel cameras and two lidar sensors, and is powered by Nvidia’s Drive Orin processor which offers 254 trillion operations per second (or TOPS). By comparison, Xpeng’s G6 features 31 sensors and Nvidia’s dual Orin chips.

• Denza also revealed that its advanced driver assistance system (ADAS) will cost RMB 23,000. It will allow cars to change lanes, speed up, and slow down on Chinese highways when it is updated in the last three months of this year and on city streets by next March.
• By comparison, Huawei-backed Aito and Avatr last week cut the price of their similar offerings in half to RMB 18,000. Both will roll out their assisted driving tech for urban scenarios in 45 cities by year-end, according to Richard Yu, head of Huawei’s consumer business group.

Other details: The N7 has a driving range of 702 kilometers (436 miles) and can be refueled with an additional 350 km of range in 15 minutes by BYD’s proprietary dual charging technology. For comparison, Xpeng’s G6 can travel 300 km on a 10-minute charge.

• The five-seater battery electric crossover is also among several new BYD models to adopt the company’s body control suspension system DiSus for a smooth ride on bumpy roads, with Zhao on Monday claiming the function can eliminate car sickness.
• Zhao also told Chinese reporters that around a third of the N7 reservations were from existing owners of German brands such as BMW, Mercedes, and Audi. Delivery of the vehicle is scheduled to begin later this month and the company expects monthly deliveries to reach 10,000 units as early as October.

Context: BYD and partner Daimler first unveiled the Denza brand in early 2012 two years after the set-up of a joint venture to develop EVs for Chinese consumers. Denza in late 2019 began selling the X, a seven-seater SUV with a starting price of RMB 289,800, which was discontinued two years later.

• In late 2021, BYD announced plans to restructure Denza as the company reached a deal to buy an additional 40% shares of the JV from its German partner, Reuters reported. Last August, Denza launched the D9 multi-purpose vehicle, its first model after the rebranding, with a starting price of RMB 329,800, and posted deliveries of nearly 80,000 units as of writing.
• China’s biggest EV maker has been aggressively entering the high-end market with a growing portfolio of luxury brands including Denza, Yangwang, and an upcoming sub-brand called Fang Cheng Bao. The first two models under the Yangwang brand were priced from RMB 1 million; Fang Cheng Bao will specialize in professional and personalized identities, according to the company.

Chinese electric vehicle makers Nio, Xpeng Motors, and Zeekr on July 1 reported significant volume gains in June after months-long dips amid intensifying competition. Nio’s aggressive price cuts and Xpeng launching new models have spurred each to improved numbers.

Although BYD remains the dominant player in China, Aion, Li Auto, and Great Wall Motor are emerging as rivals with enhanced technologies and competitive prices, with the sector’s intense competition showing no signs of easing anytime soon.

Why it matters: Jefferies analysts forecast an 8% monthly growth in the wholesale volume of new energy vehicles to around 774,000 units in June and a 20% sequential increase in foot traffic in the industry. 

• Still, the ongoing price war could intensify across the industry during the upcoming summer slow season, as global automakers such as BMW and Mercedes widen their retail discounts and compete on price, Jefferies analysts wrote in a July 1 note.

Major improvements: Li Auto crossed another monthly delivery threshold, reporting delivery of 32,575 plug-in hybrid crossovers to customers in June, up from the 28,277 units a month earlier. The automaker’s year-to-date deliveries of 139,117 units have already surpassed its total unit sales from 2022. Chief executive Li Xiang previously stated he expects that number to get to more than 40,000 units later this year.

• Great Wall Motor also saw strong growth last month, as sales of its new energy passenger vehicles, including pure electrics and PHEVs, surged 110% year-on-year to 26,643 units following the recent launches of its new Haval-branded SUV and six-seater Blue Mountain. Jefferies analysts said sales of the Blue Mountain reached a similar level to Li Auto’s L8 in some areas last month, citing information from dealerships.
• Nio’s delivery figures bounced back to 10,707 units in June, following two consecutive months of lackluster sales of less than 7,000 units. The firm’s June figures were buoyed by its recent price cut across all lineups. 
• Zeekr reported slightly fewer deliveries of 10,620 units last month when it began shipping its third model Zeekr X, a compact crossover with a starting price of RMB 189,800 ($27,590). This figure was up 22.4% from May.
• Xpeng Motors also saw a solid recovery in June with deliveries of 8,620 units, which marked a 14.8% growth from a month earlier. That figure was still 44% lower than a year ago, however, yet the company’s newest model G6 SUV might give it a chance to get further back on track. Jefferies analysts expected the G6, with delivery scheduled for this month, to “surprise on the upside” with monthly sales likely to reach more than 10,000 units.

Other results: BYD sold 253,046 EVs in June (of which 11,058 were Denza-branded multi-purpose vehicles), a new record compared to the 240,220 it achieved in May. The company had projected monthly sales of its D9 premium vans to reach 15,000 units and is set to begin sales of its second model, the N7 crossover, on Monday.

• Aion maintained its growth momentum and delivered 45,013 vehicles last month, slightly more than the 45,003 units it reached a month earlier. The EV arm of state-owned GAC Group is also moving upscale with the launch on Monday of its Hyper GT, a coupe with a price tag of RMB 219,900.
• EV startups Leapmotor and Hozon are still catching up in the sector, with June deliveries of 13,209 and 12,132 representing a mild growth of 9.5% and a 6.9% reduction from a month earlier, respectively. They’re followed by Changan’s EV brand Deepal with deliveries of 8,041 units.
• Huawei-backed EV brand Aito continues to face growth challenges in an increasingly competitive market, reporting deliveries of 5,668 units last month. That figure brings its total delivery numbers for this year to just 27,541 units.

Context: UBS analysts expect Chinese carmakers to continue market share gains as foreign rivals see a shrinking demand for internal combustion engine vehicles. Chinese EV makers “are acting fast in terms of new model launches, with a better understanding of consumer’s needs,” wrote UBS analysts led by Paul Gong on June 19.

Chinese EV maker Xpeng on Thursday revealed the prices of its G6 sports utility vehicles at a competitive starting price of RMB 209,900 ($28,956), more than 20% cheaper than Tesla’s Model Y in China. The automaker is under growing pressure from investors to drive up sales with the new model after the months-long slump.

Why it matters: Speaking to reporters during an interview on Thursday, Xpeng’s CEO He Xiaopeng said that the G6, which has a similar size and appearance to Tesla’s Model Y, has the potential to achieve monthly deliveries of over 10,000 units.

•  He voiced confidence in a “positive” conversion ratio of its backlog reservations to orders following Thursday’s launch, adding that the company has received more than 35,000 pre-orders for the G6 as of Wednesday after reservations opened on June 9.

Details: The long-anticipated G6 five-seater is almost the same size as the Model Y. The new model measures around 4.75 meters in length, and 1.92 meters in width, and spans a 2.89-meter-long wheelbase.

• The higher-end version is powered by dual electric motors combining an output of 358 kW and maximum torque of 660 Nm, a bit higher than the respective 357 kW and 659Nm of the Model Y.
• The G6 accelerates from 0 to 100 km/h (62 mph) in 3.9 seconds, a bit slower than the Model Y’s 3.7 seconds, yet the crossover has a maximum driving range of 755 kilometers (469 miles), compared with the Model Y’s 660 km.
• Xpeng’s CEO also boasts a faster charging time for the G6, allowing additional travel of 300km on a 10-minute charge and greater powertrain efficiency than peers’ offerings, empowered by an 800-volt silicon carbide power module.
• The charging rate could be more than twice as fast as existing offerings with a 400V charging system, according to a Thursday statement from the company. Xpeng has operated more than 1,000 proprietary charging stations as of Friday and has had plans to add 500 ultra-fast charging stations this year.
• He added that Xpeng owners will be able to access the company’s automotive driver assistance system (ADAS), called the XNGP, for urban traffic roads without the utilization of high-precision maps in 50 major domestic cities during the second half of this year.
• Additionally, Xpeng will begin offering a so-called “AI Valet Driver” function to all XNGP users from the fourth quarter of 2023, allowing its vehicles to navigate on some fixed routes like an “experienced” human driver, according to the company. Rival Li Auto shared similar plans earlier this month.
• The G6 has a price range of between RMB 209,900 and RMB 276,900 ($28,956-$38,134), with the starting price being 7% lower than its previously announced tag of RMB 225,000. By comparison, the China-made Model Y currently costs from RMB 263,900 to RMB 363,900.

Context: Xpeng reported year-to-date deliveries of 32,815 vehicles as of May, a nearly 40% reduction from the same period a year earlier.

• President Brian Gu on May 24 told investors that it expected monthly deliveries to reach 15,000 units starting September when the G6 is scheduled for mass delivery.
• Xpeng’s shares rose 6.85% in Nasdaq during before-hours trading as of writing on Friday, although its shares have fallen 80% since the beginning of 2022.

Chinese EV makers saw a flat month overall in May, with 0% growth in the market from April. However, some EV makers are squeezing out growth more than others. BYD, Aion, and Li Auto managed to report monthly growth of around 10% to 14%, while Nio saw delivery figures sink to its lowest level in 12 months. Xpeng Motors and Zeekr look on track for a modest recovery. 

Why it matters: Total sales in China of new energy vehicles, including all-electrics and plug-in hybrids, were relatively flat in May despite an outstanding performance by major Chinese electric vehicle makers, highlighting the growing advantage of domestic players over foreign counterparts amid rising competition.

• Automakers mostly saw a slowdown in new order intakes and foot traffic at showrooms during the second half of May due to a new surge in Covid cases, weak consumer sentiment, and the phase-out of regional subsidies by some local Chinese governments, analysts at investment bank Jefferies wrote in a note on Thursday, citing Sun Shaojun, founder of auto consumer service platform Carfans.
• Sun expects a strong recovery during June and July, as multiple domestic players begin mass delivery of new models. Sales of passenger EVs were around 483,000 units during May 1-28, up 82% thanks to a low base from a year ago due to Covid lockdowns. However, May deliveries showed no growth from the previous month, according to figures from the China Passenger Car Association.

Strong growth: BYD reported a record high in monthly vehicle sales at 240,220 units, up 108.9% from a year ago and 14.2% from April. This was buoyed by price cuts from dealerships and the launches of multiple cheaper models, including the new Han and Tang models with smaller batteries and the entry-level Seagull. Its premium brand Denza also posted impressive results of 11,005 vehicles delivered.

• GAC’s EV unit Aion and EV startup Li Auto also hit new milestones with deliveries of 45,003 and 28,277 vehicles last month, representing a monthly growth of 9.73% and 10.1%, respectively. The two companies have set goals of selling up to 600,000 and 300,000 vehicles this year, which would more than double their totals from last year.
• Hozon and Leapmotor both reported strong May sales of 13,029 and 12,058 units, respectively, after announcing “price protection” measures in March to counter a months-long price war ignited by Tesla. Historically a budget carmaker, Hozon said it delivered 1,716 Neta GT sports cars, launched last month and priced from RMB 178,800 ($25,276).

Under pressure: Nio on Thursday revealed that its monthly delivery figures have fallen for four months in a row to 6,155 units in May, as fierce competition and an aging product lineup continue to weigh on the Shanghai-based EV maker. On May 24, the company began handing over its all-new ES6 crossovers to customers and said mass delivery of its redesigned ET5 sedans would begin later this month.

• Xpeng’s May delivery was 6% higher from a month earlier, as the EV maker began delivering the P7i, a revamped version of its popular P7 sedans in March. The modest growth was due to supply chain constraints, with chief executive He Xiaopeng recently telling investors the company would “significantly” ramp up production of the key components for P7i with partners in June.
• Geely’s premium brand Zeekr posted deliveries of 8,678 units last month, a 7% increase from April. Its new compact SUV, the X, is scheduled for delivery this month. Rival Deepal began shipping the S7, its second model, on Tuesday, with monthly deliveries of Changan’s EV marque reaching 7,021 units in May, a 9.5% decline from April.
• Aito’s sales rose 22.8% month-on-month to 5,629 units in May. The Huawei-backed EV maker began selling a top-end version of its M5 plug-in hybrid crossover equipped with Huawei components and software for automated driving in April, with delivery scheduled to begin on June 18. Meanwhile, sales of Dongfeng’s EV unit Voyah fell 10.1% to 3,003 units from a month ago.

The Chinese government has approved an action plan to push for the buildup of charging infrastructure across the country, a move Beijing says will step up the adoption of electric vehicles especially in the country’s vast rural regions, state broadcaster CCTV has reported.

Why it matters: The plan could pave the way for a sales boost of green energy cars in Chinese lower-tier cities and rural areas where EV penetration has so far remained low, according to Cui Dongshu, secretary general of the China Passenger Car Association (CPCA).

• China’s countryside is expected to provide a new source of growth for what is already the world’s biggest EV market, Cui wrote in a May 7 article (in Chinese). Less than 20% of new car sales were EVs in small-sized Chinese cities and towns in March, compared with 34% in first-tier cities, official figures showed.

Details: The plan will adopt a “forward-thinking and moderately progressive” (our translation) strategy to scale up the number of charging stations for EVs across the country, state broadcaster CCTV reported on May 5, citing a meeting of China’s top executive body, the State Council.

• The cabinet said it would also release measures that would facilitate businesses’ expansion of their EV sales and service networks in less developed regions, as well as boost the training of technical workers for EV maintenance from vocational schools.
• The Council said these efforts would allow it to step up its focus on removing the major bottleneck for EV popularity in rural areas. Policymakers expect a nationwide charging network to sustain at least 20 million EVs traveling on Chinese roads by 2025.

Context: China’s EV market has seen slower growth this year, after being partly disrupted by a major price war amid fierce competition and Beijing’s scrapping subsidies for EV purchases in December.

• Sales of new energy passenger vehicles, mainly all-electric cars and plug-in hybrids, increased 22.4% year-on-year to 1.3 million units during the first three months of 2023, significantly slower than the 93.4% growth last year, CPCA data shows.
• China operated an EV infrastructure network of more than 1.9 million public chargers as of March, of which nearly 60% were less powerful AC chargers with the rest being DC ones, according to figures from the Chinese Electric Vehicle Charging Infrastructure Promotion Agency.
• Multiple automakers have pledged to expand their EV charging networks. Nio and Xpeng Motors have set goals of making 2,300 swap stations and 500 fast charging stations available nationwide this year, respectively, while Li Auto opened its first batch of charging facilities last month.

Traditional Chinese automakers GAC and Geely, along with market leader BYD, have reported impressive electric vehicle delivery figures in April, taking market share away from young competitors such as Nio and Xpeng. 

Why it matters: April deliveries show the growing importance of traditional auto manufacturers in the Chinese EV market, putting additional pressure on EV upstarts, especially Nio and Xpeng.

Details: BYD has maintained its dominant position as sales nearly doubled to 210,295 vehicles in April from a year earlier. In particular, it sold 10,526 units of the Denza D9, a multi-purpose vehicle under its premium brand Denza, surpassing the threshold of 10,000 units for a second month.

• GAC’s EV unit Aion has also enjoyed strong growth momentum with sales of 41,012 units, representing a year-on-year increase of 302%. Li Auto also saw impressive growth, becoming the top-performing brand among EV startups with reported deliveries of more than 20,000 vehicles for a second consecutive month in April.
• More traditional Chinese manufacturers, namely Geely and Dongfeng, showed small but gradual rises. Geely reported deliveries of 8,101 of its Zeekr-branded vehicles, up 22% from the previous month. Dongfeng’s Voyah family cars reported 3,339 deliveries, a 10% growth from the previous month.  
• Meanwhile, deliveries of Changan’s EV arm Deepal declined by 9.5% to 7,756 units from a month ago. Yet, that number surpassed those of Nio and Xpeng for the first time following the launch of the brand by Ford’s manufacturing partner last April.
• Nio and Xpeng now face serious pressure. Xpeng saw relatively flat deliveries of 7,079 units for the month, although the automaker has managed to stall the delivery declines that began late last year, thanks to the launch of its revamped P7 sedan in late March, which began to offset the slump in sales of its G9 crossovers.
• Nio’s April deliveries plunged by 36% month-on-month to 6,685 units. Speaking on the sidelines at the Auto Shanghai show last month, president Qin Lihong said the company is in a period of model transition, clearing out most of its older models and still racing to introduce redesigned and new models.
• Seres did not reveal the numbers for its Aito brand. However, a total of 4,585 units were handed over to customers last month, according to data obtained by Chinese financial media outlet Caijing. The Huawei-backed car brand delivered 16,244 units from January to April.  
• Hozon and Leapmotor have settled into a period of steady growth, with deliveries of 11,080 and 8,726 vehicles, respectively. Both companies are increasingly focusing on higher-price segments rather than the budget offerings they are known for. Leapmotor said its pricier C series accounted for 83% of April’s sales.

Context: Established Chinese automakers commanded 67% of the country’s passenger EV market in March, a 6% increase from a year ago, according to figures published by the China Passenger Car Association. For “new forces,” which refers to younger EV startups, market share declined by 6.7% annually to 10.4%. In addition, Tesla took a 14.1% market share in China.

• The CPCA has yet to reveal detailed April figures but estimated on April 25 that passenger EV sales would decline by 8.4% month-on-month to roughly 500,000 units, as the market faced disruption from the recent price war and continued to slowly recover from the Covid-19 pandemic.

The biennial Auto Shanghai Show is traditionally a time for global automakers to flex their muscles and woo Chinese consumers. Yet this year’s edition, China’s first major auto exposition since the country reopened after Covid, has been very much dominated by local manufacturers.

The growing presence of Chinese brands reflected the mounting pressure on traditional global carmakers and also new makers such as Tesla, a notable absence at this year’s event. The US electric car pioneer launched one of its biggest-ever price cut campaigns this January, sparking a price war in China’s competitive EV market.

Below, TechNode highlights new releases and updates from major Chinese EV makers at the Auto Shanghai Show 2023, including BYD, Geely, Nio, Xpeng, and Li Auto, which all displayed an impressive portfolio of electric vehicle models.

BYD: Song L concept, Chaser 07, and Seagull

As China’s best-selling new energy vehicle brand, BYD came to the exposition with a wide range of updates covering all major price points, from budget-friendly compact cars to luxury off-road sports vehicles, as well as everyday SUVs. 

BYD’s main brand focused on three car models. The first one is the Song L concept car, a pure electric sports SUV equipped with an electric rear spoiler and BYD’s e-platform, and DiSus electric body control technology. BYD said it will be launched within the year but did not specify the exact model that will be made available or a launch time. The Song L may be a new supplement to BYD’s best-selling Song Plus SUV.

The brand also showcased the Chaser 07, a medium-sized plug-in sedan that is a new model in the Ocean family. It will be priced at RMB 200,000 to RMB 250,000 ($31,000-$39,000) and will be launched in the third quarter of this year. It is BYD’s effort to attract young car owners with an everyday hybrid. 

At the same time, BYD also announced the start of pre-sales of its entry-level mini car Seagull, which is priced at a budget-friendly RMB 78,800 to RMB 95,800 ($12,200-$14,800), and has two driving ranges of 305 km or 405 km. The car is equipped with four safety airbags, an ESP electronic vehicle stability system, and a fast charging capability of 30kW or 40kW.

BYD’s luxury car brand Yangwang unveiled new versions of its U8 and U9 models at the auto show on Tuesday. 

The U8, a new energy off-road vehicle with 1100 horsepower and the ability to accelerate from 0 to 100 km/h in 3.6 seconds, has officially started pre-sales and comes in two versions: the luxury edition and the off-road player edition. The official pre-sale price for the luxury edition is nearly RMB 1.1 million($170,000) and the model is expected to be delivered in September. The off-road player edition will be delivered later, with no specific timeframe announced yet. This high-end off-road vehicle will use BYD’s independently developed core technologies, E4 technology and DiSus (Yunnian) intelligent hydraulic body control system.

Meanwhile, Yangwang also unveiled a new look for its luxury sports car the U9, which now features a rear wing design that was not present in the version unveiled in January this year. The delivery time and specific price of the U9 have not yet been announced.

Geely: Zeekr X, Lynk & Co 08, and overseas plans

Zeekr X, the first SUV model launched by the Geely-affiliated brand Zeekr, made its public debut during this year‘s Auto Shanghai. The vehicle is aimed at attracting the country’s growing young and affluent population with a price tag of RMB 189,800 ($27,590). This is lower than what one of the firm’s executives projected early this year, considered a reaction to a months-long price war first launched by Tesla and now engaged in by dozens of automakers.

Zeekr also announced detailed plans to expand into Europe. Regional CEO Spiros Fotinos announced on Tuesday that the company will open proprietary showrooms and begin delivering the X along with its 001 sedans in the Netherlands and Sweden later this year. The brand is expected to enter most western European countries by 2026, Fotinos added.

Geely on Tuesday also focused on the Lynk & Co 08, the first model equipped with its in-house produced in-car software co-developed with Meizu after the carmaker completed its acquisition of the Chinese smartphone maker last July. The plug-in hybrid will have a maximum driving range of 1,400 km and a power output of up to 400 kW, with vehicle delivery scheduled during the second half of this year, according to Lin Jie, a senior vice president at Geely Auto.

Volvo’s parent expects its Flyme digital cockpit system not only to offer a connected and seamless experience to users across devices with its latest crossover but also to provide additional computing power to existing vehicle models from Meizu smartphones. The mainstream luxury brand, jointly unveiled to the public by Geely and Volvo in 2016, plans to innovate its current dealership model by opening direct sales stores in major Chinese cities, Lin told the Economic Observer earlier this month.

Nio: 2023 ES6 crossover and ET7 sedan

Nio unveiled a new version of its popular ES6 sports utility vehicles, which the company boasts can hit a speed of 100 km/h (62 mph) within five seconds. The models also feature a supercomputer that can perform over 1,016 trillion operations per seconds (TOPS). Current Nio cars have a maximum driving range of 900 kilometers equipped with a 150 kilowatt-hour (kWh) battery pack. The EV maker has not yet revealed the driving range of the updated vehicles. 

The five-seat crossover has been the company’s most popular vehicle model since it was first introduced in December 2018, with total deliveries of more than 120,000 units at the time of writing. Official release dates and pricing details have yet to be announced, though the EV maker has now begun taking orders for the latest version of its ET7 sedans priced from RMB 458,000, which was first launched in January 2021.

Xpeng: G6 crossover

The G6 is Xpeng’s first offering built upon its latest SEPA vehicle architecture and is expected to be a key test of the company’s efforts to return to a leading position in the country’s crowded EV race. With an estimated price range of between RMB 200,000 and RMB 300,000, the midsize SUV is set to be a mainstream, high-volume model compared with its more premium-oriented G9 sibling.

The electric coupe SUV will be capable of traveling up to 300 kilometers (186 miles) on a 10-minute charge, empowered by an 800-volt silicon carbide power module. Meanwhile, the EV maker boasted of its assistant driving tech, claiming drivers will only need to control the car once per 1,000 kilometers in complex traffic environments with the latest version, which it will roll out later this year. 

Li Auto: details of first all-electric model

Li Auto shared further details regarding its all-electric strategy at this year’s Auto Shanghai Show, co-announcing with CATL that its upcoming battery vehicle will be the first in the market to install the latter’s next-iteration Qilin battery that could provide a 4C charge rate. Charging at a 4C rate normally means that the battery could be charged from 0 to 100% in just 15 minutes, according to Quantumscape, a Volkswagen-backed battery startup and a spinout company from Stanford University.

Set to go on sale later this year, Li Auto’s first battery EV will also be built upon an 800-volt architecture for a range of up to 400 km after 10 minutes of fast charging. Chief engineer Ma Donghui added that the company is rushing to build 300 supercharging stations on Chinese highways by year-end and expand the number to 3,000 in three years, by which time it will have a lineup of at least five battery EVs. Li Auto currently has three plug-in hybrid crossovers on sale.

Nio and Li Auto this week reaffirmed plans to stick to their pricing strategy, bucking an industry-wide trend of significant price cuts in China initiated by Tesla and followed by dozens of auto majors from Toyota to Volkswagen. The young electric vehicle makers are looking to protect their superior brand images and achieve profitable growth despite concerns of a slowdown in sales in the short run, according to industry observers.

Why it matters: The ongoing price war in the Chinese auto market has created an unhealthy situation, as it might cause a growing number of consumers to wait on the sidelines in anticipation of further price reductions, UBS analysts told investors in a Wednesday note.

• Sales in provinces with local subsidies such as Hubei could see a temporary boost, wrote analysts led by Paul Gong. However, they also cautioned that for many companies, their brand premiums could be negatively affected, making it more difficult to sell their cars at normal prices in the future.
• China’s passenger EV sales increased 9% year-on-year to around 131,000 units during March 1-12, while total retail sales of passenger cars declined 17% against the same period last year to around 414,000 units, according to figures published Wednesday by the China Passenger Car Association.

No price cuts planned: Nio has no plans to cut prices for, or release affordable versions of, its flagship models to counter recent price cuts by competitors, Pu Yang, assistant vice president of sales operations, told Chinese reporters on Tuesday. A Nio spokesperson confirmed the report.

• In-store visits to Nio showrooms over the past weekend rose to a new three-month high, according to Pu, who added that some potential customers are holding off on purchases and waiting for prices to stabilize, which has affected order intake.
• Nio will compete for a larger market share by offering competitive prices in the premium car segment and shoring up services with the expansion of its battery swap facilities, Pu said, citing the strength of its products and brands.
• Nio’s domestic sales declined to 2,170 units during the week of March 6-12 from 3,345 units a week earlier, according to figures compiled by Chinese auto trade media outlet EV Observer. In comparison, Li Auto’s sales grew by 32% to 4,243 units during the same week.

Protection against price cuts: Li Auto also made a related move on March 11 by offering a price guarantee on its EVs until the end of the month to reassure customers that no price cuts are on the horizon. CEO Li Xiang said on March 2 that the company would stand by its pricing strategy.

• Four car brands are following suit. On Monday, Denza, BYD’s premium EV brand, announced an upfront price protection program through which it will give customers a rebate if there is a price reduction for its D9 multi-purpose vehicles within 90 days of purchase. This comes soon after the company slightly raised the price of its electric minivan to RMB 395,800 ($57,302) on March 1.
• Lynk & Co, owned by China’s Geely Auto Group, as well as younger makers Hozon and Leapmotor, had made similar moves as of Thursday. However, on Feb. 27, Lynk & Co began selling a cheaper version of its 01 models, which will be available until the end of April at a price of RMB 159,900, an 11% reduction compared to the 2023 version of the hybrid crossover.

An all-out price war: China’s car price war was in full swing last week when state-owned manufacturer Dongfeng Motor slashed the prices of some models, such as the Citroen C6, by up to RMB 90,000, with the help of incentives from the government of the central Hubei province.

• At least 30 domestic and international carmakers have joined the fight, Bloomberg reported. SAIC-Volkswagen on Monday announced a massive cut of up to 20%, or RMB 40,000, for EVs under the German automaker’s ID family, SCMP reported. Meanwhile, some local BMW dealers reportedly offered a discount of as much as RMB 100,000 on its i3 sedans.
• Experts cited excess inventory of gas-powered vehicles, waning competitiveness of joint brands by Chinese makers and their overseas partners, and Beijing’s full implementation of new emission rules this July as reasons for the price reductions. Analysts from China’s Huatai Securities expected most price campaigns to last until the end of March.
• Multiple EV makers have been tempted to follow Tesla’s lead and reduce the prices of their vehicles since late last year when the US carmaker launched price promotions to boost sales. This was followed by a reduction of up to RMB 48,000 on select models early this year, forcing rivals from BYD to Xpeng Motors to lower their prices to stay competitive.

READ MORE: Chinese EV makers rush to offer big incentives as sales slide

Two of Xpeng Motors’ vice presidents are stepping down after more than five years in their respective roles as the EV maker carries out a wider leadership restructuring, according to two people familiar with the matter.

Why it matters: The departures are Xpeng’s latest leadership reshuffle after it appointed Wang Fengying, a former executive at Great Wall Motor, as the company president on Jan. 30. Xpeng is undertaking a drastic reorganization in the hopes of turning its prospects around as falling sales add to its stresses in an increasingly competitive EV market. 

• The reshuffle is also meant to help chief executive He Xiaopeng reinforce his control over the company and give more weight to Wang, the sources said. Industry observers expect Wang to guide Xpeng through these difficult times.

Details: Liu Minghui, a long-standing vice president of powertrain engineering at Xpeng, stepped down last month after more than five years in the role and was replaced by Gu Jie, who recently joined the company from US auto supplier Delphi.

• Gu will report directly to CEO He Xiaopeng. Xpeng is looking to improve its development and manufacturing competitiveness, especially regarding electric powertrain and battery-related technologies, one of the sources told TechNode.
• As part of the overhaul, Liao Qinghong, a vice president of sales and chief of talent at Xpeng, handed over some of his responsibilities to Yi Han, a former executive at Geely, in preparation for leaving the company.
• Before joining Xpeng earlier this year, Yi led marketing efforts and brand execution for Volvo, Lynk & Co, and Smart within the Geely Group for more than a decade, public records show.
• The ongoing reorganization will dilute the authority of some founding members, a potential hindrance to the company’s refocus on efficiency and profitability, according to one of the sources and a third person with knowledge of the situation.
• This significant change follows the late January appointment of president Wang to a role that includes responsibility for major operations from vehicle planning to sales management, roles that used to be overseen by co-founder Henry Xia and Liao, respectively.
• An Xpeng spokesperson declined to comment when contacted by TechNode on Thursday. Chinese tech media 36Kr first reported the news.

Context: Xpeng has made a series of moves over the past months as it hopes to drive sales back up amid growing competition from larger players. Soaring battery material prices have also weighed on the company’s profitability in the past year.

• The Guangzhou-based automaker set up multiple cross-functional teams to encourage collaboration and boost efficiency last October, followed by new measures aimed at lowering costs and streamlining the company’s workflow weeks later.
• The company is rushing to launch two all-new vehicles and three redesigned models in the hope of reaching a modest delivery target of around 200,000 vehicles this year. P7i, a revamped version of the company’s best-selling model P7, launched sales on Friday with a starting price of RMB 249,900 ($35,904).
• Meanwhile, sales of the G9 crossover, initially supposed to be a flagship, high-volume model, flagged to 2,249 units in January from 4,020 units a month earlier, following heated criticism of pricing and specs from customers when it was launched in September. The company delivered a total of 6,010 vehicles last month without specifying the breakdown of models.
• Xpeng’s total deliveries were 11,228 units during the first two months of this year, falling further behind rivals Li Auto and Nio, who delivered 31,761 and 20,663 vehicles respectively. Li Auto reported a gross margin of 20.2% as of the fourth quarter of 2022, while Nio’s margin plunged to 3.9%. Xpeng generated a 13.5% gross margin as of the third quarter of last year.

READ MORE: Despite recovery in February, Chinese EV makers still face challenges as costs and competition increase

TechNode Chinese reporter Zheng Huimin contributed to the reporting of this story.

Chinese automakers mostly saw a return to their growth trajectory in electric vehicle sales in February after taking measures to ride out a seasonal lull worsened by Beijing’s phase-out of EV purchase subsidies. 

BYD, GAC’s Aion, and Nio saw strong recoveries, while Xpeng and Huawei-backed Aito continue to fall behind in the competition. However, sales are still down from the historic highs of the past year, and a tougher competitive environment could create more headwinds in the near term, according to executives.

Why it matters: The figures come as many automakers have said they face increasing pressure from competitors just as operation costs mount. 

• Li Auto chief executive Li Xiang told Chinese reporters on Thursday that the lingering impact of the end of EV subsidies and recent price cuts by bigger rivals will continue to weigh on sales in the first quarter.
• Nio also anticipates more pressure on its margins as the company currently undergoes “a transitional period,” CEO William Li told investors on Wednesday, adding that it was clearing out inventory of its older vehicles in preparation for the release of new models in the second quarter.

Strong recovery: BYD has continued its growth momentum in customer demand despite a slowdown in the overall Chinese EV market, reporting delivery of 193,655 vehicles in February, a jump of 119.4% from a year earlier and an increase of 28% from the previous month.

• BYD has retained its dominant position, especially in the price segment of RMB 100,000 to RMB 250,000 ($14,478 to $36,196), according to Sun Shaojun, founder of auto consumer service platform Che Fans.
• GAC’s EV unit Aion also saw a big revival, with sales almost tripling to 30,086 units from a month ago. Sun said Aion was among the few rivals to BYD that “can catch up a little bit in certain regions and car segments.” (our translation)

Back to normalcy: Li Auto’s February sales grew 97.5% year-on-year to 16,620 units, representing a mild increase of 9.8% from a month earlier. Nio and Hozon posted double-digit growth from a month ago with 12,157 and 10,073 vehicle deliveries, respectively.

• Hozon  began offering a de-facto price cut on Feb. 3, as customers who placed an order for its Nezha S electric sedan with a deposit of RMB 5,000 by the end of the month could secure a rebate of RMB 20,000.
• Li Auto and Nio are expected to deliver around 23,200 and 12,300 vehicles respectively in their best-case scenarios for March, as delivery guidance for the first quarter reached 55,000 and 33,000 units.

Lackluster sales: Xpeng Motors is still struggling to get back on track after facing poor sales and criticism over its pricing strategy in 2022. Its vehicle deliveries totaled 6,010 in February, despite a recent price reduction. This is just 15.2% higher than January’s sales and 3.5% lower than a year ago.

• Huawei-backed EV maker Seres also saw little improvement following major promotions on their Aito-branded EVs, as February deliveries fell 21.7% to 3,505 units on a sequential basis.
• Sales of Changan’s EV marque Deepal declined 33.1% sequentially to 4,103 units. On Monday, the automaker kicked off a spat with rival Geely about the design of the latter’s newest EV.
• Geely’s premium brand Zeekr posted deliveries of 5,455 vehicles last month, and sales at Hong Kong-listed Leapmotor were up 180.8% from a 12-month low to 3,198 units.

Context: Sales of new energy passenger vehicles, which include all-electrics and plug-in hybrids, rose 9% year-on-year to around 546,000 units from Jan. 1 to Feb. 19, according to figures published by the China Passenger Car Association (CPCA) on Wednesday.

• Gas-powered cars were worse off, as sales slumped more than 30% annually over the same period. The CPCA has estimated 31% annual growth for passenger EV sales to 8.5 million units this year.

Li Auto aims to double its China market share in high-end sports utility vehicles to 20% in 2023, encouraged by buoyant demand from the country’s emerging middle class, chief executive Li Xiang said on Monday.

The electric vehicle maker also reported a solid rise in fourth quarter revenue and an upbeat outlook for the current quarter. Despite intensifying competition and slowing demand in China’s EV market, Li Auto is on track to launch its first all-electric model later this year.

Why it matters: Li Auto has set an annual sales goal higher than analysts had anticipated and much more positive than those from the likes of Nio and Xpeng Motors. If achieved, it would make Li Auto the first Chinese automaker to capture a significant share of the country’s premium car segment, according to Sun Shaojun, founder of auto consumer service platform Che Fans.

Rosy 2023 outlook: If met, the market share goal would more than double last year’s share of 9.5% and equates to an annual sales volume of around  300,000 vehicles in the Chinese premium SUV segment, Li said during an earnings call. This is higher than the 270,000 units forecasted by Bernstein analysts.

• The key to success on this front is a strong product portfolio that covers a broader customer base, according to Li. The carmaker estimates sales in the segment of between 1.4 million and 1.5 million units this year, including gas-powered and electrified crossovers, with a price range of RMB 300,000 to RMB 500,000 ($43,205 to $72,009).
• Li said that vehicle delivery would likely reach 30,000 units per month during the second quarter as shipments of the newly-launched L7 begin in April. Li sees little chance of cannibalization between the five-seat L7 and its larger sibling, the L8. The former is intended to attract small nuclear families comprising two or three members, while the latter targets two-children or three-generation households.

All-electric lineup: Li Auto is on track to launch its first pure electric vehicle model, which will be equipped with Qualcomm’s latest five-nanometer cockpit chip 8295, Li told investors. He added that the company’s battery EV series will cost between RMB 200,000 and RMB 500,000.

• The company sees high battery costs and inconvenient charging as some of the biggest issues for EV penetration and aims to promise future buyers the ability to add 400 kilometers (249 miles)-worth of charge in 10 minutes. Rival Xpeng pledged a similar experience with its premium SUV G9 late last year.
• Meanwhile, Li Auto acknowledged that it has been negotiating new price terms with suppliers, responding to an analyst question about reports that CATL has been offering big discounts on EV batteries, but declined to provide further details. President Ma Donghui said the company would commit to a multi-supplier strategy to ensure stable supply.

Solid Q4 results: Li Auto’s revenue increased 66.2% year-on-year to more than RMB 17.7 billion in the fourth quarter of 2022, compared with estimates of RMB 17.6 billion, according to Bloomberg. Net income declined 10.5% annually to RMB 265 million but improved from a net loss of RMB 1.65 billion in the previous quarter.

• The Beijing-based automaker’s gross margin came out as 20.2% in the quarter, from 12.7% in the third quarter and fairly close to Tesla’s 25.6% over the same period. Peers Nio and Xpeng posted gross margins of 13.3% and 13.5% in the third quarter of 2022, respectively.
• Li Auto expects to deliver up to 55,000 vehicles in the first quarter of this year, which would represent an increase of 73.4% from a year ago. Overall sales of passenger electric cars declined 6.3% year-on-year in January, according to figures from the China Passenger Car Association.

Context: Nio and Xpeng have both set a delivery target of around 200,000 vehicles this year as China’s EV market shifts into a lower gear, partly due to the phasing-out of EV purchase subsidies by the central government last December.

• Nio CEO William Li has said he expects deliveries this year to surpass the nearly 190,000 units Lexus sold in China last year. Xpeng is aiming for accumulated overall sales of 450,000 EVs this year, of which around 250,000 were delivered as of last year, according to an internal letter obtained by local media outlets.
• Li Auto’s first plug-in hybrid vehicle, the Li One, ranked fifth in terms of sales in the Chinese premium SUV segment with the shipment of 78,791 units last year, the CPCA figures showed. Tesla’s Model Y topped the chart with deliveries of 315,314 units, while Mercedes-Benz’s GLC, Audi’s Q5, and BMW’s X3 each booked sales of more than 140,000 units.

Chinese electric vehicle maker Li Auto released its cheapest ever car on Wednesday, a five-passenger compact sports utility vehicle that the company says has been developed to appeal to women and small families, and that it hopes will take on bigger rivals from BMW to Mercedes-Benz.

The company also launched a new, RMB 20,000 ($2,948)-cheaper version of the L8, its six-seater crossover, offering customers a de facto price cut in response to increased competition from carmakers such as Tesla.

Why it matters: Some industry observers have voiced bullish views on Li Auto as the company keeps expanding its portfolio with new vehicles aimed at meeting the needs of growing Chinese middle-class families.

• Li Auto and Nio should still be able to grow their sales because of their brand new products despite forecasts of a challenging 2023, said Tu T. Le, managing director of Sino Auto Insights.
• “The market has become so competitive that we will likely see many EV makers do whatever they can to protect any share they have been able to carve out in the market,” Le added.

Details: Li Auto on Thursday introduced the L7 extended-range SUV, the company’s first five-seater explicitly designed for Chinese nuclear families. It measures around 5 meters in length and spans a 3,005-millimeter-long wheelbase, bigger than many similar mid-size models.

• For comparison, the BMW X3, Audi Q5L, and Mercedes-Benz GLC crossovers are all less than 4.8 meters in length and have a maximum wheelbase of 2,973 mm. The L7 is also more spacious than its rivals the BYD Tang, Xpeng Motor G9, and Huawei-backed Aito M7.
• The car boasts a luxurious interior and roomy passenger space, with a so-called “Queen’s seat” mode in the back providing leg room of almost 1.2 meters and well-bolstered seatbacks.
• The EV maker is targeting women in China who are increasingly picking the family car. Speaking at a conference on Wednesday, Han Ling, a product manager of Li Auto, specifically used female terms of address a dozen times during a 10-minute speech, according to a TechNode calculation.
• The L7 SUV will be equipped with a supercomputing platform – powered by two of Nvidia’s Orin X chips or by a Horizon Robotics Journey 5 processor depending on the model, and will use cameras and lidar sensors for driver assistance on Chinese highways.
• The Meituan-backed carmaker plans to send selected customers a beta version software update for assisted driving technology on busy urban streets in the fourth quarter of 2023. Rival Xpeng Motors has been implementing a similar update since September.
• The L7 crossover will have a driving range of 210 kilometers (130 miles) on a single charge and can drive for about 1,315 kilometers with a full fuel tank and a full charge, the same as its larger sibling, the L8. The company said its starting price will be RMB 319,800 and delivery is set to begin on Mar. 1. 
• Meanwhile, chief executive Li Xiang on Wednesday revealed a so-called “Air” version of its L8 crossover with a starting price of RMB 339,800, down RMB 20,000 from the Pro model which used to be the lowest-priced option offered by the automaker.

Context: Beijing-headquartered Li Auto currently has three models of different sizes on sale, namely the full-size crossover L9, L8, and the L7, with a price range of around RMB 300,000 to RMB 400,000, in a segment traditionally dominated by global carmakers such as BMW and Mercedes-Benz.

• The L9 was China’s top-selling large-size electric SUV in December with 10,582 units shifted, four months after delivery began in August, while 10,189 units of the L8 crossover were sold in the month, according to figures compiled by the China Passenger Car Association. Both were lower than the 29,387 units of Tesla’s Model Y, but higher than the roughly 4,000 units Nio delivered of its ES7 and Xpeng delivered of its G9.

Nio will expand its charging network by building at least 400 battery swap stations across China this year, alleviating a major concern among potential buyers that cars have insufficient driving range to travel between charging points, its president said on Monday.

Riding the wave of China’s speedy EV adoption, the electric vehicle maker also launched a special service campaign for owners during this year’s Lunar New Year holiday season, including unlimited free battery swapping and personalized customer service.

Why it matters: Nio’s recent moves to shore up its charging network and customer service capability are expected to further enhance its place in the Chinese luxury car segment, according to president Qin Lihong, who spoke to reporters in Beijing on Monday.

Charging infrastructure: In what Qin described as “a stress test” to check how Nio could “provide users with seamless services that were beyond their expectations” (our translation), Nio swapped nearly 1.25 million EV battery packs between Jan. 13 and Feb. 5 in China. For comparison, the company completed just over 800,000 swaps with a chain of 143 service stations between May 2018, when its first swap facility began operations, and mid-August 2020.

• Nio ran a network of 1,305 battery swap stations around China for a user base of nearly 290,000 drivers as of last year and will build more swap facilities than its previous estimate of 400 this year, Qin said, without giving a new number. The EV maker initially planned to expand its charging network to 1,700 swap stations in 2023, chief executive William Li said on Dec. 24 at Nio’s annual press conference.
• The eight-year-old company also claimed to be carmakers’ biggest EV-charging provider, with a network of 13,629 charging piles in China as of December. During the Lunar New Year holiday season, 76% of the charging sessions using Nio’s charging piles came from non-Nio cars, of which 17.6% were from BYD, 15.8% from Tesla, and 4.1% from Xpeng models. Official figures showed that China had nearly 1.8 million public charging piles as of December.
• Senior vice president Shen Fei said that Nio would scale up its charging operations at a pace that is in line with the increase in its sales volume. This not only refers to the build-up of swap stations but also applies to hybrid locations that include swap facilities and charging piles, which the company believes will better serve clients at peak times.
• Qin added that the seasonal campaign will not significantly impact Nio’s financial results but rather enhance its reputation for premium service and experience, as the company reduced advertising spend accordingly to keep its gross margin flat. Nio began offering owners six free swaps a month in late 2020, but maintains its policy of unlimited free battery swaps for an undisclosed number of early owners.

Unexpected services: In addition to existing, regular on-call valet charging and parking services it offers to car owners whose vehicles are running out of power, Nio provided a wide range of personalized, value-added services during the recent Lunar New Year holiday season.

• This ranged from family photoshoots at the company’s clubhouse-style flagship stores to the feeding of pets at the homes of Nio owners who were traveling, which a Shanghai-based Nio owner surnamed Dai described as “trivial but touching” when contacted by TechNode on Monday.
• Shen clarified by saying that these service options did not put pressure on its business, as most of them were provided unofficially by frontline employees who were simply working hard to fulfill customers’ needs.

Industry outlook: Nio remains optimistic that this year’s sale figures will exceed the roughly 184,000 units Lexus sold in 2022 in China. The auto upstart expects solid growth momentum for the country’s EV market despite a recent slump as China dropped its COVID-19 prevention measures.

• Qin added that intelligent, electrified, and high-end vehicles will continue to gain traction in the world’s biggest auto market, citing the average sale price of passenger vehicles in China, which is RMB 30,000 ($4,422) more in 2022 than in 2019.
• Industry observers expect rising competition and waning profits for Chinese automakers this year amid Beijing’s phase-out of EV purchase subsidies and a slow post-pandemic recovery. The China Passenger Car Association estimated passenger EV sales will reach 8.5 million units in 2023, representing an increase of around 50% from a year ago.

READ MORE: China’s EV battle 2022: why BYD is leaving Tesla and Xpeng in the dust

Major Chinese electric vehicle makers, from Aion to Nio, are joining the likes of Xpeng Motors in an industry-wide price war ignited by Tesla, offering generous sales incentives to boost demand after posting dismal delivery results for January.

Why it matters: Sales growth for new energy vehicles (NEVs) at the start of 2023 has reached a bottleneck after the central government fully scrapped subsidies for purchasing them at the end of December, the China Passenger Car Association (CPCA) wrote in a post on Wednesday, quoting January sales figures. NEVs is a catchall phrase used in China that includes all-electric cars, plug-in hybrids, and hydrogen fuel-cell vehicles.

• A price war kicked off by Tesla has left many consumers on the fence about buying an EV in the immediate future, as some automakers followed suit with price cuts while others raised prices to help offset rising costs, the industry group added.

READ MORE: Local Chinese authorities unveil stimulus measures to spur EV sales

Flagging January sales: Retail sales of Chinese passenger electric vehicles fell by 1% year-on-year and 43% month-on-month to around 304,000 units from Jan. 1 to Jan. 27, according to figures published by the CPCA on Wednesday. The industry group has yet to publish figures for the full month, but reports by many Chinese EV makers are out, and they show a definite sales slump.

• GAC’s Aion on Wednesday reported a 66% month-on-month drop in vehicle deliveries to 10,206 units in January, during which time the company raised its car prices by between RMB 3,000 and RMB 8,000 to make up for rising costs.
• Figures from Xpeng Motors and Huawei-backed EV brand Aito more than halved sequentially to 5,218 and 4,475 units respectively. Both companies followed Tesla’s move with significant price cuts across their vehicle lineups early last month.
• Nio delivered 8,506 vehicles in January, marking a 46.2% decrease from a month earlier, while Li Auto reported a relatively solid performance with deliveries falling 28.7% sequentially to 15,141 vehicles. CATL-backed Hozon sold 6,016 EVs, down 22.8% from a month ago.
• Zeekr’s January sales of 3,116 vehicles were less than a third of the number delivered in December, which the company attributed to a 22-day production suspension for an upgrade at its Ningbo facility. Hong Kong-listed Leapmotor only delivered 1,139 vehicles, an 86.6% drop from a month ago, but didn’t provide any further details.
• BYD handed over 151,341 EVs, including around 10,400 units overseas, which was 35% lower than December’s sales but 62.4% higher than in the same month last year, according to a Wednesday statement.
• Other than diminishing subsidies, most companies blamed the slide on the seven-day public holiday during the Lunar New Year, as well as the spike in coronavirus infections that swept China after the country’s zero-Covid policy ended in early December, among other reasons.

Nio’s big promotion: Nio on Wednesday began offering customers a package of discounts and special offers for its first-generation electric sports utility vehicles, including a more than RMB 10,000 ($1,483) allowance to cover the cost increase caused by the phasing-out of Beijing’s subsidy.

• The EV maker also unexpectedly discounted inventory of the older version of its ES8 and ES6 crossovers by at least RMB 18,000 and offered existing car owners an additional exchange discount of RMB 15,000, local media outlet Powerhouse reported on Thursday, citing two Nio salespeople.
• The company also offered buyers free access to its advanced driver assistance software Nio Pilot which has a sticker price of RMB 39,000, among other promotions. If all these offers are combined, one can purchase a performance version of the 2022 ES6 SUV for RMB 313,700, more than RMB 100,000 cheaper than last month.
• Nio on Thursday responded by saying the company is about to launch its redesigned ES8, ES6, and EC6 models and is therefore offering discounts on the small amount of inventory and showroom cars of the old models it has left.
• Sales of Nio’s ET7, ES7, and ET5 cars, built upon the company’s second-generation technology platform, accounted for 85.6% of its monthly delivery in January, according to a Wednesday statement.

More price campaigns: State-owned automakers SAIC and GAC also announced they would slash prices on their vehicles this week in the hope of grabbing a share of sales during a traditionally slow season.

• Rising Auto, an EV brand launched by Volkswagen’s manufacturing partner SAIC in mid-2020, on Thursday cut the starting price of its base R7 crossover by 7.5% to RMB 279,900. The model is also available at a big discount of RMB 10,000 and can be purchased for RMB 195,900 if customers subscribe to its battery-swap program.
• On Wednesday, GAC’s EV unit Aion also began offering a limited discount of RMB 5,000 on its Aion Y SUVs and Aion S Plus sedans, priced from RMB 137,600 and RMB 149,800 respectively, before the end of this month. 
• A day earlier, Geely’s luxury EV brand Zeekr said that customers who place their orders before the end of March would be able to get certain discounts on car insurance and optional parts.

Skirmishes have surrounded China’s speedy uptake of electric vehicles in the past year, with industry giant BYD reigning supreme but an increasingly large crowd of challengers looking to muscle in on the action. Once-promising startup Xpeng Motors and major automaker Great Wall Motor have been among those to falter in 2022 – and the war is far from over.

Industry observers link BYD’s success to China’s national shift towards electric vehicles, the company’s highly-integrated supply chain across key components, and a rising consumer preference for high-quality, cost-competitive automobiles as recession looms. 

Xpeng’s recent setbacks, however, reflect structural weaknesses at the company, including limited competitiveness and low operational efficiency in a crowded marketplace. Now, the risk of falling behind the competition has become real for the Guangzhou-based company.

Even Tesla faces an eroding market share in a highly competitive field, thanks to an onslaught of new models from various domestic rivals. Meanwhile, foreign auto giants from Volkswagen to Ford have long lagged behind Chinese counterparts in transitioning to green energy.

Here, we look at the annual results of China’s EV leaders and attempt to explain the dynamics behind some of the biggest winners and losers of the past year.

Winners and losers 

Despite being a bright spot in a slowing auto market, China’s two-year run of huge growth in the EV sector hit unexpectedly fierce competition as it shifted into a lower gear in the second half of 2022.

BYD was the biggest winner of the year, with annual sales of 1.86 million electric cars. The company’s output was more than triple 2021’s figure of around 600,000 units, comfortably exceeding its goal of 1.5 million units.

Tesla was left a distant second. The company’s sales started to slow last year as concern grew about an underlying mismatch between supply and demand. In 2022, the US automaker delivered 439,770 China-made vehicles to local customers, a 37% increase from a year ago and significantly lower than its 50% growth target for overall sales volume.

Besides BYD and Tesla, multiple Chinese EV makers including Nio and Xpeng embarked on 2022 with optimism and ambitious sales targets. However, only a handful managed to hit their goals. Aion (the EV arm of state-owned automaker GAC) and Hozon kept their word by selling around 271,000 and 152,000 EVs respectively last year. Geely’s premium EV brand Zeekr also achieved its goal by delivering just over 71,000 vehicles.

China’s US-listed EV makers mostly underperformed. Nio played tough to secure around 80% of its 150,000-vehicle delivery goal, while Xpeng delivered just over 120,000 units of its 250,000 unit target.

Why BYD dominated the market

In December, when most automakers struggled to protect their market shares by offering generous discounts as the Chinese government phased out EV subsidies, BYD went the opposite way by announcing a price rise of up to RMB 6,000 ($870) across its lineup. The move proved BYD’s role as “price maker” in the mass market, analysts at Jefferies wrote in a Dec. 1 report.

Analysts attributed BYD’s dominance partly to its success in ramping up manufacturing capacity and building a secure, integrated supply chain from batteries to chips. In 2022, when the company tripled its annual car capacity to around 3 million units at its eight manufacturing locations, according to public information gathered by investors, it also more than doubled its battery capacity to 285 gigawatt-hours (GWh), according to estimates by Founder Securities. A company spokesperson declined to comment on the capacity figures.

Also, the automaker has adopted a dual strategy of betting on both all-electrics and plug-in hybrid EVs (PHEVs) as range anxiety continues to be a top concern among local buyers. BYD offers nearly 70  models in major configurations and price categories. This helps the company stand out in a crowded market where many competitors pick a type and limit buyers’ options.

Why Xpeng and Great Wall Motor are losing ground

As China’s EV sales reported nearly 100% annual growth in 2022, Xpeng Motors and Great Wall Motor are among the most surprising names for whom sales growth dipped well below the industry average. The two companies sold 120,757 and 131,834 EV units last year, posting a flat increase of 23% and a 4% decline from a year earlier, respectively.

Multiple factors have put pressure on the two companies, including weaker consumer sentiment and interest rate hikes. 

The sales slump at Great Wall Motor indicates a major setback in the company’s slow shift to EVs. In 2022, monthly sales of the company’s Haval H6, once China’s top-selling gas-powered crossover, fell 75% to around 20,000 units from historic highs, as it appeared to be outpaced by popular EV models produced by Tesla (Model Y) and BYD (Song Plus). 

Ora, the company’s dedicated EV sub-brand, saw sales decline by 23% year-on-year to 103,996 units. Nevertheless, Great Wall Motor’s management has big plans for 2023 — promising to launch more than 10 EV models, including five new PHEVs under the Haval brand and two new models under the Ora marque.

Xpeng is facing a more complicated external environment, as well as the threat of increased pressure from rivals, said David Zhang, a school dean at Jiangxi New Energy Technology Institute. Not only are sales of big name rivals such as BYD and GAC’s Aion gaining momentum, but younger makers such as Hozon and Leapmotor are increasingly catching up. That’s the broader context behind Xpeng currently restructuring its business, according to Zhang.

Meanwhile, Xpeng is exposed to a potential demand mismatch risk in the short-term, as consumer confidence in vehicle intelligence technologies lags behind ambitious plans to bring self-driving cars to the market, analysts from Zheshang Securities told local media outlet Jiemian.

The Alibaba-backed EV maker has pledged to put more effort into overall car-making after reporting three consecutive months of dropping sales as of October and losses of RMB 6.78 billion ($1 million) for the first three quarters of 2022. It is also dealing with an aging product portfolio and implementing cost control measures to boost efficiency and drive sales, with chief executive He Xiaopeng promising to refocus on the core company after spending some time and energy on emerging businesses such as flying cars.

“We have high expectations for 2023. It’s a game of both competence and persistence. We have winning cards to play the game, and the evolution is making good progress,” a company spokeswoman said when contacted by TechNode.

Trend 1: Bring everything in-house

In-house manufacturing of key components has become one of the biggest trends in China’s EV industry over the past year, as many automakers look for ways to reduce supply chain vulnerability amid persistent chip shortages and the surging cost of battery materials. Among them, BYD is widely seen as a role model for this vertical integration strategy: the automaker builds its own supply chain and performs most of the activities required to bring its vehicles to market.

Already the world’s second-biggest battery maker and a major domestic supplier of power semiconductors for automobiles, BYD is now looking to expand production capacity significantly and accelerate the development of new products. Founder Securities expects BYD’s capacity to increase to 445 GWh-worth of batteries to close the gap with dominant player CATL by the end of 2023. In November, the company abandoned an initial public offering plan for its semiconductor unit as it decided to focus instead on expanding the capacity of a local plant by 80% to reach 360,000 wafers in 2023.

Other major industry players, from state-owned GAC to US-listed Nio, have also been racing to develop battery and semiconductor technologies in-house to ensure a secure supply of the key components. Here are some recent moves and potential developments for the companies heading into 2023:

• On Nov. 18, Svolt, an EV battery startup backed by Chinese automaker Great Wall Motor, filed initial paperwork for a public share sale on Shanghai’s Nasdaq-style Star market. The company is looking to raise RMB 15 billion to build three manufacturing plants with a combined annual capacity of around 106 GWh.
• On Dec. 29, GAC began building an RMB 2.2 billion drivetrain plant in Panyu, a city in the southern province of Guangdong, with mass production to kick off at the beginning of 2024. Initial capacity will enable it to assemble drivetrain systems for 400,000 battery EVs and 100,000 plug-in hybrid vehicles annually by 2025.
• On Dec. 21, Xpeng confirmed that it has set up an RMB 5 billion subsidiary to produce battery packs on its own but will still source battery cells from partners. On Oct. 25, peer Nio made a similar move by forming an RMB 2 billion subsidiary for battery manufacturing, in addition to a $32.8-million research facility for battery development.
• On Oct. 10, Chinese media outlet LatePost reported that both Nio and Xpeng had formed hundred-strong teams to work on chips for autonomous driving, while Li Auto had been hiring chip designers for more fundamental semiconductor components.

Trend 2: Short-term bumps

Analysts have warned about the prospects of a bumpier year for EV makers in 2023, and sure enough, the industry is already seeing some sharp movements. On Jan. 6, Tesla made a big splash by cutting the prices of its China-made vehicles by between 6% and 13.5%, a move that Sun Shaojun, a popular Chinese car blogger, described as kicking off an industry-wide battle for survival in the year ahead.

Sun added that many rivals would probably have to follow suit in the face of such a big promotion by an industry leader. Meanwhile, analysts at Bernstein expect competition to heat up with as many as 126 new battery EV models and 55 new plug-in hybrid models coming to market in 2023, a 40-50% increase on last year.

In anticipation of a post-Covid recession and in light of EV subsidies being scrapped, sales are expected to slow this year. Credit Suisse’s sales forecast of 9.4 million EV sales in China is one of the more bullish on Wall Street, while Bernstein more cautiously holds that 8 million units will be sold in the country this year.

An ongoing growth story 

And yet, long-term growth prospects remain buoyant, as demand shifts from policy-led to consumer-driven, Bernstein analysts wrote in a Jan. 5 report. UBS shared the sentiment, expecting the new energy vehicle (NEV) penetration rate, mainly for all-electrics and PHEVs, to grow by 10% this year to reach 37% of all new car sales.

2022 proved to be a big year for Chinese EVs. The central government achieved its goal of EV adoption approaching 25% of total car sales three years ahead of schedule, as industry sales nearly doubled to 6.8 million units. Still, pressure on margins is likely to persist in the near term for smaller companies, which have already been exposed to high battery material costs.

Looking ahead, China has cemented its growth momentum in the global EV race, but industry players should expect short-term sacrifices to hit their profits as they glimpse a bigger and brighter future.

Xpeng Motors is aiming for profitability on an operating level by 2025, according to an internal speech from chief executive He Xiaopeng to employees. The electric vehicle maker will also focus on redeveloping business strategies, dealing with corporate restructuring issues, and bolstering corporate value in 2023. 

Why it matters: He’s comments come on the heels of a turbulent year for Xpeng during which the company faced major setbacks, including a 23% sales drop in the second half of 2022 and an 80% plunge in market capitalization from a year ago.

Details: Xpeng expects to break even in 2025 with its earnings margin before interest, taxes, depreciation, and amortization reaching 17%, according to a report from 36Kr that cites comments made by He at an internal meeting on Wednesday.

• The management is more optimistic than some analysts’ predictions. Bernstein estimates that Xpeng will turn its adjusted operating margin from -5.1% in 2024 to 0.3% in 2025. That number was estimated to be -33.1% last year, according to Bernstein.
• He also pointed out that employee morale at the electric car company is low due to falling sales and share prices and that Xpeng’s productivity as a company is not where it should be, vowing greater restructuring efforts to simplify operations this year.
• Meanwhile, He highlighted the company’s push to forge ahead with vehicle development from the perspective of customers, adding that all future Xpeng vehicles will be equipped with safety-based driver assistance technologies.
• Xpeng will also accelerate its overseas expansion in the next few years, with plans to launch two new vehicle models for the global market in 2023, followed by a third in 2024, according to He.

Context: Xpeng reported an annual growth rate of 23% in vehicle sales in 2022, significantly lower than the industry average of around 90% and falling behind US-listed peers Li Auto and Nio, who posted year-on-year growth of 47% and 34%, respectively.

• The Alibaba-backed EV maker has been undergoing a major restructuring since late last year with the establishment of several committees and financial teams to enhance efficiency and control costs. It also announced price cuts of up to 15% for its vehicle lineups earlier this week amid rising competition with Tesla.
• Xpeng is not the only Chinese EV maker taking steps to streamline operations. On Jan. 1, Nio chief executive William Li told employees that low-productivity teams and insignificant projects would be “streamlined and optimized” this year in light of a slight increase in budget, according to an email seen by 36Kr.

China’s electric vehicle price war has edged up a notch, with Xpeng Motors and Huawei-backed Aito now following Tesla in slashing prices on their lineups, responding to intensifying competition as Tesla’s China-made vehicles gain market share.

Why it matters: These latest price cuts could force more EV makers to follow suit, hitting profit margins that have already been squeezed by the recent sharp rise of battery raw material costs.

• The next two months may see more price drop campaigns thanks to new product offerings and a decline in lithium carbonate prices, said Cui Dongshu, secretary general of the China Passenger Car Association (CPCA), on Jan. 10.

Details: According to a “new pricing scheme for the Chinese New Year” released by Xpeng on Tuesday, the starting price of its P7 sedan dropped RMB 30,000 or around 15% to RMB 209,900 from RMB 239,900 ($30,942 to $35,365). Xpeng’s newly-launched G9 crossovers were excluded from the cuts.

• The EV maker also cut the price of the top-spec long-range model of its G3i crossover by RMB 25,000 to RMB 176,900, while the starting price of its mainstream P5 sedan dropped by 12.8% to RMB 156,900.
• The actual transaction prices of the G3i and P5 remain largely unchanged as the respective cuts on the sticker prices are in line with an RMB 20,000 discount that the company offered from October to December, Morgan Stanley told investors in a report.
• However, the price reduction for the P7 comes as sales costs increase by between RMB 10,000 and RMB 16,000. Xpeng’s gross margin in the current quarter will “likely hit a trough” due to the price adjustments, wrote the analysts.
• On Jan. 13, Aito, a Chinese EV brand backed by technology giant Huawei, also cut prices for its M7 and M5 sports utility vehicles by nearly 10%, bringing the two vehicles’ prices to RMB 289,800 and RMB 259,800.
• The price cuts will likely squeeze vehicle margins per unit. Still, selling at volume may help Aito increase gross margins and grow its business, according to an investor relations representative at Seres, which makes Aito-branded vehicles with Huawei.

Context: Despite a backlash from many existing car owners, Tesla has achieved instant results on sales and regained growth momentum after it drastically cut prices on its China-made vehicles earlier this month.

• Order volumes at some of Tesla’s showrooms in lower-tier Chinese cities have surged by as much as 500% from a month earlier, according to a Monday report by Chinese media outlet Yicai. The Beijing News also reported that the company saw an increase of 300,000 new orders in three days following the cuts.
• Some competitors have so far refused to join the fray. On Monday, an executive at Zeekr said that Geely’s premium EV brand would stick to its current price for its 001 crossovers. Meanwhile, BYD and GAC’s EV unit Aion raised prices across their vehicle lineups at the beginning of this year, citing Beijing’s phasing out of EV incentives among other reasons.
• Tesla handed over nearly 440,000 China-made vehicles to local customers in 2022, representing a below average increase of 37% from a year ago. The company’s share in the Chinese EV market fell by 8.3% year-on-year to 6.6% in December, according to figures from the CPCA.

READ MORE: Chinese EV makers rush to boost year-end sales as subsidies expire

BYD became the world’s best-selling electric vehicle brand in 2022, managing to sell a record 1.8 million units, more than triple its numbers from a year earlier. Other major automakers also reported improvement in December, according to the latest sales figures. 

Why it matters: The figures show that BYD has had an iron grip on the market in the last year while smaller EV makers faced ups and downs. China’s EV sales in 2022 are set to finish lower than expected as the industry enters a slower period after authorities phased out EV purchase subsidies at the end of 2022.

• China’s wholesale sales of electric passenger vehicles in December will increase by 17% from a month earlier to around 700,000 units, according to estimates by the China Passenger Car Association (CPCA).
• This means China’s new energy vehicle sales for last year could be below the previous estimate of 6.5 million units by CPCA. Passenger EV sales from January to November grew 100% year-on-year to 5.7 million units.

Details: BYD said on Monday that it delivered around 235,200 vehicles in December, an increase of 150.5% from the same period a year earlier. That figure also brings BYD’s total sales for 2022 to more than 1.86 million units, up 208.6% compared to 2021 figures.

• Aion, the electric vehicle unit of Chinese automaker GAC, maintained strong growth momentum with sales of 30,007 units last month. Overall sales surged 126% year-on-year to around 271,000 units in 2022. The company has set a target of selling 600,000 EVs in 2023, according to general manager Gu Huinan.  
• Hozon, a budget carmaker backed by CATL, was another bright spot with deliveries of 152,073 vehicles, an 118% jump compared with 2021. The company exported a significant number of 3,456 EVs and is looking to accelerate overseas expansion in regions such as Southeast Asia and the Middle East in 2023.
• Li Auto also ended the year with a record delivery count, handing over 21,333 crossovers to customers in December and becoming the first Chinese EV startup to reach the 20,000-unit milestone in monthly delivery. The total delivery count in 2022 for the brand was 133,246 vehicles, up 47.2% from a year ago.
• After a difficult third quarter, Xpeng Motors’ deliveries bounced back in December to a normalized level but still fell short of its US-listed peers Nio and Li Auto. The company delivered 11,292 units last month, including 4,020 units of the G9, its first premium crossover, which it launched in September. The final tally was 120,757 EVs, a mild 23% annual increase.
• Huawei-backed EV maker Aito also reported strong deliveries of 10,143 units in December, with total 2022 deliveries topping 75,000 units. 
• Monthly deliveries of Geely-backed EV brand Zeekr also surged 199% year-on-year to 11,337 units, bringing the maker’s total delivery count to 71,941 units.
• Nio delivered 15,815 cars last month, a monthly record high following November’s 14,178 units. Annual deliveries totaled 122,486 vehicles, representing a 34% growth from the previous year.
• Tesla’s deliveries increased 40% to 1.3 million EVs in 2022 from the prior year. The CPCA, which has tracked monthly sales for the company’s China operations since 2020, has not revealed its December sales figure for the Chinese market.

Context: Analysts expect industry sales to hit a plateau in 2023 after several years of strong growth as the Chinese government scraps subsidies for EV purchases.

• Citic Securities forecast sales of new energy vehicles, which mainly include battery-powered EVs and plug-in petrol-electric hybrids, to rise by 31% annually to 9 million units in China in 2023.

Xpeng Motors has intensified its restructuring efforts by setting up a new financial platform to control costs and streamline the company’s workflow, according to an internal memo obtained by Chinese media Dianchang (Powerhouse).

Why it matters: The cross-functional financial platform is the latest in a series of restructuring actions undertaken by Xpeng to get its business back on track, after it faced declining sales and slimming margins in recent months due to rising costs and competition.

Details: Xpeng has set up a number of financial units under the new scheme, including two teams to implement specific cost-saving measures with its sales and marketing operations and research and development units, according to the report.

• The new teams will allow chief executive He Xiaopeng to take back control of the company’s finances that he previously handed to management executives, such as budget planning for supply chain and technology development.
• The EV maker has also established several teams dedicated to asset management, tax administration, and business analysis to enhance its expense control, make more accurate cost estimates, and improve compliance practices.

Context: Xpeng has unveiled organizational changes that include setting up a number of committees for corporate strategy, product planning, and technology road mapping in the past few months, following criticism about the pricing and specs of its new premium crossover G9.

• With around RMB 40 billion ($5.74 billion) in cash on Xpeng’s balance sheet, CEO He told investors on Nov. 30 that the company still has enough capital to support its business growth for the coming years.
• The EV maker has recorded losses of nearly RMB 6.8 billion for the first three quarters of 2022, while annual revenue growth has slowed from 152.6% to 19.3% during the same period.

Chinese EV makers Nio, Xpeng Motors, Zeekr, and Aito, as well as Tesla’s operation in China, are racing to get the last slice of the sales pie before the end of 2022, offering special promotions with the country scheduled to phase out subsidies for electric vehicles beginning next year.

Why it matters: Analysts have projected slower EV sales in the coming months after the phase-out but remain positive on the overall growth of the EV sector in China in 2023.  

The end of subsidies: The Chinese government currently grants a small number of subsidies to EV buyers, with all-electrics and plug-in hybrids eligible for subsidies of RMB 12,600 ($1,836) and RMB 4,800 ($689) per unit, respectively. Beijing reduced the incentives gradually by 10%, 20%, and 30% from 2020 to 2022. 

• Multiple Chinese automakers, including Nio, Xpeng Motors, Volkswagen’s Chinese partner SAIC, Geely’s premium EV unit Zeekr, and Huawei-backed EV brand Aito, have recently promised to cover the price increase if customers place their order before the end of 2022 when those subsidies expire and EV prices rise accordingly. 

Tesla’s multiple discounts: Tesla China has offered various discounts on its vehicle lineups amid investors’ fears of a looming slowdown in demand, including an additional discount of RMB 6,000 and a rebate of RMB 4,000 on customers’ end-of-the-year orders.

• The US automaker kicked off the price war on Sept. 16 by offering customers an insurance incentive of RMB 8,000 and then slightly lowered the amount to RMB 7,000 for orders made from October to December.
• This was followed in October by a round of price cuts of its base Model 3 sedans and Model Y sports utility vehicles by at least RMB 14,000 and RMB 20,000, respectively.

Outlook for 2023: Some other automakers have announced the upcoming car price rises in advance, pushing customers to place their orders by the end of the year. 

• BYD said on Nov. 23 that the price of most of its EV models would be up by up to RMB 6,000 starting next year to offset the increase in vehicle costs from expiring government subsidies and rising battery prices.
• GAC’s EV unit Aion and Ford’s manufacturing partner Dongfeng followed suit by previewing a price increase for the next year of up to RMB 8,000 and RMB 9,000, respectively.
• The phase-out will also increase profit pressure for EV makers, who have already been hampered by the rising cost of battery raw materials and other supply chain issues over the past year. Carmakers are facing challenges to increase market share while maintaining their margin guidance, UBS analyst Paul Gong told Chinese media outlet Caixin in a Tuesday report.
• Gong remains positive on the market’s growth prospects for 2023 and forecasts that the penetration rate of new energy vehicles (NEV), mainly all-electrics and plug-in hybrids, will rise to 37% of all new car sales next year from the current level of 27%. China’s state council in 2020 set a goal of NEVs to account for 20% of new car sales by 2025, which was completed well ahead of time.
• Cui Dongshu, secretary general of the China Passenger Car Association (CPCA), expressed a similarly positive sentiment during an online conference on Thursday, saying he expected China’s NEV sales to more than double annually to 6.5 million units this year. The CPCA estimates the number will reach 8.5 million units in 2023, representing a 31% growth year-on-year.

Context: Beijing’s various policy measures and a vast selection of offerings by automakers have allowed the Chinese EV industry to thrive even amid increased competition. EV buyers will still be exempt from a 5% purchase tax next year, the central government said in August.

• In November, retail sales of passenger NEVs increased 58.2% from last year and 7.8% from the previous month to around 598,000 units. BYD and Tesla are the two most prominent players, recording sales of 229,942 and 100,291 units respectively, according to CPCA figures (in Chinese) published Thursday.

Chinese electric vehicle makers reported slower growth in deliveries in November and some even saw decreases as the market continues to be hit by a macroeconomic downturn. Nio and Li Auto posted record deliveries, but Xpeng continued its delivery slump. For other automakers, Aion, Hozon, and Huawei-backed Aito reported a monthly decline in vehicle deliveries in the month while Zeekr and Leapmotor started to show signs of slowing growth.  

Why it matters: The latest figures reflect a slowdown of China’s electric vehicle market as consumer confidence is hit by fears of a potential recession while an ongoing rebound of Covid cases in the country impacts vehicle production.

Sales recovery: 

• Li Auto and Nio saw significant sales recovery in November following a slump linked to growing competition and supply chain disruptions. The pair reported new record deliveries of 15,034 and 14,178 units, an increase of 50% and 41% from a month earlier, respectively.
• Nio expanded its product portfolio from three to six models on sale this year. It began deliveries of its first sedan model, ET7, in March, followed by the medium-size ES7 crossover in August and the long-awaited ET5 sedan a month later.
• Li Auto adopted a similar strategy, as delivery of its second large-size crossover the L9 started on Aug. 30 and that of the L8, a smaller version of the L9, came in October.

Xpeng’s slump:

• Xpeng Motors has continued to report lackluster sales, saying November deliveries totaled 5,811 vehicles, a 14% increase from a month earlier but still far from the historic high of 15,414 units in March.  
• The Alibaba-backed EV maker, once touted as a “Tesla killer” in China, is facing a number of challenges amid economic headwinds and fierce competition. Speaking to analysts on Thursday, chief executive He Xiaopeng said he expected its second crossover the G9 to drive deliveries back up to the threshold of 10,000 units in December.

Monthly declines: 

• Aion on Thursday reported (in Chinese) sales of 28,765 units in November, 4% lower than last month, though it still represented a 91% growth from the same period last year. Vehicle deliveries totaled 241,149 units from January to November for the EV unit of state-owned automaker GAC, which represents a near doubling of last year’s total of 123,660 units.
• Hozon, backed by Chinese battery giant CATL, followed a similar trajectory as deliveries increased 51% year-on-year but fell 16% from October to 15,072 vehicles last month. Year-to-date deliveries reached 144,278 units, with three entry-level crossovers and one mainstream sedan on sale from the brand.
• Aito’s sales in November represented the firm’s first monthly decline since delivery began in March, down 31.3% month-on-month to 8,260 vehicles. The Huawei-backed EV brand provides two plug-in hybrid crossovers, the M7 and M5, which compete against Li Auto’s L9, a successor model based on the latter’s popular Li One SUV.

Slowing growth: 

• Geely’s premium EV brand Zeekr said it delivered 11,011 vehicles in November, a nearly 9% month-on-month rise, compared with a 22.3% increase a month earlier. And yet year-to-date deliveries reached 66,611 units as of last month, inching closer to its annual goal of 70,000 vehicles.
• Meanwhile, Hong Kong-listed Leapmotor reported a 14.4% month-on-month sales rally of 8,047 vehicles. However, vehicle delivery fell for a third straight month as of October after the Zhejiang-based automaker sold a milestone 12,525 cars in August.
• Nevertheless, Zeekr and Leapmotor have emerged as strong competitors in the Chinese EV market. 

Aion and Zeekr, the electric vehicle subsidiaries of Chinese automakers GAC and Geely respectively, each broke their monthly records for vehicle deliveries in October, while US-listed EV trio Nio, Li Auto, and Xpeng Motors lagged behind their peers.

Why it matters: Although Tesla and BYD have long been the undisputed leaders in the Chinese EV market, GAC and Geely are among the traditional automakers leading the chase. The October delivery results also reflect the strong momentum of Huawei-backed EV maker Seres and the mounting troubles faced by Xpeng.

GAC: The state-owned automaker said on Tuesday that it delivered 30,063 Aion-branded vehicles in October, an increase of 149% from the same month last year. That number brings Aion’s total delivery numbers this year to 212,384 vehicles.

• Toyota’s Chinese manufacturing partner is ramping up efforts to meet an annual delivery target of 250,000 Aion-branded EVs this year, with its second auto manufacturing plant for Aion beginning operations in Guangzhou in early October.

Geely: Zeekr made deliveries of 10,119 EVs in October, a record high for Geely’s premium EV brand. Year-to-date sales totaled almost 50,000 as of last month, with the brand close to reaching its goal of delivering 70,000 cars this year.

• Geely is looking to spin off Zeekr for an initial public offering, through which Volvo’s parent company expects to fund its plans to introduce six Zeekr-branded models within five years.

Seres: Huawei‘s manufacturing partner delivered 12,018 Aito-branded EVs last month, a 461% jump from a year earlier. October was also the third straight month that it has delivered over 10,000 units in a single month since the delivery of its first production car began in March.

Xpeng: Deliveries of the eight-year-old EV maker more than halved year-on-year to just 5,101 vehicles last month. Vehicle deliveries totaled 103,654 units from January to October, far from the company’s unofficial 2022 guidance of 250,000 vehicles set early this year.

• A total of 623 G9 crossovers were handed over to consumers last month after delivery began on Oct. 27. The company expects monthly deliveries of its second sports utility vehicle to surpass the threshold of 10,000 units next year after production ramp-up.
• The company’s second sedan model, the P5, which the company expected to be a hit in the mainstream segment with a starting price of RMB 157,900 ($21,707), has underperformed with deliveries of around 33,700 units as of October this year.

Nio and Li Auto: The two other EV upstarts each reported October deliveries of more than 10,000 units, slightly lower than the previous month. Yet both have enjoyed a solid performance despite ongoing supply chain issues amid the post-pandemic rebound.

• Nio’s premium sedan ET7 is the company’s most in-demand model on sale, recording deliveries of 3,050 units. At the same time, the company only handed over 1,030 units of the ET5, its second sedan model, as production is still ramping up.
• The automaker was also forced to cut production at its facilities in the eastern city of Hefei in mid-October due to Covid restrictions, Chinese media outlet 36Kr reported Tuesday, citing people familiar with the matter.

Hozon and Leapmotor: With three entry-level cars on sale, Zhejiang-based Hozon managed to exceed deliveries of 18,016 units in October, representing a 122% year-on-year rise, while Leapmotor deliveries dropped by more than a third to 7,026 units.

China’s electric vehicle market continued to trend upwards in September, with year-to-date sales already surpassing last year’s total of 3 million, according to the latest figures compiled by the China Passenger Car Association (CPCA). However, the growth rate of overall car sales in China hit its lowest point in the last two decades owing to an economic slowdown, the industry group said.

Why it matters: The industry-wide sales figures released Tuesday further indicate a broader recognition among Chinese consumers of locally-made EVs, as well as a rising trend of Chinese automakers growing their international business.

• Retail sales of new energy passenger vehicles, mostly all-electrics and plug-in hybrids, soared by 82.9% in a year to around 611,000 units in September, bringing the total sales number for this year to nearly 3.9 million units as of last month, according to CPCA.
• Meanwhile, the overall industry reported a monthly growth of only 2.8% in new passenger car sales in September, reaching its lowest level since 2002, as the pandemic hit some of the most populous provinces, such as Sichuan, weakening demand.

Details: Last month, domestic auto majors, such as BYD and Geely, enjoyed a 67% share collectively in the passenger car market, up 9.2% from a year earlier, while those numbers for both younger EV startups and Tesla declined to 14.6% and 12.7%, respectively. The share of the market for traditional overseas carmakers further narrowed by 3.3% from a year ago to only 5.7%, CPCA figures showed.

• BYD ranked top with an annual growth of 144.3% to reach more than 191,000 EVs last month, taking nearly 10% of China’s auto market. It was followed by FAW-Volkswagen and SAIC-Volkswagen (two joint ventures of the German carmaker) at 165,000 and 122,000 automobiles, respectively.
• Geely reported its September retail sales of passenger cars increased by 24.4%  from last year to around 109,000 units, followed by Changan at roughly 107,000 units. Zeekr, a premium EV unit of Volvo’s parent company, delivered 8,276 vehicles last month, up from 7,166 units a month earlier. Changan is set to begin delivery of its first car model under the Avatr marque with partner Huawei in December.
• Meanwhile, Tesla China achieved a new record by selling 83,135 vehicles, of which 5,522 were overseas exports, bringing the year-to-date number to 483,074. The US automaker has an annual capacity of over 750,000 vehicles at its Shanghai facility, according to its second-quarter financial report.
• Chinese EV startup Li Auto delivered 11,531 plug-in hybrid crossovers last month as production of its second model, the L9, began to ramp up. Nio recorded a monthly delivery of 10,878 vehicles, with its new crossover ES7 making it to customers since late August.
• However, the numbers for Xpeng Motors declined 18.7% year-on-year and 11.6% month-on-month to 8,468 units, as the EV maker faces stiff competition from bigger names such as BYD in the mainstream EV segment. The company also reduced the prices of its first premium crossover, the G9, just two days after launch.

Context: The CPCA has maintained its sales projection of 6.5 million new energy vehicles (NEV) this year, with EVs expected to make up 28% of the country’s new car sales. The central government previously set a sales target of 25% of all new car sales to be NEVs by 2025.

• Nearly 14.9 million passenger cars, including internal combustion engine vehicles and EVs, were handed over to customers from January to September, a bit higher than the 14.5 million units during the same period of last year.
• Speaking to reporters on Tuesday, Cui Dongshu, secretary general of the CPCA, said he expected China’s general car market to recover with “explosive growth” over the last two months of this year, buoyed by easing Covid restrictions and tax breaks for vehicle purchases.

Chinese electric vehicle upstarts Li Auto and Xpeng saw declines in August, while Huawei’s auto partner Seres and Geely’s Zeekr saw strong growth. Among them, Li Auto reported a record decline in August deliveries, more than 50%, as the electric vehicle maker’s new crossovers cannibalized sales of its existing model. Seres deliveries up28% in August while Geely’s EV brand Zeekr grew more than 42%. 

Why it matters: Li Auto’s shortfall took place when Seres and Zeekr saw growth, highlighting a more competitive EV landscape and a preference among Chinese consumers to gravitate towards the latest products, according to Tu Le, managing director of consultancy Sino Auto Insights.

Li Auto’s decline in August: Li Auto’s deliveries fell more than half in August to 4,571 crossover vehicles from a month earlier, extending a month-on-month decline of 21.3% in July.

• “Li Auto and Xpeng have recently had some high-profile vehicle launches that have likely led them to lose focus a bit,” said Le. “For Li Auto specifically, the new L9 has really cannibalized sales of the Li One, so it’s like they only have one product in the market again.” 
• This echoed a comment Shen Yanan, Li Auto’s president, made during an earnings call last month, in which he acknowledged that many customers “with enough budget” preferred the L9, the company’s second sports utility vehicle, over the cheaper Li One. The company began delivering the L9 on Aug. 30.
• Analysts also worry that the upcoming L8 crossover, confirmed by chief executive Li Xiang as a redesigned model of the Li One and scheduled for delivery in November, will have an even more significant cannibalization effect. 
• The eight-year-old EV maker on Monday confirmed to state media outlet Jiemian that it will phase out production of the Li One three years after its release in 2019, introducing a price reduction of RMB 20,000 ($2,882) for its first car model in some markets.
• The price cuts have angered some owners who accused the company of cheating them over the new car release and price changes. At least 1,000 Li One owners have filed complaints against the company on “Black Cat,” a complaint platform owned by Chinese tech firm Sina.

Rise of Seres and Geely: Meanwhile, Seres and Geely have both seen healthy growth in August. Xpeng Motors’ deliveries also declined by 16.9% to 9,578 vehicles in August from a month earlier, while Nio saw deliveries grow 6.2% month-on-month to 10,677 vehicles. There is a major concern about demand for Xpeng’s current models, as buyers might wait for the introduction of its G9 crossover, scheduled for delivery by year-end, as well as a retrofitted P7 sedan set to be released next year.

• Huawei’s manufacturing partner Seres saw a monthly record by delivering 10,045 vehicles in August, up from 7,807 vehicles in July, while Geely’s premium EV brand Zeekr also reported a record delivery number of 7,166 vehicles, representing a 42.7% month-on-month growth.
• Le expects that sales of both Seres and Zeekr will continue to grow. With Seres being able to sell via Huawei retail stores and Geely backing Zeekr, these “pseudo-startups” have support structures that most other “true” EV startups do not, which gives them quite an advantage, Le added.

Context: BYD maintained its leadership in the market by delivering 174,915 vehicles last month. Tesla is expected to have delivered more than 77,000 cars from its Shanghai facilities, according to estimates by the China Passenger Car Association on Sept. 1.  

• BYD and Tesla have much more production capacity than their counterparts, Le said, adding that the two companies’ leadership will continue amid “particularly tough” competition in the mainstream, small- to medium-sized SUV segments.

Tesla and Chinese automaker SAIC are turning to the Shanghai government to help with new supply chain disruptions after Sichuan province cut down power supply for six days to cope with severe heatwaves, Chinese media outlets reported on Friday. The southwest province of Sichuan is home to many auto parts makers. 

The power restrictions in Sichuan and Chongqing have also forced Tesla, Nio, and Xpeng to temporarily close multiple charging and swapping stations in the region, Chinese media outlet Jiemian reported, citing feedback from car owners.

Why it matters: Automakers in China were already reeling from an industry-wide chip shortage and surging battery material prices exacerbated by the country’s Covid restrictions and the Russia-Ukraine conflict. The worsening situation in auto parts’ supply chain could force them to scale back further production in the country, a major growth market for electric vehicles.

Details: In a widely circulated letter to Sichuan provincial government, Shanghai authorities asked Sichuan to ensure basic electricity demand to 16 local parts makers. On Monday, the provincial government of Sichuan began rationing electricity supply and asked factories to shut down for six days as unprecedented hot summer weather surged the region’s electricity demand.

• A government representative confirmed the Shanghai authority’s letter to the Chinese financial media outlet Caixin on Thursday. According to the letter, Tesla and SAIC said they are facing challenges in getting enough supply of car components, as some of their suppliers in Sichuan have reduced production due to the power cut. 
• Only one auto supplier, Chengdu Yinli Car Parts, was named in the letter. The supplier makes aluminum wheel and vehicle body components for automakers such as SAIC-GM, a joint venture between the state-owned manufacturer and General Motors.
• State-owned automaker Changan and Seres, a small automaker and partner of Chinese tech giant Huawei, are also being hit by the sudden cut. The two companies have halted production at their facilities in the southwestern municipality of Chongqing, which borders Sichuan.
• On Tuesday, Changchun Engley Automobile, a Shanghai-listed car body panel manufacturer, told investors that its Chengdu factory had received notice of the power cut by Sichuan regulators. According to its website, the company’s clients include Volkswagen, BMW, Nio, and Xpeng Motors.
•  Toyota and Chinese EV battery giant CATL have suspended operations in the province.

In 2021, Chinese automakers sold more than 1.85 million units in the overseas market, hitting a significant milestone just two decades after China joined the World Trade Organization in 2001.

Beijing’s efforts to make China an auto superpower and the long-term strategy of betting on electric vehicles are starting to pay off. China made up almost 60% of the electric vehicles exported globally in 2021, with the annual shipment of passenger EVs nearly tripling to more than 310,000 units. Analysts expect this momentum to continue, with China on course to surpass Germany as the world’s second-biggest exporter of automobiles by volume this year, just behind Japan.

However, with European and American automakers catching up to China’s success in an increasingly crowded EV field, convincing global consumers to buy China-made vehicles continues to be an uphill battle. Chinese manufacturers, known for churning out cheap, humble cars for developing regions, are struggling to move upscale and compete head-to-head against long-established European car giants for a share of the premium segment in the latter’s home market.

A look at a few carmakers that have been ushering in a wave of EV adoption in China gives a sense of how the global auto landscape might be transformed in the next couple of years. As the world, particularly Europe, reaches a critical period in its energy transition, the localization of an entire EV industrial value chain will be vital for Chinese carmakers to become a global force that upends existing significant players, according to analysts.

State-owned manufacturers

State-owned brands SAIC and Chery are China’s most significant car exporters, with the pair jointly accounting for nearly half of the country’s vehicle sales to overseas markets in 2021.

Morris Garages (MG), the iconic British car brand acquired by SAIC in 2008, is currently the most significant contributor to SAIC’s success. Birmingham-based MG booked sales of over 470,000 vehicles globally last year, at least 10% of which were delivered in Europe.

Another SAIC’s sub-brand, Wuling, is also increasingly gaining popularity globally. Wuling produced the top-selling EV model in China last year, the Hongguang Mini EV. Wuling’s overseas shipments reached an all-time high of 146,000 vehicles to over 40 nations in 2021.

Anhui-based Chery is one of several Chinese carmakers that made early moves to explore global markets, exporting 10 sedans to Syria back in 2001, when China was just about to join the World Trade Organization. Having established a presence in more than 80 countries with 10 manufacturing plants and 1,500 dealership stores, the country’s top passenger car exporter mainly operates in Brazil and Russia, with sales of over 37,000 and 40,000 vehicles, respectively in the two countries last year.

Chery is also the Chinese manufacturing partner of Jaguar and Land Rover. It has plans to expand its reach in Europe and the US by selling its own-branded vehicles in the two regions, chairman Yin Tongyue said in May 2020. Although few details related to this move have been revealed thus far, the company expects its car exports to nearly double to 500,000 vehicles by 2025.

Private auto giants

Great Wall Motor and Geely are the only two homegrown private automakers in China who ranked in the top 10 by export volume in 2021, with shipments of over 143,000 and 115,000 vehicles overseas, respectively. The two automakers are pioneers of Chinese assemblers’ overseas expansion in the era of gasoline-powered cars. They have been expanding their sales networks and manufacturing presence abroad significantly in the last two years, focusing on Europe and countries connected to China’s Belt and Road Initiative.

One of China’s top-selling SUV manufacturers, Baoding-based Great Wall Motor, posted significant growth overseas last year, with shipment volume rising 104% from 2020 and accounting for about 11% of the firm’s total sales, a result of its accelerating push into overseas markets. The Chinese automaker sped past several milestones in 2021 amid a rush of positive news, such as the acquisition of a former Daimler plant in Brazil last August, followed by the launch of its regional headquarters in Munich, Germany three months later.

Great Wall also saw its second overseas plant begin operations in Rayong, Thailand, in June 2021 with a capacity to build 80,000 vehicles annually, two years after the automaker started production of its popular Haval-branded crossovers locally in Russia. The company is on track to launch an electric compact car under its Ora marque, which targets young female buyers, and a plug-in hybrid SUV under its premium EV brand WEY in Europe this year, Reuters reported last September.

The export volume of Geely’s domestic plants increased by 58% year-on-year and accounted for 8.6% of its annual sales in 2021, compared with a growth rate of 25% and a 5.5% share of total sales in 2020. The company’s footprint now covers 28 countries, with entries into Laos, Egypt, and three other states last year.

Like SAIC, the Zhejiang-based automaker expanded in Europe through partnerships with locally-based players, launching a car brand called Lynk & Co in late 2016 and forming a joint venture with subsidiary Volvo to sell the vehicles globally a year later. Reporting deliveries of 25,167 Lynk-branded vehicles overseas in 18 months as of June, the automaker operates eight retail stores in Germany, Italy, Belgium, Sweden, and the Netherlands, with plans to enter France and Spain this year.

Rising EV upstarts

Chinese EV upstarts Nio and Xpeng are still a long way from catching up in overseas sales with traditional Chinese auto giants, but they have pioneered new approaches to going global. For example, the Chinese EV startups are opening direct stores and service centers in European countries to build a strong brand image with quality service, something that has never been done before by a Chinese car brand on the continent.

Located at Oslo’s center of commerce and culture and opening to the public last October, Nio’s first showroom in Norway is as much planting of the company’s flag as an entry into the European market. Called Nio Houses, the two-story, 2,100-square-meter location is not only built for potential customers, but also serves a range of functions with a café, a library, and a living room for car owners on site, hoping to win over wealthy local customers.

So far, the eight-year-old EV maker is seemingly on the right track with deliveries of 327 ES8 crossovers, priced above NOK 609,000 (around $69,300), in Norway in the first four months of this year, which means the brand has already surpassed last year’s total of roughly 200 cars. The company also has plans to enter Germany, the Netherlands, Sweden, and Denmark with the same strategy later this year and to expand its footprint to 25 countries by 2025.

Xpeng has also aggressively pushed ahead in Europe’s booming EV market and currently operates three flagship showrooms – located in Denmark, Sweden, and the Netherlands – in addition to selling vehicles through local car dealerships in Norway since December 2020. The company delivered 486 units of its P7 sedan and G3 sports utility vehicle in Europe last year, while that number reached 426 units for the first four months of this year.

However, multiple supply chain disruptions, including semiconductor shortages and soaring battery material costs, are hitting the company’s growth trajectory. The Alibaba-backed EV maker stopped taking orders for its mainstream P5 sedan in Europe in late June, citing supply chain issues.

Conclusion

The world’s transition to clean energy and carbon neutrality – and China’s head start in EV production –  has opened up new opportunities for Chinese carmakers to become globally competitive players in electric mobility. European Union countries reached a deal in June to completely phase out internal-combustion vehicles by 2035, a target that Japan and Canada have also set; the timetable for the UK is 2030.

Experts have urged Chinese automakers to invest more to build their own supply chain networks overseas along with parts suppliers and, therefore, better leverage their technology and expertise globally, rather than just offering direct exports.

There is no easy route to performing successfully on the global stage, but it would be wise to seize the chance when it comes – and China’s EV makers seem well poised to do so. 

Chinese electric vehicle makers Aion, Hozon, and Leapmotor, reported record deliveries in July, overshadowing the numbers reported by leading players Nio, Xpeng Motors, and Li Auto as the landscape in the world’s biggest EV market continues to evolve.

Why it matters: Nio, Xpeng Motors, and Li Auto are facing increased competition. Traditional brands and new challengers have recently introduced an avalanche of lower-priced models to the market thanks to improving battery technologies, vastly expanding consumer options.

Details: Aion, the EV arm of Chinese state-owned automaker GAC Group, saw monthly deliveries surge about 138% year-on-year to 25,033 vehicles in July, meaning the firm has put roughly 125,000 cars into customers’ hands through the first seven months of the year. GAC, Toyota’s manufacturing partner in China, has a broad EV portfolio under the Aion marque with a price range between RMB 163,800 and RMB 469,600 ($24,218 to $69,430).  

• EV startups Hozon and Leapmotor followed suit, reporting triple-digit yearly growth with July deliveries of 14,037 and 12,044 vehicles, respectively. Zhejiang-based Hozon attributed its growth to increased production capacity.
• Meanwhile, Xpeng, Li Auto, and Nio lost their lead in the Chinese EV market, delivering 11,524, 10,422, and 10,052 vehicles to customers in July, respectively, with all three brands seeing a decrease of more than 20% month-on-month. Nio’s chief executive William Li said on July 31 that the company reduced production of “several thousand units” last month due to parts shortages.
• Seres, Huawei’s manufacturing partner and formerly known as Sokon, posted sales figures of 7,807, while Geely’s premium EV brand Zeekr claimed it sold 5,022 vehicles last month.
• Chinese auto majors such as BYD and Great Wall Motor have yet to release their July sales numbers.

READ MORE: BYD records over 162,000 deliveries in July

Context: Nio, Xpeng, and Li Auto are also expanding their product range in a fight to keep their lead positions.

• Nio plans to diversify its offerings by mulling a separate sub-brand targeting cheaper price points. The company is also on track to roll out a separate mainstream brand codenamed the Alps in 2024.
• Li Auto has already launched a full-size crossover, the L9, with delivery scheduled for this August, and plans to release its first medium-sized, lower-priced vehicle model in 2023. 
• Xpeng said it will soon begin taking pre-orders for its first premium sports utility vehicle, the G9, this month and launch three new models by 2025.

China’s electric vehicle industry has experienced a strong recovery in June, recording over 140% growth in passenger EV sales amid the ongoing impact of the Covid-19 pandemic and supply chain challenges, data from the China Passenger Car Association (CPCA) showed on Friday.

Why it matters: The growth was driven mainly by a strong comeback from BYD, Tesla, and other Chinese auto brands like Nio and Li Auto, after Shanghai and other cities lifted pandemic-related lockdowns, showing the impressive resilience of the Chinese EV space.

Details: The CPCA said on Friday that the wholesale volume of passenger EVs in China hit a record monthly high in June with a total sales of 571,000 vehicles, a whopping yearly 141.4% increase. In June, passenger car sales, including combustion engine cars and EVs, increased by 22.6% from last year to 1.94 million units.

• The boost in sales comes as China rolls out hefty stimulus measures, which include additional subsidies and tax cuts, Cui Dongshu, CPCA secretary-general, told reporters during an online conference on Friday. 
• Tesla’s Shanghai Gigafactory came back “with a vengeance” after a 22-day stoppage in April due to Shanghai’s lockdown, chief executive Elon Musk previously told investors, with shipments surging 145% month-on-month and 135% from a year ago to 78,906 vehicles.
• BYD has maintained its top place with almost 25% of the market share, with sales in June hitting 134,036 units, tripling 2021 levels. Meanwhile, EV sales from domestic auto majors Geely and GAC’s EV unit Aion rose by 393% and 182% to 29,671 and 24,109 units, respectively.
• Young EV makers Nio, Xpeng Motors, and Li Auto are also getting back to previous levels by ramping up production and working closely with suppliers, while Sokon, a manufacturing partner of Chinese tech giant Huawei, delivered 7,658 Seres-branded EVs last month, a 41% monthly growth.

Context: Forecasts for the Chinese EV market have remained bullish. Morgan Stanley raised its outlook for this year’s EV sales by 24% to 5.7 million vehicles in a research note on Li Auto on Friday, Chinese media outlet Sina Finance reported.

• CPCA expects China’s EV sales to edge up 84% to 5.5 million units this year, while consulting firm AlixPartners forecasts that number to be 5.1 million, with Chinese-brand vehicles retaining an enormous share of the market.

Aito, a Chinese electric vehicle brand backed by Huawei, received more than 10,000 pre-orders for the M7 in just two hours, after it was unveiled on Monday. The new model is the brand’s second production vehicle featuring Huawei’s HarmonyOS operating system for cars.  

Why it matters: While reservations do not always translate into actual sales, the M7 has captured people’s attention, signaling that Huawei is turning into a serious rival to existing carmakers since entering the burgeoning EV space about one year ago.

• Experts believe that the new car will become a direct competitor to Li One, a popular large plug-in hybrid vehicle launched by Chinese EV maker Li Auto that has similar configurations and a similar price point. Aito has the potential to achieve a sales volume of up to 100,000 units for this year, state media outlet Shanghai Securities News reported Monday, citing analysts from China Securities.

Details: More than 10,000 people pre-ordered the Aito M7 sports utility vehicle in the first two hours after the car brand began accepting RMB 1,000 ($149) deposits on Monday afternoon, a company spokesman told TechNode on Tuesday.

• With a four-cylinder, 1.5-liter engine developed by Huawei and a 40.6 kWh battery pack supplied by CATL, the M7 will be able to go as far as 1,220 km (758 miles) on a full tank and 100% battery charge. It consumes 6.85 liters of fuel per 100 km, well below the 7.8 liters of Li Auto’s L9 SUV and the 10.8 liters of the BMW X7.
• The car uses Huawei’s HarmonyOS operating system, enabling drivers to access “all the mobile services“ from Huawei’s app store, Richard Yu, chief executive of Huawei’s consumer business group said during a press conference.
• The six-seater luxury SUV will have a starting price of RMB 319,800 ($47,737) and will be delivered to customers in August. More than 600 Huawei stores around China will provide test drives starting July 23, and that number will be increased to over 1,000 stores by year-end, according to Yu.

Context: Huawei and its manufacturing partner Sokon have seen a steady increase in sales of the M5, their first vehicle under the Aito brand, shipping 7,021 crossovers in June, a 40% increase from a month earlier.

• According to the latest figures, Aito has reached total delivery of 18,317 units in just four months since delivery began in March. Prior to this, the two companies had experienced an initial setback, delivering only around 8,000 Seres-branded electric crossovers in 2021 after unveiling in April, last year.
• Huawei’s core business growth is still under pressure from US sanctions with revenue dropping by 14% year-on-year to RMB 131 billion in the first three months of 2022, CNBC reported. The smartphone maker has also partnered with state-owned automakers like BAIC and Changan to make EVs.
• Domestic EV makers Nio and Li Auto released their new crossovers, the ES7 and the L9, last month, respectively, and scheduled delivery to begin in August. Another rival Xpeng Motors is set to launch its second SUV model G9 in the same month and will begin delivery in September, with pricing expected to start at more than RMB 300,000.

Chinese automakers have moved quickly in the first five months of 2022, securing a lion’s share of the country’s electric vehicle market. The country’s EV makers are likely to keep that momentum going for the rest of the year, according to management consultant firm AlixPartners.

Domestic auto brands have extended their lead over their foreign rivals in the EV segment this year, making up 85% of all new EV sales in the first five months of 2022, up from 80% in 2021 and 74% in 2020, official figures show. This number may remain unchanged by the end of the year as Chinese brands continue to launch more new EV models than their foreign counterparts, Stephen Dyer, co-leader of AlixPartners’ Greater China business, told TechNode on Thursday.

However, as more traditional global automakers prepare to launch new EVs in the next few years, this share will likely go down due to the increased availability of foreign EVs, Dyer said, predicting an increasingly competitive environment for less experienced automakers.

China’s growing EV industry is holding up better than that for combustion engine vehicles and will likely maintain an upward trend in the coming months, despite Covid-19-related lockdown measures and supply chain constraints. AlixPartners projects that there will have been 5.1 million EV sales in China by the of the year, representing a 45% increase year-on-year and accounting for 22% of total new car sales.

With that said, overall auto sales may fall by 11% year-on-year to 23.4 million units in 2022, as stringent Covid control measures disrupt offline sales, the firm said during an online briefing on Thursday. Meanwhile, supply chain issues will continue to be a headwind for Chinese automakers until 2024, when chip supply issues will largely be resolved, allowing China’s auto sales to return to normal growth rates, according to Dyer.

Chinese EV makers have been moving upmarket and squeezing most international competitors out of their home market. Major Chinese automaker BYD’s EV sales more than tripled to 507,314 units as of May this year, driving its market cap to nearly $130 billion and making it the third-largest automaker in the world in early June.

SAIC-GM-Wuling, a joint venture between General Motors, SAIC, and Wuling Motors, is by far the country’s second-biggest EV maker, with sales of 164,552 vehicles over the same period, mostly thanks to its affordable Hongguang Mini EVs. US-listed EV makers Li Auto and Nio last month launched their new electric crossovers with price tags starting from RMB 459,800 ($68,418) and RMB 468,000 respectively, aiming to take on luxury carmakers such as BMW and Mercedes-Benz.

Tesla and Volkswagen are the only two global automakers with a major presence in the Chinese EV race, selling around 172,000 and 54,000 vehicles respectively to local customers from January until May. In November, Volkswagen moved to replace its China head Stephan Wöellenstein, in part due to lower-than-expected EV sales, according to a Reuters report. The German automaker announced on June 17 that it has set up a regional China board with a new leadership team that includes Marcus Hafkemeyer, a former adviser at Huawei, as technology chief.

US-listed Chinese electric vehicle makers Xpeng Motors, Li Auto, and Nio are undergoing significant restructuring as rising costs of raw materials and supply chain disruptions cut into profit margins. Meanwhile, EV battery makers are upping their investment to increase production capacities as China continues an accelerated shift to EVs.

Chinese EV makers are restructuring their businesses as challenges grow

Having enjoyed exponential growth over the past two years, Chinese electric vehicle startups are showing signs of contraction as supply chain constraints and rising raw material costs (partly worsened by the Covid-19 pandemic) continue to weigh on the industry. 

Facing a serious slowdown in economic growth and a resurgence of Covid-19 outbreaks, the US-listed Chinese EV trio of Nio, Li Auto, and Xpeng Motors are undertaking thorough reorganizations, laying off workers, and shifting away from non-core projects to meet their growth targets. The companies have been handling these challenges relatively well, but the outlook going forward is a bit unclear.

Xpeng Motors: Xpeng is facing a significant setback in its global ambition. Several senior executives, including vice president of overseas sales He Liyang, recently left the Guangzhou-based automaker amid a comprehensive restructuring across the company meant to streamline operations and save expenses, Chinese media LatePost reported on May 26, citing people familiar with the matter. The departures come after the EV upstart experienced lackluster sales of merely 438 vehicles in Norway in 2021, while leader Tesla took a nearly 20% market share in the country as it delivered more than 20,000 EVs over the same period, according to official figures.

In an effort to pare back losses, the Alibaba-backed EV maker is trimming its sizable staff in several major divisions, including a software team developing intelligent cockpit solutions and its data management department. As part of the change, Zhao Hengyi, a tech lead on Xpeng’s in-car voice assistant, left his position in March. The company also cut some of its plans of cultivating some fresh graduates, with dozens of them recently having their job offers rescinded.

Xpeng has been known to spend cash more quickly compared with peers. It posted a record loss of RMB 1.7 billion ($268.3 million) in the first quarter of 2022, widening from RMB 1.29 billion in the previous quarter. Analysts had warned of more losses to come from April to June due to high material costs and recent Covid lockdowns in China. The company earned a gross margin of only 12.2% during the first three months of this year, far lower than the 22.6% and 14.6% posted by rivals Li Auto and Nio, respectively.

Li Auto: A relative latecomer in a competitive industry, Li Auto is also facing a critical juncture and has scaled down some of its recruitment plans as it anticipates tough times ahead, the LatePost report said. Eight-year-old Li Auto recently lowered its delivery target for this year by 15% to 170,000 vehicles and planned to recruit 2,000 fewer people than it had initially planned, as the company worried about sales performance in the face of an economic downturn.

In anticipation of it becoming harder to get capital as investor sentiment worsens, Li Auto is also downsizing. Since March, the company has cut 20% of its full-time employees in its enterprise system development team after a large hiring spree, while dismissing some workers in its camera research and development team, formerly set up by then technology chief Wang Kai, LatePost reported.

The Meituan-backed EV maker was hit harder than rivals by the recent wave of Covid-19 lockdowns in the country, seeing its April deliveries down  62% and its second production model delayed amid the current supply chain disruption. The cuts could help the automaker reduce costs and survive a looming recession, yet investors were disappointed when the automaker forecast an even lower revenue target and warned of a worse margin for the second quarter of 2022.

Nio: Once the front-runner in the field of Chinese EV startups, Nio is making a pivot to battery-making, with plans to develop and potentially manufacture its own battery packs. The move marks a revamp of company strategy that comes as soaring material costs and supply chain bottlenecks slowing its factory output. Speaking to analysts during an earnings call on June 9, chief executive William Li said that the company now operates a team of over 400 employees on battery technologies and plans to launch an 800-volt battery pack for fast charging in 2024.

A new $32.8 million research facility is also slated for construction near its Shanghai headquarters this summer, aimed at developing lithium-ion battery cells and packs. This is in line with the EV maker’s battery strategy of both in-house development and outsourcing, a move that Li believes will benefit Nio’s overall competitiveness and profit-making capability in the long term. The company has warned that battery price hikes will continue to weigh on its margins in the second quarter.

Meanwhile, the company is reorganizing its autonomous driving team, which is at the core of its long-term ambition to become China’s top luxury car brand, following the departure of a long-time vice president of engineering in April. A team of more than 400 engineers, who work on diverse technology domains including sensors, algorithms, and system integration, has been reassigned to other departments to flatten the management structure for communication and combine functions where appropriate, Chinese media 36Kr reported.

Battery makers racing to expand capacity

Despite automakers’ short-term adjustments, the long-term prospects for China’s EV market remain robust with strong consumer demand. In response, major battery makers have kicked off a fierce expansion race in the hope of scaling up supply to meet the demand and take a larger market share. Government-backed industry group the China Passenger Car Association (CPCA) has maintained its forecast of 5.5 million passenger electric vehicle sales for this year in China despite the ongoing Covid-19 outbreaks across the country. 

Here are some of the major players’ expansion plans:

CATL is moving to become more directly involved in lithium mining in order to make its own supply of the EV battery material, thanks to soaring prices. The Chinese battery giant recently won approval to build a new lithium plant with a mining claim on nearly 1,600 acres in the central province of Jiangxi, state media CLS reported on June 1, citing government documents. The new RMB 2 billion ($297 million) facility would be capable of producing 30,000 tons of battery-grade lithium carbonate annually and is scheduled to be in production in  2023.

BYD is making a similar move and is said to be on the verge of closing deals to acquire six lithium mines in Africa, which experts estimate could allow the company to produce about 1 million tons of lithium carbonate, which translates into at least 27.78 million EVs. A BYD executive confirmed that it will supply lithium-ion batteries to Tesla “very soon” earlier this month. There has also been speculation that Nio and Xiaomi are looking at sourcing batteries from the company as well.

Gotion High-Tech is the latest Chinese battery maker to expand its local production by partnering with prominent players like Volkswagen and Great Wall Motor. The battery supplier announced (in Chinese) on May 31 that two new facilities have been put into production with a combined capacity of 30 gigawatt-hours (GWh) each year. The company is on track to double its total capacity to 100 GWh by this year and expand that number to 300 GWh in 2025.

On Tuesday, Li Auto announced the L9, a full-size, three-row sports utility vehicle, as part of its stated ambitious plan to achieve 1.6 million vehicle sales by 2025. The car’s starting price is less than half that of similar offerings from the likes of BMW and Mercedes-Benz.

Why it matters: With delivery planned to begin in August, the six-passenger L9 SUV will be the second production model from Li Auto and the Chinese EV maker appears to be confident that it might become a hit.

• Speaking to reporters on Wednesday, chief executive Li Xiang declined to reveal specifics about order volume, but said that the L9 will outsell its existing Li One, which was the top-selling large new energy SUV in China last year, according to official figures.

Details: The L9, a plug-in hybrid, is described by the company as the pinnacle of large luxury SUVs, with what it says is a spacious interior specifically for Chinese three-generation family households. The automaker said the model offers passengers more room than other luxury automaker offerings.

• The plug-in hybrid has a driving range of 215 kilometers (134 miles) on a full charge but can drive for about 1,315 miles with a full fuel tank and a full charge, a 20% increase compared with the company’s first model. It accelerates to 100 km in 5.3 seconds, according to Li Auto. 
• The model comes with many high-end tech features. It has five screens, including two 15.7-inch touch-sensitive ones in the middle of the dashboard that control the in-car entertainment system, two smaller ones around the steering wheel,  and an OLED television screen for rear-seat passengers.
• The vehicle uses a combination of 24 sensors to detect and predict road conditions, including eight 8-megapixel cameras, a long-range lidar unit, and two Nvidia Orin AI chips to enable autonomous driving.
• The L9 will only enable assisted driving on highways, once delivered; the company has not revealed when its car system will support autonomous driving in city traffic. Its rival Xpeng Motors plans to send an over-the-air update that would allow its vehicles to drive autonomously on urban roads later this year.
• The vehicle will sell for RMB 459,800 ($68,418), a price that the seven-year-old automaker claims is lower than any other similar SUV on the market. For comparison, the BMW X7 and the Mercedes-Benz GLS crossovers start at RMB 1 million and RMB 1.07 million in China, respectively.

Context: Meituan-backed Li Auto has been at the forefront of the Chinese EV field with just one model on sale, recording deliveries of 90,491 Li One vehicles in 2021, a 177.4% increase from a year earlier. The sales number is close to the sales of all three of rival Nio’s models over the same period combined.

• CEO Li Xiang has set an ambitious target of delivering 1.6 million vehicles annually by 2025, according to an internal memo obtained by Chinese media outlet Caixin in February 2021.
• Li said earlier this month that monthly delivery of the latest model could reach more than 10,000 units starting from September, although investors now reportedly expect that number to be around 5,000-6,000 units due to supply chain constraints and Covid-19 control measures.
• Earlier this month, Nio also launched a new SUV model, the ES7, with a starting price of RMB 468,000. Alibaba-backed Xpeng said in April that it will launch its second SUV model, the G9, this month.

READ MORE: Drive I/O | Nio, Xpeng, and Li Auto face more challenges after a mixed 2021

Local Chinese governments are releasing economic stimulus packages to boost consumption, including measures targeted at boosting car sales, as Shanghai gradually emerges from a two-month Covid-19 lockdown. 

Why it matters: The latest government measures, ranging from voucher programs to new quotas, could be a sign of recovery in China’s auto sector, which has seen production halted and raw material prices surged amid a spate of recent Covid-19 outbreaks across the country.

Details: Many Chinese cities have released a host of measures to help boost demand for cars as part of their economic stimulus package. The Shanghai municipal government on May 29 unveiled (in Chinese) 50 stimulus measures, which included giving out 40,000 new car plates and handing out cash incentives for gas car owners trading in for EVs. 

• Consumers will also receive rebates of RMB 10,000 ($1,503) per car for any trade-in of gasoline vehicles for new electric vehicles (EVs) for the rest of the year, as stated on the notice of the municipal government’s official WeChat account.
• Cui Dongshu, Secretary General of the China Passenger Car Association, on Monday told Jiemian News (in Chinese) that he expects Shanghai’s stimulus package to increase sales of passenger vehicles by around 150,000 units, of which two-thirds could be new energy vehicles, which includes all-electric vehicles and plug-in hybrids.
• On Monday, a Nio spokesperson told Chinese media The Paper on Monday that the company expects the stimulus measures to accelerate EV adoption, adding that orders for its models in the city have increased “significantly” in May (our translation).
• A number of local authorities also released similar cash subsidies for people to buy cars. Shenzhen on Thursday announced (in Chinese) plans to lift its limits on the number of new vehicles allowed on the city’s roads by allocating 20,000 new license plates to quotas and providing incentives of up to RMB 20,000 for new car purchases.
• Both the central Chinese city of Zhengzhou and Shenyang, the capital city of the northeastern Liaoning province, announced new voucher programs of RMB 100 million to boost vehicle buying earlier this month. Meanwhile, car buyers in the central city of Wuhan could receive a subsidy of RMB 8,000 or RMB 3,000 for each trade-in of new energy vehicles or combustion engine vehicles, respectively.  

Context: China’s central government has pledged to strengthen the current state subsidy to EV makers to encourage auto sales, as the latest wave of Covid-19 cases has disrupted auto parts supply chains and forced carmakers to drop their outlooks for the year.

• During a State Council executive meeting on May 23, Beijing unveiled dozens of new stimulus measures, including cutting car purchase taxes by RMB 60 billion, in the hope of helping the industry withstand the impact of the pandemic, SCMP reported.
• China’s auto sales dropped by nearly half to 1.18 million units in April compared to the same time a year earlier, according to official figures. Major automakers such as Tesla were hit hard by supply-chain constraints and a month-long production shutdown.
• Local EV upstarts Xpeng and Li Auto earlier this month issued a gloomy outlook for the second quarter of this year, after reporting record declines in vehicle deliveries for April.

Xpeng Motors released first-quarter earnings on Monday night, giving a second-quarter forecast that fell far below estimate. The company said it has made progress in ensuring the production against the backdrop of a global shortage of chip and battery supplies, but investors remained concerned that a prolonged supply crunch and China’s strict Covid-19 measures will hurt margins this quarter.  

Why it matters: Xpeng is joining a long list of Chinese tech companies facing a challenging quarter with production cuts and profits squeezed. The company expects deliveries to fall between 31,000 and 34,000 units in the three months until June, compared to the 34,561 vehicle deliveries in the first quarter of 2022.

Details: On Monday, Xpeng reported revenue of RMB 7.45 billion ($1.2 billion) in the first quarter of 2022, up 152.6% from the same quarter last year. However, net loss more than doubled year-on-year to RMB 1.7 billion. The company’s share prices fell 5.5% on Monday.

• Xpeng expects second-quarter revenue to reach up to RMB 7.5 billion, well below analysts’ average estimate of RMB 8.3 billion, according to data compiled by Bloomberg. Gross margin will also be impacted due to existing supply chain constraints, but is set to improve in September with the delivery of higher-priced new models to customers, said Dennis Lu, vice president of finance at Xpeng.
• Xpeng executives said on Monday that the company has expanded efforts to reduce the impact of supply-chain difficulties and China’s Covid-19 lockdowns. In addition, it has contracted multiple new suppliers and implemented more flexible design and manufacturing for its EVs.
• During an earnings call, Chief executive He Xiaopeng said that the company has begun to see significant progress as it aims to secure enough battery supply to meet demand in the current quarter. More “optimization” is likely to happen during the second half of 2022, thanks to a multi-sourcing strategy and the decline of battery prices, He said.
• However, the ongoing semiconductor shortage is getting worse, as the electric vehicle (EV) maker can only monitor the impact on the production of chip supply chains one week into the future. He added that the current semiconductor supply bottleneck could last into 2023 or even longer, in contrast to a previous estimate that the issue could be resolved or alleviated by the end of 2022.

Context: Earlier this month, rival EV maker Li Auto also delivered a gloomy revenue forecast for the second quarter, expecting up to RMB 7.04 billion, which is 36% lower than previous estimates, with the company citing supply chain issues related to Covid-19 lockdowns in China. Li Auto’s vehicle delivery plunged by 62% in April from the previous month to 4,167 vehicles, with Nio’s and Xpeng’s volumes nearly cut in half over the same period.  

READ MORE: Nio, Xpeng, Li Auto see dismal April deliveries as coronavirus lockdowns disrupt production

Xpeng Motors and Li Auto recently rescinded some job offers given to fresh college graduates as a recent Covid-19 outbreak and strict lockdown controls put stress on Chinese businesses, local media reported on Thursday.

Why it matters: The cutbacks indicate that Chinese electric vehicle (EV) companies are adopting more conservative and selective hiring practices as they navigate a time of economic uncertainty. EV makers are also facing rising battery material costs and semiconductor shortages, putting pressure on their earnings.

Details: A college graduate surnamed Wang, who had received a written offer from Xpeng last year and was supposed to begin work this summer, has had his job offer rescinded, according to a Thursday report by Chinese video outlet Houlang.

• A human resources staff member told Wang on May 9 that the company had to rescind the offer because of “business adjustment,” offering him RMB 5,000 ($748) in compensation instead, Wang recalled, adding that over 20 fresh graduates he knows are in a similar situation.
• In a statement sent to local media outlet Sina Tech on Friday, the EV maker said that it withdrew some job offers for fresh graduates and let go of some employees as part of a realignment of some “marginal” functions (our translation).
• The company added that it has recruited over 10,000 new employees amid strong growth since early 2021. It added that around 900 fresh graduates are scheduled to be on board this July but that it will take measures to reflect business priorities and increase operational efficiency.
• Xpeng’s news came days after rival Li Auto reportedly (in Chinese) rescinded around 100 graduate job offers. The company did offer transfers for job openings to some technical graduates that had offers in the autonomous driving and data analytics departments.
• On May 11, Li Auto confirmed that some of its positions were eliminated because the company is realigning certain functions and teams without revealing any further information. The EV maker is scaling down some recruitment plans due to delayed product launches and changed business outlook for the year, state-owned media outlet Yicai reported on May 12, citing a company insider.

Context: A broader hiring slowdown is on the way across sectors in China, as the country prioritizes strict pandemic control. 

• ByteDance on Thursday denied reports that it was cutting 80% of its workers in its game distribution department but confirmed that the company trimmed headcounts, following several rounds of layoffs last year amid Beijing’s regulatory crackdowns on tech firms.
• Social e-commerce site Xiaohongshu cut about 200 employees, mainly affecting fresh graduates and recent hires. Home appliance maker Midea on Thursday confirmed plans to reduce its workforce and halt non-essential investment given the current macroeconomic environment, Chinese media Yicai reported.

Correction: Xiaohongshu’s layoff number has been updated from an earlier version of this article.

Nio and Li Auto’s vehicle deliveries halved in April compared to the previous month, while Xpeng saw a nearly 41% drop. These Chinese EV upstarts have cut production as China fights a new wave of widespread coronavirus outbreaks with frequent lockdown measures since late March.

Why it matters: The massive drop comes as a wave of omicron cases and strict lockdown measures have led to severe supply chain and logistical disruptions to automakers and parts suppliers in Shanghai and surrounding areas, a major auto manufacturing hub for the country.

Details: Li Auto took the biggest hit among the main Chinese electric vehicle (EV) makers, reporting a 62% monthly drop to 4,167 vehicle deliveries for April. Nio saw vehicle deliveries plunge nearly 50% to 5,074 units in April from a month earlier, while Xpeng’s volume dropped 41.6% to 9,002 over the same period.

• Li Auto’s vehicle assemblies in Changzhou, a neighboring city to Shanghai in the eastern Jiangsu province, sat idle after stockpiles of components became depleted during the past month. Over 80% of the company’s parts suppliers are located within the region and many were hit by factory disclosures and logistics difficulties over the period, president Shen Yanan said in an announcement.
• With a factory in the eastern city of Hefei and its global headquarters in Shanghai, Nio was also forced to halt operations for a few days early last month before parts of its business resumed operations beginning April 14. Xpeng was less affected due to its operations being primarily based in the southern city of Guangzhou, saying that it is navigating the pandemic-driven disruption.
• Some traditional auto majors with southern bases weathered the storm better, with Shenzhen-based BYD selling (in Chinese) 106,042 vehicles to customers in April, up 313% from a year ago and 1% up a month earlier. State-owned GAC, also with manufacturing bases in the southern Guangdong province, said that deliveries of its Aion-branded EVs increased 23% year-on-year to around 10,200 last month.
• The ongoing lockdowns have also had minor effects on smaller players such as Leapmotor and Hozon, which reported decreases of 9.7% and 26.7%, respectively, in April deliveries month-on-month. Leapmotor delivered 9,087 vehicles last month, followed by Hozon’s 8,813, local media reported.

Context: The China Passenger Car Association projected total passenger vehicle sales in China in April will plunge to 1.1 million units, a 31.9% drop compared to the same period last year, as the auto industry needs time to recover from the effects of the pandemic.

• Some automakers like Tesla and Volkswagen are gradually resuming production at their factories in Shanghai and the surrounding areas, which have been shut down for weeks due to the lockdowns but still face various hurdles such as parts shortages and a limited workforce.

Although Nio, Xpeng Motors, and Li Auto recorded explosive growth in 2021, the US-listed share prices of the Chinese EV trio still trade much lower than their all-time highs. As the poster children of China’s electric vehicle revolution, the three automakers reported in March mixed results for 2021, with record revenue and significant losses. 

All three EV makers have seen doubled revenues and deliveries surge in their home market. And yet, having lost a total of nearly $10 billion in just 2021 alone, the US-listed EV trio is still struggling to make money. The share prices of Nio and Xpeng have slumped to under $30, falling over 60% from their respective highs two years ago, as they show no signs of turning a profit any time soon while facing risks of delisting from US exchanges.

Xpeng is expanding at a faster pace and higher cost than its competitors. In 2021, the company posted its biggest net loss in its eight years of operations, while revenue more than tripled to nearly RMB 21 billion ($3.3 billion). Li Auto has managed to make its business more efficient than its rivals, reporting a net loss of RMB 321.4 million last year, which is less than one-tenth of Nio’s and Xpeng’s losses. Nio’s sales growth slowed markedly last year, and yet the company earned the most among the three, thanks to its higher-margin luxury cars.

Key figures

Strong growth: Xpeng stole a march on Nio in the Chinese EV space in 2021, with its deliveries jumping 263% year-on-year to 98,155 vehicles. Nio, meanwhile, delivered 91,429 vehicles with a 109.1% yearly growth rate, Li Auto delivered 90,491 vehicles. Although Xpeng delivered the most vehicles among the three EV companies, it earned the least due to a lower selling price of RMB 196,000 for its offerings, almost a half of Nio’s and Li Auto’s prices. 

Heavy losses: With an aggressive expansion of its sales footprint and production capacity, Xpeng reported a record loss of RMB 4.86 billion last year, exceeding Nio’s RMB 4 billion for the first time over the past four financial years. Nio’s annual loss was 24.3% lower than a year ago, helped by growing sales, but the company expects to double its spending on research and development this year to ramp up the development of its self-driving technology. Li Auto once again proved to be better managed in terms of profitability. It increased net profit by 175% to RMB 295.5 million in the fourth quarter and kept annual losses far lower than competitors.

Other takeaways

New models: All three companies promised to speed up the launch of new models to keep their businesses strong, despite an intensifying global supply chain crunch. Nio began deliveries of its first sedan ET7 to customers in the eastern city of Hefei on March 28, with deliveries of its second sedan ET5 expected to start in September. In addition, the company is rushing to launch ES7, a new medium-sized SUV featuring its latest assisted driving technology, in the third quarter. During the same period, Xpeng is expected to deliver its second SUV model G9, in the hopes of grabbing a share of the high-end market from its peers. Meanwhile, Li Auto, which currently only has one model, will launch its second SUV L9 by June of this year, chief executive Shen Yanan confirmed during its earnings call on Feb. 25.

New plants: All the three EV makers are expanding their manufacturing capacities aggressively as orders continue to grow faster than supply. Nio’s second factory, scheduled for completion in Hefei in the third quarter, has the potential to produce 300,000 vehicles a year, the same capacity as its first plant, according to CEO William Li during the company’s earnings call on March 25. Both Xpeng and Li Auto plan to have three plants in the country by the end of 2023 with a total capacity of at least 500,000 and 750,000 vehicles, respectively, executives told investors during their earnings call. However, production could be disrupted by various supply chain shortages in the short term, while Xpeng CEO He Xiaopeng expects this situation to improve starting the second half of this year.

Conclusion

Looking ahead, the Chinese EV trio is still under pressure to capture demand and drive profitable growth in the short term. They face severe production problems due to chip shortages, rising material prices, and the recent lockdowns in Shanghai and nearby regions. Still, the companies are plotting a path to profitability in the long term, with some analysts expressing optimism about the EV upstarts achieving these goals. The gross margins for Nio, Xpeng, and Li Auto had improved to 18.4%, 12.5%, and 21.3% last year, respectively, and executives say that the companies could break even no later than 2024. 

As the industry faces challenges with supply chain constraints, including rising battery prices and a chip crunch, the sequential improvement in Li Auto’s gross margin could be “more limited” in 2022, Bernstein analysts led by Eunice Lee wrote in a March 1 note. And yet, that number could reach 25% in the longer term, as production volumes ramp up and fixed costs decline, Lee added.

Shanghai and Changchun, two of China’s major auto hubs, have been swamped by the highly contagious omicron variant of the coronavirus. The outbreaks, coupled with China’s strict epidemic control measures, have resulted in a huge blow to April auto sales. Now auto executives and analysts say that the impact could cripple the whole industry if the lockdowns remain unchanged.

“All Chinese car manufacturers will have to stop production in May, if there is no way for those in Shanghai and suppliers nearby to restart operations and production,” He Xiaopeng, chief executive of Xpeng Motors, said Thursday on his Weibo microblog (our translation).  

The Xpeng leader is not the only boss to express deep concerns about the consequences of China’s current wave of lockdowns. Richard Yu, chief executive of Huawei’s consumer business group and smart car solution unit, said on Friday that technology and manufacturing businesses linked to suppliers in Shanghai could “stop altogether” in May if a solution is not found soon. “This is especially the case for the auto industry, and the economic loss could be huge,” Yu wrote on his WeChat Moments feed, according to a report by Chinese media Sina Tech (our translation). 

Auto giants are already feeling the pain of lockdowns that began in Changchun early in March and were extended later that month to Shanghai. Auto sales in Shanghai and Changchun, the capital city of northeastern Jilin province, have ground to a halt. The Shanghai outbreak could lead to a sharp 20% drop in vehicle sales, the China Passenger Car Association said earlier this week.

Meanwhile, Volkswagen’s auto sales in China tumbled 23.9% year-on-year to 754,000 units for the first quarter, which the company’s China CEO Stephan Wöllenstein on Thursday attributed to lockdown measures and chip shortages.

Tesla has been forced to halt assembly lines in its Shanghai factory since late March. General Motors is eking out some limited output with partner SAIC in Shanghai by asking workers to sleep on factory floors, while multiple major auto suppliers such as Bosch and Aptiv have suspended production, Reuters reported. 

China’s auto industry is now enveloped in a “perfect storm” with lockdowns added to the existing problems like semiconductor chip shortages and raw material disruptions due to the Russia-Ukraine war, said Stephen Dyer, a managing director at consulting firm AlixPartners. 

“The bottom line is that unless China can stamp out COVID completely, this uncertainty will hover over the entire sector like a dark cloud,” said Tu Le, managing director of consultancy Sino Auto Insights.

Both Dyer and Le expressed confidence that the industry can be on a path toward recovery if lockdown measures loosen soon, but the industry will see major losses if lockdowns continue in the long run.   

He Xiaopeng’s Thursday Weibo post noted that some of the related government officials are now “working hard to coordinate” reopening activities. Nio on Thursday also said that it is restarting operations in its plant in the eastern city of Hefei as the supply of key components improves slightly, without revealing details.

“The silver lining is that it is still only April so any lost production from late March can be made up via overtime in the rest of the year,” said Le from Sino Auto Insights. A similar sentiment is being expressed by AlixPartners’ Dyer, “If production halts are relatively short, it is possible for vehicle production and sales to quickly make up for production stoppages so that annual sales are less affected, as was the case in 2020.”

In addition, auto companies are now doing everything in their power to minimize damage and prepare for a rebound. SAIC-Volkswagen is reportedly (in Chinese) working 24 hours a day to track their shipments of components and is in contact with more than 500 suppliers to ensure supply. Volvo’s parent Geely has been assigning its employees to guard the highway junctions to transport goods from Shanghai with its own fleet, according to an April 11 report by Chinese media Caixin.

The immediate focus is on business recovery rather than profit. “Profit margins will be squeezed but their priorities right now should be to get production back online the second they get that thumbs up,” Le said.

Since last week, more than 10 Chinese electric car makers have raised prices for their EV models, prompted by the significant increase in raw material costs. Analysts say that the price hikes will not hurt vehicle sales in the short term due to an already high order backlog, but also predict that companies will change prices more often in the future to meet their sales targets.

Some of the biggest names in the EV market have led the price hike. In March, Tesla raised prices for two premium versions of its China-made Model Y electric crossover twice in less than a week. Chinese EV giant BYD on March 15 announced it was lifting prices for most of its vehicle lineups, after it upped prices two month previously to address government EV subsidy cuts. Among the 11 carmakers that raised their prices in recent weeks, EV startup Leapmotor enacted the biggest hike, increasing its list prices by as much as 15%, or RMB 30,000 ($4,710), while state-owned automaker SAIC introduced the lowest price rises on average, with a 1.2% hike, or RMB 2,000, according to data compiled by TechNode. 

Why the price hikes?

A major reason behind the rise in EV prices is the “very strong” growth in the Chinese market, making it harder for raw material suppliers to keep up with demand, Peter Li, a Credit Suisse analyst, said on Tuesday during the company’s Asian Investment Conference.

EV battery makers have been scrambling to secure supplies of key ingredients, such as lithium. In mid-January, the cost of battery-grade lithium carbonate was 569% higher compared to two years ago, according to figures from Benchmark Mineral Intelligence. Lead battery maker CATL raised its price by RMB 20,000, Chinese media Yicai reported Monday. 

Major battery suppliers have now directly linked their pricing mechanisms to raw material price changes rather than adjusting their rates on an annual basis, due to the volatile commodity market. “That’s why we are seeing further battery price hikes in the second quarter,” Li said, adding that the trend will continue in the next two years, pushing potential price surges throughout the industry value chain from material suppliers to battery makers to car manufacturers.

Credit Suisse expect the lithium supply deficit to be expanded from 37,000 tonnes in 2021 to 101,000 tonnes this year, around 18% of global demand, and commodities prices to remain high at least until 2024, due to EVs’ growing popularity in China. Sales of new energy vehicle sales (NEVs) in China, mainly EVs and plug-in hybrids, skyrocketed 154% year on year to 3.52 million units in 2021, according to official figures. 

Does the future hold more frequent price changes?

Analysts anticipate the price hike won’t have a major impact on automakers’ deliveries in the short term, thanks to major players enjoying massive backlogs of orders in the market.

The waiting time for new orders of Tesla’s locally-made Model 3 sedan is now 20 to 24 weeks, compared with only six weeks last April, while the waiting time for Xpeng’s P7 is at least 12 weeks. BYD chairman Wang Chuanfu said in November that the company’s orders for its various models had reached an all-time high of 200,000 and it had to spend four months on average to deliver a vehicle, Chinese media reported.

In the longer term, Chinese EV makers could implement more flexible pricing strategies, lowering prices at the cost of their margins to ensure growth, if the current high demand for EVs slows down later this year. Some automakers are already preparing for more pricing adjustments, which means they could provide promotions or discounts to maintain their volume targets if demand starts to weaken during the second half of this year, Wang Bin, a Credit Suisse analyst, said at the investment conference.

EV makers could also change prices more frequently to attract new buyers, as the industry is transitioning towards a revenue model based on software subscription services rather than car sales, said Lu Shengyun, an independent adviser to entrepreneurs and CEOs. Passenger EV sales could grow by 84% year on year to 5.5 million vehicles this year, industry group the China Passenger Car Association said in January.

Electric vehicles “is a strategically important direction for automakers. They will sacrifice margin to offset the impact from rising material cost,” Wang added.

Ward Zhou contributed to the reporting of this story.

Chinese electric vehicle (EV) sales achieved a strong momentum over the past two years, reporting robust figures in January. They are expected to reach 5.5 million units this year. Tesla ended 2021 with a solid profit performance driven by both strong consumer demand in China and Europe, and cost improvement from expanded production in its Shanghai factory. Battery maker CATL retained its competitive lead, dominating the global EV market last year, followed by a group of smaller domestic competitors. BYD’s chip unit is racing the clock to complete an initial public offering in the mainland stock market, thanks to explosive growth in EV sales amid a worldwide chip shortage.

January EV sales signal a strong 2022

News: China’s electric vehicle market remains buoyant despite the seasonal holiday slowdown and the looming impact of the recent subsidy reductions. January retail sales of new energy vehicles (NEVs), including all-electrics, plug-in hybrids, and hydrogen cars, totaled 347,000 units and a 132% yearly increase, according to figures published by the China Passenger Car Association (CPCA). However, this figure is a 27% decline from last December, as China auto sales in January and February tend to be affected by the Lunar New Year holiday (roughly the first two weeks of February this year) when consumers often delay purchases and automakers halt production, the industry group said.  

Insights: The market was relatively flat during the first half of January due to a last-minute push by automakers to get their cars delivered in December. Yet sales recovered fairly quickly during the last two weeks of the month, said Cui Dongshu, secretary general of the CPCA. Cui remained positive about the impact of Beijing’s 30% subsidy cut on EVs, with CPCA affirming its previous forecast of 5.5 million vehicle passenger EV sales in China this year. Although multiple automakers have raised prices for their EVs just enough to offset the subsidy cut, Cui expects overall EV prices to maintain relatively stable, as automakers have been taking various measures such as diversifying sourcing of parts to reduce costs.

News link: TechNode 

Tesla posts second profitable year as Shanghai factory reaches full capacity

News: Riding a wave of growing customer interest for green energy vehicles, Tesla on Jan. 26 posted a profit for the second year in a row. It ended 2021 with a net profit of $5.5 billion, a more than sixfold yearly increase. Annual deliveries also surged 87% in the year, marking the fastest pace of growth since 2019, thanks to strong sales in China and Europe. The US EV giant expects to achieve 50% annual growth in vehicle deliveries “over a multiyear horizon,” while warning that the ongoing global chip shortage could dent its production output “across all factories” this year.

Insights: Rising demand in China has been a key driver for Tesla’s growth. The total sales of Chinese-made vehicles reached 484,130 units last year, accounting for over half of its global deliveries, China Passenger Car Association (CPCA) data shows. The company’s Shanghai factory also plays a prominent role for its global expansion, becoming a “main export hub” with a shipment of around 163,000 vehicles last year to EU, Japan, among other regions, said Tesla’s financial chief Zachary Kirkhorn during its fourth-quarter earnings call.

Now, as EVs continue their current growth trajectory, Tesla has planned to invest RMB 1.2 billion ($188 million) to increase the production staff of the Gigafactory Shanghai by a quarter to about 19,000, Bloomberg reported in November citing sources. The Shanghai plant, which began deliveries in late 2019, was designed to produce up to 500,000 vehicles annually and has been regularly running at a capacity of 450,000 units per year.

News link: TechCrunch 

Battery giant CATL’s dominance unabated in China’s EV boom

News: CATL’s dominance of the EV battery market has continued unabated. It retained its top spot as the world’s biggest battery vendor last year, thanks to an accelerated shift of consumers embracing EVs in China. The Chinese battery giant supplied 96.7 gigawatt-hours (GWh) equivalents of EV batteries in 2021, representing a 167% yearly increase. It commands a 32.6% global market share, according to data compiled by market tracker SNE Research. South Korea’s LG Energy Solution came in second with 60.2 GWh, while Chinese auto major BYD ran a distant fourth with 26.3 GWh. Smaller Chinese players Gotion High-Tech, CALB, AESC, and SVOLT all rank lower in the world’s top 10 battery makers and form a combined market share of around 8%.

Insights: This has been the fifth year CATL retained its position as the world’s biggest battery maker, buoyed by a rebound in EV demand in its home market in 2021. A total of 150 GWh of battery capacity were deployed into newly sold NEVs in China last year. That number is expected to grow by over 50% year on year to 230 GWh in 2022, according to a Jan.12 report published by Chinese brokerage Huaan Securities.

The battery maker is also quickly expanding its manufacturing capacity to meet a surging demand. In December, it kicked off production at its largest plant to date in Fuding, a city in the eastern Fujian province, with a designed capacity of 120 GWh per year. 

News link: TechNode

BYD’s chip unit to list on Shenzhen stock market

News: The chip unit of Chinese automaker BYD is racing to go public with an offering that could raise as much as RMB 2 billion ($314.4 million), after getting a green light from the Shenzhen Stock Exchange. The listing is expected in the next few months and it would become the first auto chipmaker to list in China. BYD Semiconductor became an independent subsidiary of the Chinese EV giant in April 2020 and mainly develops less advanced chips such as microcontrollers (MCUs) used for controlling simple functions in cars. The company has become China’s biggest MCU manufacturer with nearly two decades of chip-making experience, Chinese media Caixin reported last month, citing analysis from market research firm Omdia.

Insights: The imminent listing comes at a time when the Chinese EV industry has seen a strong rebound in demand, despite significant disruption due to the global chip shortage over the past year. BYD Semiconductor estimated its net profit will jump by up to 574% yearly to RMB 395 million in 2021. Revenues are projected to reach an upper limit of RMB 3.2 billion, an 122% increase from 2020. However, the company is still a tiny player in the global automotive MCU sector, which is dominated by Japan’s Renasas and six other chip powerhouses with a combined market share of 98%, according to figures from information services company IHS Markit.

And yet, investors have high expectations for the subsidiary. It has already raised RMB 2.8 billion from a list of big names including Xiaomi’s industry investment fund, Sequoia Capital China, and CICC Capital prior to the IPO filing. BYD’s stake will fall from 72% to 65% after the listing is completed.

News link: TechNode 

China’s electric vehicle (EV) sales soared in 2021, bucking the national trend of slowing auto sales. Local automakers have shown strong competitiveness against overseas counterparts. However, industry players may face new challenges: a looming price war among competitors will likely reduce profits, a UBS Securities analyst said on Tuesday.

Why it matters: There might be greater supply than demand in the Chinese EV market this year, since consumption could be reduced by slowing economic growth amid the recharged pandemic, Paul Gong, head of China auto research at UBS, told reporters on Tuesday.

• An easing chip shortage may also help EV makers return to normal auto production this year, Gong said. He warned that an intense “price war” would push the prospect of profitability further away for automakers in the short term.

Details: Still, the rise of domestic EV makers will be “the way of the future” in China, as local players have generally “achieved greater progress” in the development of products and technology than foreign auto majors, according to Gong (our translation).

• UBS projects cautious optimism in its outlook for the industry over the long term. It expects that, compared to its 2021 projection of 3 million vehicles, China’s EV sales will increase by 35% to more than 4 million vehicles this year. Sales could grow to 7.05 million units in 2025, according to UBS. 
• Sales of new energy vehicles, which include all-electrics and plug-in hybrids, increased by nearly 160% year-over-year to 3.52 million units in 2021, according to a statement published by China’s Ministry of Industry and Information Technology on Wednesday.

Read more: Drive I/O | Auto China 2021: A banner year for Nio, Xpeng, and Li Auto

Context: The number of passenger electric vehicles sold in China surged 169% year on year to nearly 2.99 million units in 2021, according to figures published Tuesday by the China Passenger Car Association (CPCA). That figure beat the estimated 2.4 million units the industry group made in June.

• Tesla China sold a record 70,847 locally-made vehicles in December and saw its total 2021 sales reach 320,743, taking the third spot in the list of China’s top-selling EV makers. BYD dominated the market with sales of 584,020 vehicles, followed by SAIC-GM-Wuling with 431,130 cars, CPCA figures showed (in Chinese).
• US-listed Chinese EV trio Nio, Xpeng, and Li Auto are among the top 10 sellers, each achieving deliveries of nearly 100,000 vehicles. German auto giant Volkswagen sold around 130,000 passenger EVs, more than doubling its 2020 total, according to CPCA.
• CPCA raised its forecasts for China’s NEV sales, including passenger and commercial vehicles, by over 10% to 6 million units in 2022 from the previous year. The association added that China will maintain leadership in the global EV race.

Zvision Technologies, a Chinese startup that makes lidar sensors for self-driving cars, announced a new investment from three Chinese automakers on Monday, including Xpeng Motors. The company becomes the latest startup to tap growing investor interest in the self-driving car space.

Why it matters: The investment is another sign of the increasing interest in lidar sensors, seen as a crucial building block for future vehicles by most auto and tech firms. Lidar is a key component for self-driving cars and uses laser light to sense surroundings. 

Details: Zvision has raised “hundreds of millions of yuan” in a pre-Series C led by Xpeng Motors, according to a Monday announcement (in Chinese). Shang Qi Capital, a private equity firm owned by Chinese automaker SAIC, participated in the round. 

• State-owned automaker Dongfeng Motor and existing backer Intel Capital also joined the round. A company spokeswoman declined to disclose an exact valuation when contacted by TechNode on Tuesday.
• Zvision plans to use the funds to accelerate the development and mass-production of its automotive-grade lidar sensors, including improving its production line and supply chain. The company has yet to show a timeline. 

Context: In September, Xpeng had begun delivering the world’s first Lidar-equipped production vehicle, the P5, which the company boasts can distinguish objects within a range of up to 150 meters and can run autonomously under a driver’s supervision on Chinese roads, the South China Morning Post reported. 

• Xpeng sources lidar sensors for the P5 from Livox, an affiliate of Chinese drone maker DJI, which previously encountered technical issues when attempting to meet the reliability requirements for automobiles, TechNode reported last June.
• In November, the EV maker unveiled its second sports utility vehicle model, the G9. It will come fitted with two lidar sensors provided by Robosense, a lidar startup backed by SAIC and BYD. The G9 is scheduled for delivery in the third quarter of 2022.
• Xpeng chief executive He Xiaopeng told investors last May that the company was testing lidar technology from multiple suppliers.
• Rival EV maker Nio has heavily backed Innovusion, a startup formed by two Baidu veterans in 2016, and used the firm’s lidar technology for its first sedan model ET7 as well as the upcoming ET5.

Huawei burrowed further into the auto industry with the launch of the first vehicle with its homegrown operating system. The Chinese government cut purchase subsidies on new energy vehicles (NEVs) by 30% this year, while scrapping ownership limits on foreign automakers’ investments in the auto industry. Chinese electric vehicle (EV) makers Nio, Xpeng, and Li Auto celebrated record annual deliveries of nearly 100,000 cars in 2021. Alibaba’s head of autonomous driving lab quit the company after more than four years. Didi, soon to delist, shows a few signs of approaching break-even with its first post-IPO earnings report.

Huawei intensifies auto plans with launch of first vehicle with ‘seamless’ Harmony

News: Huawei on Dec. 23 unveiled the first EV model equipped with its HarmonyOS operating system with manufacturing partner Seres. Huawei boasts that this in-car software system offers users a seamless experience of smartphone and car features across devices. Priced from RMB 250,000 ($39,063), the Aito M5 sports utility vehicle runs on electricity or fuel and has a 1,242-km driving range, which compares with the 1,080 km offered by Li Auto’s popular plug-in hybrid crossover Li One. Huawei said that it will showcase the vehicle in 180 Huawei shops across 42 cities and deliveries should start around Feb. 20.

Insights: As US chip sanctions crippled its smartphone core business, Huawei is trying to diversify its operations by breaking into the Chinese automobile sector. The Chinese telecommunications giant last April started selling Seres vehicles through its sales network, but they did not sell well. From April through November, Seres achieved sales of only 7,080 SF5 EVs, which were equipped with Huawei powertrain system and in-car software, according to figures published by China Passenger Car Association. Huawei has also partnered with state-owned automakers BAIC and Changan to equip vehicles with its autonomous driving hardware and software. Yet some industry insiders are doubtful that the tech giant will eventually make its own cars.

News link: TechNode 

Beijing sticks to plan to end EV subsidies in 2023

News: Chinese authorities on Dec. 31 unveiled long-awaited details about its national subsidy program for new energy vehicles (NEVs), such as all-electrics and plug-in hybrids. For 2022, beginning Jan. 1, subsidies to EV buyers will be cut 30% compared to 2021. According to a document released by the Ministry of Finance, the grants for EVs delivering driving ranges of at least 400 km (248 miles) will be cut by RMB 5,400 on an annual basis to RMB 18,000 ($2,824). Meanwhile, the subsidies this year for all-electrics with a driving range of 300 km to 400 km will be lowered to RMB 13,000, while those for plug-in hybrids will be cut to RMB 6,800. Beijing also reaffirmed its plan to eliminate subsidies entirely at the end of this year. Subsidies for purchases of new energy vehicles (NEVs) were already trimmed by 10% and 20% during 2020 and 2021, respectively. 

Context: In reaction, several overseas automakers have raised prices for their EVs in China to offset the subsidy cuts. The prices of Tesla’s popular China-made Model 3 and Volkswagen’s ID series EVs have risen by RMB 10,000 and RMB 5,400, respectively. Newer local EV makers are taking a more active approach to reduce the impact of the subsidy cut. Nio on Jan. 1 announced moves to make up the difference between sticker prices and reduced subsidies of its vehicles for customers who had paid a deposit before the end of 2021 and who will get their vehicles delivered by Mar. 31. Cui Dongshu, secretary general of China Passenger Car Association (CPCA), forecasts that the trimmed government incentive program could still give a great boost to the EV adoption in the country, noting that the manufacturing cost of EVs and batteries are falling significantly. Cui estimated China’s NEV sales could more than double to around 6 million vehicles in 2022 from the previous year and therefore maintain leadership in the world EV race.

News link: Reuters 

China lifts restrictions on foreign auto ownership

News: China now allows overseas automakers to operate wholly-owned ventures in the country’s passenger vehicle sector. As of Jan. 1, 2022, foreign firms are no longer limited to 50% ownership in their joint venture auto operations. The law had been in effect since 1994. In addition, foreign automakers can now set up more than two joint ventures that make the same type of vehicles.  The new ownership rules were detailed in a Dec. 27 release from the Ministry of Commerce and the National Development and Reform Commission, China’s top economic planner.

Insights: The move has been perceived as a positive signal that would create a level playing field for domestic and foreign carmakers, Cui Dongshu, secretary-general of the China Passenger Car Association, told state broadcaster CGTN. Nonetheless, Cui said there would be no significant impact on the market from removing the limits since they were expected. German auto major BMW is expected to become the first internal-combustion vehicle maker to take advantage of the new JV rules. It plans to up its stake to 75% from 25% in its JV with Chinese partner Brilliance Automotive by the end of 2022. The Chinese government since 2018 has gradually ramped up efforts to fully liberalize the domestic auto industry, starting by scrapping limits on foreign ownership of EV makers as it aims to be a global leader in the sector. Tesla became the first foreign auto brand to enjoy the relaxed EV regulations when it set up its wholly-owned venture in Shanghai in May  2018.  

News link: Global Times 

China’s EV trio post record deliveries numbers in 2021

News: The US-listed Chinese EV trio of Li Auto, Nio, and Xpeng launched the new year by publishing record delivery numbers for 2021. Each noted that they had delivered nearly 100,000 vehicles in 2021, despite global chip shortages. All had doubled their deliveries from 2020. Xpeng Motors had stood out among its peers, delivering a record 98,155 vehicles last year, up 263% from its 2020 delivery count. It surpassed Nio, whose annual deliveries totaled 91,429 electric crossovers. Nio was hit by supply chain issues and changes to its manufacturing lines during the second half of last year. Meanwhile, Li Auto saw 2021 deliveries surge 178% year on year to 90,491 vehicles.

Context: Chinese automakers have been riding the wave of growing popularity of EVs in the country, boosted by a years-long national subsidy program and special license plates to EV buyers, among other policy measures. Nio, Xpeng, and Li Auto, all once struggling to stay afloat and beset by lackluster sales, are the poster children of the revolution. The trio has laid out ambitious plans to expand their sales and service networks as they vie to grab market share from internal-combustion vehicle segments. Analysts surveyed by Seeking Alpha expected Nio’s annual revenue to increase by 74% this year, Forbes reported, while Citigroup forecast that Xpeng’s deliveries could almost double to 175,000 units in 2022.

News link: South China Morning Post 

Alibaba’s head of autonomous driving quits

News: Alibaba has parted ways with Wang Gang, a renowned computer scientist who has served as head of the tech giant’s autonomous driving lab under its Damo Academy research division for three years, Chinese media reported on Jan. 5, citing people familiar with the matter. A former tenured professor at Nanyang Technological University, Wang joined Alibaba in early 2017 as the chief scientist for the company’s artificial intelligence lab and was tasked with improving speech recognition capabilities for its first smart speaker device, the AliGenie X1, launched later that year. Wang has begun working on a startup developing robot vacuum cleaners and has raised an unknown amount of funds, the sources added.

Insights: The move is noteworthy in many ways. For one, Chinese industry giants had hoovered up research talents and poured resources into exploring the potential of artificial intelligence (AI) over recent years. The rush is over given a slower-than-expected process of implementing AI in industries, as many top scientists give up the high salaries in the industry for academia, while others start up their own businesses. Wang’s departure comes after Li Lei, the director of ByteDance’s AI Lab, left the company to join the University of California Santa Barbara as a professor last August, following the resignation of ByteDance Vice President Ma Wei-Ying a year earlier, SCMP reported. Chinese tech powerhouses also struggle with executive turnover and layoffs, as Beijing’s regulatory clampdowns continue to weigh on the sector.

News link: TechNode 

Didi’s first earnings report after IPO: $4.7 billion loss

News: On Dec. 30, Didi reported its first earnings as a public company. It wasn’t pretty: The company lost RMB 30.4 billion ($4.7 billion) on RMB 42.7 billion ($6.6 billion) in revenue during the September quarter of 2021. To compare, the company reported a profit of RMB 665 million on revenue of RMB 43.4 billion in the same quarter of 2020. Didi’s largest source of revenue is still its domestic ride-hailing business, which yielded RMB 39 billion, down 12.9% from the previous quarter. The company posted an 8% quarter-over-quarter decline to 2.36 billion in ride volume over the period.

Context: Still the largest ride-hailing service in China by ride volume and revenue, Didi has been at the forefront in Beijing’s wide crackdown on local tech companies. Did’s business has taken a hit from a suspension order that has kept its services off Chinese app stores since July. Having been listed in the US for less than six months, the Chinese mobility giant on Dec. 3 announced plans to take its shares off the New York stock market and instead pursue a listing in Hong Kong. Beijing has yet to announce the results of its cybersecurity investigation into Didi, and the company’s shares have fallen more than 60% from its IPO price.

News link: TechNode 

Just a year ago, Nio, Xpeng, and Li Auto faced a cloudy future. All three had burned through hundreds of millions of investors’ dollars and were beset by lackluster sales. Most observers thought they had yet to hit bottom. Not anymore.

Despite the lingering impact of the pandemic on China’s automotive industry, 2021 has been a fantastic year for Tesla’s major Chinese challengers. The three companies all reached their 100,000-vehicle production milestones, racked up big war chests from new investors, and recently set records for their vehicle deliveries. Their cars are going mainstream in major domestic cities, according to Xpeng President Brian Gu, as internal-combustion vehicles and legacy automakers are increasingly being regarded as outdated.

The Chinese trio, all listed in the US, not yet profitable, but all poised for stronger growth in the coming year, have become the poster children for the country’s EV revolution. Despite a 20% cut in subsidies this year, the world’s biggest EV market in September witnessed an unexpected growth rebound, as the NEV (new energy vehicle) penetration rate surpassed 20% of all new car sales for the first time. 

We round up the most significant milestones in the three companies’ turbulent histories this year and forecast what’s next for them in the coming year.

Nio — Mounting a comeback

With deliveries beating those of BMW and Audi EV at a price tag comparable to those of German auto giants, Nio is literally the first Chinese automaker to have gained a foothold in the country’s premium vehicle segment. Formerly referred to by Deutsche Bank analysts as number one among the promising local EV makers, Nio was overtaken by its peers, as measured by deliveries, due to its relatively slower pace of growth this year.

Once maintaining a leadership position in the non-Tesla piece of the Chinese premium EV segment, Nio found itself in a bittersweet position over the past few months as rivals’ sales grew at a stunning speed. Li Auto and Xpeng in July recorded deliveries of 8,589 and 8,040 vehicles, respectively. Those numbers surpassed Nio’s monthly output for the first time ever. Nio produced only 7,931 for the month.

Then Nio’s monthly deliveries decreased to an even lower level of 3,667 vehicles in October. That number was less than half of both Li Auto’s and Xpeng’s for the month. The company blamed the drop on the restructuring of manufacturing lines in preparation for introducing new models. The most recent sales figure of 10,878 vehicles in November marked a strong rebound for Nio, despite an ongoing industry-wide chip shortage. Moreover, that figure lagged behind those of the other two US-listed EV makers by several thousand units.

More notably, Nio faced one of its worst public relations crises in China in August, when a 31-year-old driver was killed using Nio’s driver-assistance feature with his ES8 electric crossover. The incident not only put further dents into an already tough outlook for the regulatory environment and public confidence in China’s autonomous vehicle space: It also stoked criticism of Nio for overstating the capability of its technology and fragmented its once incredibly loyal fanbase. Details about the accident still have not been released.

Nonetheless, the Tencent-backed EV maker is ramping up efforts to regain its leading position in the market. It’s currently on track to deliver its first premium sedan model ET7, equipped with a Lidar sensor and Nvidia’s supercomputer, in March 2022. It also just launched a lower-priced new sedan model, ET5, as it aims to lift its sales in the country. At the same time, it is rushing to launch a mass-market EV sub-brand next year, targeting the most competitive and yet the biggest segment in China’s auto market.

Xpeng — Taking first place

Once chugging away in Nio’s tracks , Xpeng has raced ahead as China shifts from gasoline power to electric transportation. It is emerging as the new leader in the competitive mid- to high-end Chinese auto segments. The Alibaba-backed EV maker delivered a record-breaking 15,613 electric vehicles in November, bringing its annual deliveries to more than 82,155 vehicles. That figure surpassed Nio’s 80,940 deliveries in the year to date.

Xpeng’s strong performance comes at a time when the country has seen a major rebound in EV demand, signaling a tipping point for mass adoption. Sales of NEVs, comprising all-electrics and plug-in hybrids, are expected to more than double to 3.4 million units annually this year and could further increase by 47% to 5 million units in 2022, according to estimates made by the China Association of Automobile Manufacturers (CAAM) earlier this month.

To ride the wave of the EV recovery momentum, Xpeng has aggressively expanded its product lineup with the release of a premium sports utility vehicle (SUV) model and an affordable family sedan. The company boasts that both will offer the most advanced automated driving capabilities in China.

G9, Xpeng’s first luxury electric crossover, will be equipped with an 800V supercharging platform, which could boost driving range to 200 kilometers (124 miles) with only a five-minute charge. It also has advanced driver assistance software that will allow vehicles to cruise autonomously in gnarly urban traffic conditions. Aiming for a price range between RMB 300,000 and 400,000 ($47,100 and $62,800) according to Jefferies analysts, Xpeng’s G9 model is scheduled for delivery in the third quarter of 2022. It will then compete head-to-head against Tesla’s Model Y and Nio’s ES6, among other top-line EVs.

Meanwhile, Xpeng’s second sedan model, P5, is expected to be a hit. It is equipped with two Lidar sensors, offering urban automated driving capabilities, and is priced competitively, beginning at just RMB 157,900. With P5 deliveries started in October, President Brian Gu expects the company to continue to experience rapid growth in the coming months. Gu projected a monthly delivery target of 15,000 vehicles for the last two months of 2021 during an earnings call last month.

Analysts are bullish on Xpeng’s growth prospects, expecting its monthly sales momentum of 15,000 vehicles will continue in 2022, Chinese media reported in late November, citing Daiwa Securities Meanwhile, Citigroup analysts forecast that Xpeng’s deliveries could nearly double to 175,000 units in 2022.

Li Auto — Radically readjusting

Considered by many as taking a conservative yet non-mainstream approach in betting on the transitional extended-range technology, Li Auto also had a vintage year in 2021. In the year to date, the company has delivered nearly 80,000 Li One electric crossovers, its first and the only model currently on sale. That number is almost as much as the combined deliveries of Nio’s three SUV models.

Backed by Chinese food delivery giant Meituan, Li Auto pursues greater operational efficiencies than its peers. The strategy paid off, with the automaker reporting an impressive gross margin of 23.3% in the third quarter of this year, compared with Nio’s 20.3% and Xpeng’s 14.4%.

Also, each of Li Auto’s stores makes more money on average than those of Nio and Xpeng. The company in November sold nearly 80 vehicles per showroom, more than double Nio’s figure for the same period. Li Auto planned to expand its sales network to 200 stores by this year’s end. In contrast, both Nio and Xpeng said they will each operate more than 350 outlets by that time.

However, Li Auto’s competitiveness in self-driving technologies has lagged far behind rivals’. For example, earlier this month, it shipped an over-the-air update that includes an automated parking feature—the same feature Xpeng offered its customers three years ago. The company’s vehicles are also unable to cruise Chinese highways on their own while being supervised by active drivers. That assisted driving function, similar to Tesla’s Navigate on Autopilot, is already available to Nio and Xpeng customers.

To catch up with rivals and prolong its upward trajectory, Li Auto will shift its strategies radically in the coming years. Executives said the company would more than triple the annual research and development budget to RMB 3 billion ($500 million) this year. That number will be further increased to RMB 6 billion per year by 2024, financial chief Li Tie pledged to investors during an earnings call in February.

And yet, the EV maker claims that it will maintain a healthy gross profit rate while working on a significant expansion of its product lineup and production footprint over the long term. CEO Shen Yanan last month reaffirmed the plan to launch a full-size extended-range electric SUV next year, followed by the release of its first fully electric vehicle model in 2023. Its second manufacturing plant launched construction in Beijing in October. When production begins there in 2023, Li Auto hopes to double its total annual capacity to 200,000 vehicles.

Xpeng Motors confirmed with TechNode on Wednesday that it is facing delivery delays caused by an ongoing supply crunch in lithium iron phosphate (LFP) battery packs, as customers of the Chinese electric vehicle maker are reportedly frustrated over months-long waits for their new cars.

Why it matters: Xpeng is the latest Chinese automaker to feel the sting from the supply chain shortage of both semiconductor chips and key battery materials.

• The EV maker in late October began delivering its second sedan model, P5, without millimeter-wave radar units due to the shortage of radar chips. Xpeng promised owners it would install the components by next March.

Details: Xpeng said that it has apologized to customers who experienced significant delays after ordering its flagship P7 sedan. It is currently ramping up to ensure the lower-end P7 deliveries are made no later than next February, state-backed Shanghai Securities News reported Wednesday, citing a company representative.

• Xpeng will also cancel the orders and refund down payments if requested by customers, the spokesperson said, adding that deliveries of the entry-level version of its P7 sedan, which has a driving range of 480 kilometers (298 miles), would be delayed up to 17 weeks.
• Several customers complained that the Alibaba-backed EV maker deliberately intends to prioritize deliveries of higher-end versions of P7, according to a post published Monday on “Black Cat,” a complaint platform owned by Sina. The P7 allows for a driving range of up to 670 km.
• When contacted by TechNode on Thursday, an Xpeng spokeswoman responded by calling the post’s accusation “factually wrong” and that the company “didn’t prioritize deliveries of the high-end P7.” The higher-version P7 models are equipped with the conventional cobalt lithium-ion batteries that guarantee more power and range than LFP batteries, the spokeswoman noted.

Context: Xpeng delivered 56,404 vehicles during the first three quarters of this year, a figure four times higher than the 14,077 vehicles it placed with customers during the same period in 2020. It set a delivery forecast of up to 36,500 vehicles for the last three months of this year.

• Speaking to analysts during an earnings call on Nov. 23, President Brian Gu said the company was aiming to hit a monthly delivery of 15,000 vehicles over the next two months, although he expected the supply chain constraints to remain “very severe.”
• Xpeng rival Nio on Nov. 10 predicted its fourth quarter deliveries would number between 23,500 and 25,500 vehicles, as chief executive William Li said during an earnings call that the company’s delivery volume was constrained by supply chain volatilities with regards to certain chips and batteries.
• Li added that the company is currently ramping up battery production with partner CATL and expected production volume to reach “a reasonable level” in the first quarter of 2022. Nio delivered 24,439 vehicles in the third quarter of this year, an 11.6% increase from the preceding quarter.

Beyond Expo has been underway at the Venetian Convention and Exhibition Center in Macau since Thursday. The three-day offline tech summit and exhibition has attracted more than 300 exhibitors promoting everything from artificial intelligence and biotech to smart cities. Giant firms such as Tencent, China Telecom, Alibaba, and Huawei joined with upcoming vertical unicorns to showcase their latest technological developments and products.

Here are some highlights in case you missed out.

Innovations from giant firms

At Tencent’s booth, the company demonstrated 15 ways its technologies are applied in smart cities, industrial chains, and healthcare, mainly concentrating on commercial applications in the Greater Bay Area, which consists of nine cities in the southern Guangdong province, Hong Kong and Macao.

One example was Tencent’s cooperation with the Macao Water Supply Company. Tencent’s productivity app, WeCom, has greatly improved the working efficiency of his company, according to Hu Jianchao, head of the water firm’s pipeline management department.

Before adopting the app, the company relied on phone calls to learn about water pipeline emergencies. Lack of real-time updates often led to miscommunications. WeCom has streamlined the emergency treatment process by digitizing case details such as the location of the emergency, onsite pictures, and the staff in charge of the case, Hu explained.

Telecom carrier China Telecom has developed a smart city transportation platform for Macao by integrating technologies including IoT, artificial intelligence, cloud computing, and big data. The app, which claims more than 100,000 daily active users in the city, supports major features like route management and bus stop reporting.

The company’s 5G-enabled robot dog drew a large crowd at the event. The dog can be useful in various scenarios such as accompanying and guiding visually-impaired people in emergency rescues, said Chen Zhanhong, a representative from the Macao subsidiary of China Telecom. 

Robots at work

Service robots are well on track for commercial applications as traditional sectors turn to automation to increase efficiency and slash labor costs. The trend got a strong boost from the pandemic, which gave rise to the new concept of “non-contact delivery.”

Now, service robots are giving directions at malls, supermarkets, museums, and hotels, as well as delivering food in restaurants, taking care of the elderly, and assisting with medical treatments.

Cars take to the air

As electric vehicles and autonomous driving become more familiar concepts to Chinese consumers, entrepreneurs are exploring the future of daily transportation.

Developed by Chinese drone maker EHang, EHang 216 is a dual-seat passenger grade autonomous aerial vehicle designed for short- to medium-range air transportation. The passenger drone can travel at a maximum speed of 130 km/h. It can fly for 21 minutes with a full-load capacity of 220 kilograms.

Xpeng Huitian, an autonomous aviation unit of electric vehicle maker Xpeng Motors, showcased its “flying car” prototype Voyager X2 at the event. With eight propellers on four axes, the passenger drone could carry two adults. It has a maximum load of 200 kilograms. The electric drone can travel 35 minutes at between 80 and100 kilometers per hour on one charge.

Xpeng Motors will launch a pilot program for autonomous ride-hailing services in China in the second half of next year, Xpeng’s executives said at an annual tech day event on Oct. 24. The program is part of the company’s latest efforts to offer full-scenario autonomous driving capabilities by the middle of 2023. 

Why it matters: Xpeng expects the move to accelerate the development of its advanced assisted driving technology for mass-produced vehicle models. The company claims its upcoming advanced assisted driving technology will cover most traffic conditions. 

Details: Xpeng will operate a fleet of vehicles equipped with its advanced assisted driving software in Chinese urban environments in the second half of 2022, Wu Xinzhou, vice president of autonomous driving in Xpeng, told reporters during a media interview on Tuesday.

• Xpeng hopes to use the pilot scheme to study so-called “corner cases,” meaning traffic scenarios that do not happen very often and find possible solutions, according to comments made by Chief Executive He Xiaopeng at the Oct. 24 event. 
• Full details of the project are yet to be announced, but Wu said that the company will deploy its basic mass-produced vehicles rather than “retrofit vehicles with expensive sensors and semiconductors.” 
• “Xpeng will become the first carmaker in China that explores mobility solutions enabled by autonomous driving,” He said, adding that Xpeng has intended to focus on developing consumer cars with autonomous driving capabilities rather than become a mobility service company.
• On Oct. 24, the company announced plans to launch Xpilot 4.0, Xpeng’s advanced driver assistance system (ADAS), in the first half of 2023. Xpeng said the system will offer drivers unlimited, full-scenario driving capabilities.
• The Xpilot 4.0 will go beyond the current 3.0 version, which handles only Chinese highways and some expressway-style urban streets. It will also be superior to the upcoming 3.5 version, which features automated driving capabilities on urban roads, scheduled for release by next June.

Context: Compared to robotaxi companies, electric vehicle makers such as Xpeng have chosen different approaches in their quest to achieve fully autonomous driving technology. EV makers are gradually working their technology up from assistant driving to semi-autonomous driving, hoping to arrive at fully autonomous driving.

• In contrast, robotaxi companies such as Waymo believe there is no clear path from semi-autonomy to full autonomy. They chose to start their work at a high driving automation level. Baidu, Pony.ai, and WeRide are the early robotaxi players in China.
• Waymo has openly dismissed EV maker’s step-by-step approach. “It is a misconception that you can just keep developing a driver assistance system until one day you can magically leap to a fully autonomous driving system,” Bloomberg reported in January citing former Waymo CEO John Krafcik. A Waymo’s testing vehicle reportedly costs at least $130,000 in sensors and computers, according to Krafcik.
• Xpeng seems to disagree with robotaxi’s dismissal. “We will be ready to have a similar performance to any robotaxi company in China,” Wu told TechNode on Tuesday. “[The robotaxi companies] have to work very hard to find a path to a mass-production vehicle. If they don’t do that, two years from now, they will find the technology is already available in mass production, and their value will become much less than today’s,” Wu told TechCrunch in an interview in April.

Chinese flying car startup HT Aero has raised $500 million as part of a new round of funding as it pushes to popularize its technology.

Why it matters: HT Aero, an Xpeng-affiliated company, said the fund is the largest venture funding round for a startup in Asia’s passenger flying vehicle sector to date, according to a Tuesday press release. 

Details: Electric vehicle maker Xpeng Motors led the Series A funding round, along with Chinese venture capitalists IDG Capital and 5Y Capital.

• A number of other new investors also jumped on board, including Sequoia China, Eastern Bell Capital, and GGV Capitals. HT Aero saw its valuation rise above $1 billion before the investment.
• The Guangzhou-based aviation startup plans to use the proceeds to develop a new version of its flying vehicles for both low-altitude air travel and road driving, scheduled for release in 2024, founder Zhao Deli said in the press release.  
• “The investment in HT Aero will further accelerate the build-up of our ecosystem to integrate driving and flying,” Xpeng chief executive He Xiaopeng said.

Context: HT Aero in July unveiled its latest electric passenger drone, Voyager X2, featuring a flight time of 35 minutes and a maximum speed of 130km per hour (around 80mph). Yet the company has no plans for mass production of the two-seater flying vehicle prototype, for now, Caixin (in Chinese) reported Wednesday, citing a company representative.

• The technology is still at an experimental stage, making market valuation difficult. Morgan Stanley estimated the global autonomous urban aircraft sector to be worth $1.5 trillion in a report published in May 2020. However, they cut this figure to $1 trillion earlier this year.

Li Auto closed down 0.85% on its first trading day in Hong Kong Thursday. The Chinese electric vehicle startup opened at an issuing price of HK$118 ($15) per share. 

Why it matters: Li Auto is the latest Chinese tech firm listing in the US to seek a dual-primary listing in Hong Kong. Tech companies increasingly see Hong Kong as an attractive market as they seek to hedge risks when both Chinese and US regulators accelerate regulatory scrutiny.

Details: Li Auto’s Hong Kong debut met with a lukewarm market response. The company’s shares closed at HK$117 ($15.03), 0.85% lower than its issuing price, falling by as much as 2% soon after starting trading. 

• Speaking to reporters on Thursday in Hong Kong, Li Auto’s president Shen Ya’nan said the company has been considering a listing in the mainland, without revealing details.
• The company said it will use the proceeds from the Hong Kong listing to develop new car models and autonomous driving technology, and to expand charging infrastructure and sales networks.

Context: Backed by Chinese life services giant Meituan, Li Auto first went public on Nasdaq last July. The company is the second Chinese EV maker to seek a Hong Kong listing. Its rival Xpeng Motors raised $1.8 billion in Hong Kong in June.

• Li Auto so far has only one model for sale. The company delivered 8,589 cars in July, surpassing both its competitors Xpeng and Nio in vehicle deliveries for the first time in July.
• Both China and the US have issued new regulations that make it more difficult for Chinese companies to raise money in the US markets. In July, Chinese regulators proposed new rules requiring some Chinese companies to seek official approval before listing in overseas markets. The US has threatened Chinese companies with delisting over a dispute about accounting procedures.

Read more: Drive I/O | The untold story of Li Auto

As Chinese automakers pour money into autonomous vehicles (AVs), they’re relying on another emerging technology to be the eyes of self-driving cars: lidar. Chinese carmakers are promising that models with lidar will hit the road in the next six months, likely marking the first time the tech sees widespread commercial deployment.

What is lidar? Well, it’s a lot like radar, but it uses lasers. It can pick out details and see small things better—a small dog crossing the road, a pothole. It can see things other systems, such as cameras and radar, might miss. 

But established lidar systems are bulky contraptions that are proving hard to integrate into consumer cars. They’re expensive, too, driving up the price of cars that use them for self-driving functions. For now, it’s mostly seen on prototype robo-cars.

Despite the challenges, most Chinese AV contenders are counting on lidar.

Five Chinese lidar startups say that they’re close to making it work. It’s a tough act: the device has to be small enough to fit in a sedan, reliable enough to trust on the road, and cheap enough to fit into the price of a consumer car. While they won’t be the first to deliver road-ready systems, Chinese companies could be the first to do it at a practical price. 

In this week’s issue, we’ll meet China’s leading lidar players and see how they’re trying to make the emerging technology work.

Robo ski-racks

Most lidar systems on the road today are mechanical spinning lidar on AV prototype vehicles. You’ve probably seen one—they’re the ones that look like half a jetski, or three portly Alexas strapped to a ski rack. If you saw it in China, it was probably made by Hesai, the Baidu-backed startup that’s the dean of the field.

Hesai has dominated the experimental generation in China, making the systems used on most Chinese and some international prototypes. At least 10 out of the top 15 robotaxi startups worldwide are reportedly (in Chinese) among its clients, including Baidu, Didi, and Pony.ai. 

But to address size and durability, lidar makers are now turning to “solid state” sensors that eliminate most moving parts. These can fit the system into a small box, around the size of a lunch box, which fits easily into the grill or tucks under the roof of a car. But miniaturization creates new problems with range, price, and reliability.

In early 2019, Hesai unveiled its latest solid-state device, called Pandar GT and boasting a detection distance of 300 meters, but it is still validating the product and negotiating with auto clients, according to a prospectus filed by the company in January. 

So far, Hesai hasn’t found a customer to put its solid state technology into a production vehicle. Baidu, a leader in China AV tech, has skipped lidar for its self-driving package, known as Autonomous Navigation Pilot, despite years of collaboration with Hesai in mechanical lidars for its test fleets. Speaking to Chinese media during this year’s Auto Shanghai expo, Baidu’s vice president Wang Yunpeng said the company is developing a “reliable and affordable” lidar sensor for production cars with partners, without giving further details.

The key challenges

Five Chinese companies have made real progress on consumer-ready lidar, using a variety of approaches that strike different balances between range, price, and reliability, and reaching deals with major automakers to put their sensors into cars. But they each have difficult technical problems to solve. 

Huawei and Robosense, a Chinese lidar upstart backed by Alibaba, are betting on a technology called micro-electro-mechanical systems (MEMS), which uses a tiny mirror (1 mm to 7 mm in diameter) to steer light. With only this piece of glass moving, the whole unit can be smaller than one that has to rotate as a whole. Robosense is currently making lidar s¯ensors for US electric vehicle startup Lucid Motors.

Both MEMS players are struggling with range: the latest offerings from the two companies only work at distances up to 150 meters.

Experts believe self-driving systems will need to spot objects at least 200 meters away to have enough time to react. 

The MEMS solution has proven to be superior in terms of size, speed, and cost over other types of lidar sensors, according to an article published by three University of Florida engineers last year. However, a short detection distance due to the small mirror is a key flaw and, to deal with it, systems will likely need a larger detector, complicating assembly, the paper said.

With its latest offering boasting an impressive distance of 250 meters, Sunnyvale and Suzhou-based Innovusion seem to have solved the range issue. Their solution uses lasers at a wavelength of 1,550 nanometers, rather than more common 905-nm lasers. Considered a “sweet spot” by lidar developers, 1,550-nm light allows longer-range measurement and poses less danger to human eyesight. When using 905-nm lasers, power is usually restricted to avoid blinding people.

But Innovusion has faced challenges with production, for a physical reason: traditional silicon chips can’t detect 1,550-nm light, and therefore developers have to make custom sensors with an exotic material called indium gallium arsenide (InGaAs), which is more costly and more complex to manufacture. Setting up a production line for this less common technology is no easy feat, and the product may not be cheap.

Speaking at an online conference in March, Innovusion technology chief Li Yimin said getting lidars to work well on production cars had turned out to be more difficult than he expected. Nonetheless, he said his staff have been working “day and night” to meet the early 2022 timeline target set by partner Nio. The Chinese EV maker has promised to deliver its first sedan model enabled with its lidar sensors, the ET7, early next year.

“We have to pull ahead the production schedule of many advanced technologies including lidar … This has posed a lot of pressure on our teams and the partners. We are fully focused on achieving this goal and pushing ahead despite all those challenges,” Nio’s chief executive William Li said during an April earnings call.

Xpeng Motors, with partner Livox, claims it will be the first Chinese automaker to deploy lidar on production cars this October. But it is facing other problems. Livox’s sensors boast a unique method of scanning objects in a spiral or flower pattern, rather than in traditional horizontal linear scanning patterns. This helps its sensors create a higher-definition map of the world and could enable more reliable autonomous driving capabilities, the DJI-backed lidar maker has claimed.

However, the unusual scanning style requires the sensor’s motor driver to operate at a high rotation speed of over 6,000 revolutions per minute, more than five times that of sensors made by major French lidar marker Valeo. These speeds pose a big technical challenge for the five-year-old startup to meet reliability requirements for autos, since high rotational speeds usually come along with high abrasion and reduced lifetime for motors.

Livox recently said that it has resolved the issue with manufacturing improvements, based in part on DJI’s expertise in mechanical engineering from making drones, according to a Chinese media report published last week. However, Xpeng CEO He Xiaopeng last month during an earnings call acknowledged that the company is still testing lidars from multiple suppliers and is “very open” to other choices for new models scheduled for launch over the next two years.

“With an all-round sensing performance on our cars and our production capabilities, we’re very confident that we can be complementary to some of the disadvantages of lidar technology,” He added.

Some Chinese automakers and lidar startups are also seeking overseas partners. In addition to the Robosense-Lucid hookup, Chinese legacy automaker Great Wall Motors, a manufacturing partner of BMW, has teamed up with Germany’s Ibeo as its source for lidar sensors on production cars.

The price is right

After technical barriers, lidar-enable cars will have to leap another hurdle: cost. The sensors don’t come cheap.

China’s low-cost manufacturing advantage appears to apply to lidar, with the offerings of local suppliers usually costing 80% less than international competitors, or below $1,000, French market intelligence firm Yole Développement wrote in a report published last August.

However, lidar cars don’t look cheap. The latest premium electric sedan announced by Huawei and BAIC in April, equipped with three lidar sensors, has a starting price of RMB 388,900 ($60,785), more than 50% higher than that of Tesla’s locally-built Model 3. 

R&D and onboard computing could be driving the cost. The Chinese telecom giant in April announced that it will double its annual auto R&D budget for self-driving cars to $1 billion this year, without giving a breakdown of its investments. Apart from three lidar sensors, the hardware stack of the BAIC-Huawei sedan also includes five more cameras, and five more radars than a Tesla Model 3’s. Although cameras usually take significant computing power in the vehicle, the task of combining data from multiple sensors also requires much computing power and a more complex vehicle architecture. 

Mixed opinions

Not everyone agrees that AVs will need lidar. Tesla has been heavily relying on a cheaper, camera-based approach. Nissan and Baidu, are also skipping lidar, relying on cameras, radar, and ultrasonic sensors for AVs. 

Most other major players, including Google’s Waymo and General Motor’s Cruise, consider lidar an essential part of developing safe autonomous cars. “Lidar sensors contribute to the redundancy and overlapping capabilities needed to build a car that operates without a driver, even in the most challenging environments,” wrote Cruise CTO Kyle Vogt in a post in 2017.

Chinese EV makers are betting on the lidar-based approach in competing against Tesla, and have gained chances to validate the technology. “At the current stage our top priority is not to secure as many contracts as possible, but to fine-tune our products and hit volume production,” (our translation) a Livox spokesperson told TechNode last month.

But lidar prices are falling. As the sensors get cheaper, the case for them looks more and more tempting. “Lidar guarantees high reliability for self-driving cars when vehicle autonomy is still in its early stage. Such redundancy is worth taking in the name of safety,” (our translation) Paul Gong, a China auto analyst at UBS, told TechNode last month.

Xpeng Motors CEO He Xiaopeng promised Wall Street analysts May 13 that the company would roll out a new generation of autonomous driving (AV) software early next year. The company said recently that its Xpilot 3.5 system will be able to drive autonomously 90% of the time.

Why it matters: Improved AV capabilities could give the electric vehicle (EV) startup a leg up as it faces challenges. Last week, Chinese tech giants set out ambitious targets for their self-driving tech businesses in partnership with legacy automakers.

Earnings: Xpeng on Thursday reported a record RMB 2.95 billion ($450.4 million) in revenue in its first-quarter results, rising more than sixfold from a year earlier, exceeding a consensus estimate from analysts polled by FactSet, according to MarketWatch. However, Xpeng shares fell 4.8% to $23.56 on Thursday following the call.

• Gross margin expanded to 11.2% from 7.4% in the fourth quarter last year and losses attributable to shareholders was flat quarter on quarter at RMB 786.6 million.
• The young EV maker also revealed its software figures for the first time, generating around RMB 80 million ($12.4 million) in software revenue in the first quarter, and accounting for 2.5% of gross profits.
• Approximately 25% of P7 owners, Xpeng’s first sedan upgradable to advanced self-driving capability, have bought their cars with Xpilot 3.0 for an additional one-time fee ofof RMB 20,000 as of March, according to He. The company had delivered around 23,000 P7 sedans as of March.

Race to AV: He was asked about competition from Baidu and Huawei, which last month made public debuts of self-driving systems for city streets. He said the AV solutions provided by some companies are currently for limited driving scenarios or “at a very high cost.”

• In late January, Xpeng launched its Xpilot 3.0 advanced driver assistance system (ADAS), which allows vehicles to drive themselves on national highways.
• During an online conference on Apr 20, Wu Xinzhou, vice president of autonomous driving, said Xpilot 3.5 could allow autonomous driving on 90% road travel from the current 10%, as the function extends its reach from highways to city streets.
• “We are coming up with a solution that can balance all the aspects with a reasonable cost to deliver the most superior experience to our customers. This is an art,” He said.

READ MORE: Drive I/O: Key takeaways from Auto Shanghai 2021

Context: Chinese young EV makers are feeling the heat as local tech giants strive for self-driving leadership with the launch of their advanced AV solutions during this year’s Auto Shanghai last month.

• Huawei on Apr 17 announced to spend a whopping $1 billion in AV this year as the company, along with its auto partner BAIC, is pushing to deliver urban self-driving functionality first to customers from Beijing, Shanghai, Guangzhou and Shenzhen by year-end.
• Chinese search engine Baidu during the show said its ADAS solution for urban self-driving called Autonomous Navigation Pilot (ANP) will be available on vehicles launched by partners first in 20 cities by year-end and then over 100 cities by 2023.

Traditionally a time for automakers to flex their muscles, the Auto Shanghai expo this year held a surprise: It was China’s big tech firms that took the spotlight, outshining some of the country’s leading EV makers. 

Huawei made a big splash, unveiling its complete self-driving car technologies as it gears up to compete as a central player in China’s autonomous vehicle (AV) industry. Baidu, China’s biggest internet search firm, was not to be outdone, proclaiming itself the undisputed AV industry leader. The company said it expected to equip 1 million new cars in five years with its software.

Some of the biggest startup unicorns such as chipmaker Horizon Robotics were also busy, forging alliances with a list of automakers during the event as they work to establish themselves in the booming industry.

Highlight 1: Chinese tech giants bet on smart EVs

Overshadowing traditional carmakers displaying flashy concept models and production-ready cars, Chinese tech giants generated big buzz at Auto Shanghai this year. 

Tech giants unveiled advanced connected and autonomous driving solutions along with ambitious growth strategies, generating headlines and lending cachet to lesser-known auto partners. In particular, deep-pocketed Huawei and Baidu showed how they are ramping up aggressive pushes into the industry.

Huawei was one of the biggest draws at the show. Crowds swarmed the Arcfox-branded Alpha S electric sedans on display at its booth, equipped with the telecom giant’s hardware and software and made by automaker BAIC. 

After three years of co-development, the two companies said that they are on track to deliver the Alpha S by year-end. According to Huawei and BAIC, the vehicle features “best-in-class” self-driving capabilities for highways and busy streets to customers in China’s four biggest cities. Its other customers that hail from outside of the four cities will get the function via over-the-air software updates within the next two years as Huawei continues to work on its AV mapping.

To reach this target, Huawei has been plowing resources into its new auto business. Its Automotive Solutions unit will beef up headcount 25% to 5,000 employees this year, Wang Jun, president of Huawei’s intelligent Automotive Solution business unit, told Chinese media during the show.

Hands-free driving on busy city streets is widely considered a key milestone for mass AV adoption, one that Tesla has offered in its full self-driving (FSD) package since March. Eager to offset its flagging smartphone sales Huawei has been chasing this capability as it ranks auto among its top-priority businesses, though it is years behind industry leaders. At the company’s global analyst conference a week before Auto Shanghai, deputy chairman Eric Xu announced that Huawei will nearly double its annual auto R&D budget to $1 billion this year.

Lingering questions among industry analysts TechNode spoke with include understanding what progress Huawei has made on the self-driving front so far—a question it has not yet addressed—and how much safer its self-driving cars will be compared with traditional autos. The tech heavyweight faces a significant uphill climb. Many automakers remain skeptical that the “wounded tiger” will manage to make cars itself, these analysts said.

Huawei’s moves into the auto industry present a significant threat to Baidu. Wang Yunpeng, a vice president at the search firm, recently went on the counter-attack in a talk with Chinese media during the auto show, insinuating that even by throwing money at the challenge, competitors stood little chance of quickly catching up. 

Baidu, Wang said, is in the same camp as Google’s AV unit Waymo—it’s on the verge of commercializing its technologies. To compare, “companies like Huawei and Didi are probably still at the stage of testing their vehicles on fixed routes,” Wang said (our translation).

Baidu’s robocars have logged 10 million kilometers (6.21 million miles) on public roads, around a third of Waymo’s. During the event, Baidu launched what it boasted was China’s most advanced driver-assist system. Called Autonomous Navigation Pilot (ANP), the technology enables autonomous driving capabilities for vehicles made by Baidu’s automaker partners. The system will be first available to owners of these vehicles in 20 cities by year-end and then over 100 cities by 2023, the company said. Baidu said its self-driving tech will power at least one new model per month beginning in July and equip more than 1 million cars with its software over the next five years.

With blurred lines between vehicles and technology, how much tech is in a Baidu- or Huawei-enabled smart car? Using as an example WM Motor’s W6, the latest crossover from the Baidu-backed EV maker, the tech giant is responsible for most of the digital technology in the car, from the voice assistant to the map navigation in the operating system. WM Motor also sources Baidu’s self-driving software and hardware suite including 12 cameras, 12 ultrasonic sensors, a radar system, and a computing platform, while it independently develops the car’s mechanics, such as the powertrain system.

Chinese carmaker Chery is also clamoring to join Baidu’s friend circle, while BAIC is one of Huawei’s oldest allies in the automotive industry. However, some of the bigger names in auto want full control in developing the next-generation of vehicle architecture. For that reason, China’s biggest automakers, SAIC and Dongfeng Motor, displayed their latest offerings with software developed in-house or by Chinese AV unicorns they have backed.

During the expo, SAIC began to take orders for its first sedan, the L7, under its new premium EV brand IM. Short for “Intelligence in Motion,” SAIC co-launched the brand with Alibaba in November to compete against Tesla. The Volkswagen partner recently raised its holdings in Chinese AV upstart Momenta, aiming to offer urban self-driving capabilities early next year. Meanwhile, Dongfeng announced (in Chinese) that it aims to sell a total of 1 million EVs and master fully driverless technologies within the next five years.

Experts TechNode spoke with were optimistic about Chinese automakers’ moves into smart, electrified cars, thanks in part to local tech giants. Domestic players could account for 70% of auto sales from the current 40% within the next 10 years, Liu Guanghao, an investment director at Shanghai-based venture capital firm BeFor Capital told TechNode. “These driver assistance features are industry-leading, and the car interiors, such as the digital dashboards, appeared forward-thinking. This could help traditional automakers reposition their brands to be more premium,” (our translation) Liu said.

Highlight 2: EV Big Three momentum slows

Amid the hubbub from big tech and traditional auto companies, Chinese EV contenders were comparatively quiet, with no mention of new models at Auto Shanghai.

Well-funded Nio, Xpeng, and Li Auto are considered emerging EV leaders and the most promising of China’s Tesla challengers. Now, as competition heats up, they are collaborating with smaller tech unicorns—such as Li Auto’s partnership with Chinese chipmaker Horizon and Xpeng’s partnership with DJI’s Lidar unit, Livox—in an effort to maintain their leadership positions in the sector. 

But their outlook may be clouding over after internet giants overshadowed them during the expo.

On the first day of the show Nio kicked off a massive expansion of its charging infrastructure, announcing that it would open 100 battery swap stations and 500 supercharging stations in an area spanning eight northern provinces during the next three years. Meanwhile, Nio president Qin Lihong acknowledged to Chinese media on April 19 that big tech’s push into EVs was a challenge for the company considering Huawei’s established retail network, and reaffirmed its goal to expand its sales network by 60% to 366 stores nationwide by year-end.

There has been growing concern over EV upstarts lagging larger players in new product and technology development going forward. Nio CEO William Li last month expressed confidence that it would release the ET7, its next-generation electric sedan, on time, slated for delivery early next year. It would happen, he confirmed, despite steep challenges in advanced technology adoption. The company said it is doubling its R&D budget to RMB 5 billion ($774 million) this year. “Auto intelligence is where this game may be decided,” Li told Chinese media during the auto show.

Li Auto is seen as falling behind its peers in the AV race, having not yet delivered highway self-driving functionalities to its customers. Feeling the heat at the auto show, CEO Li Xiang said April 20 on Chinese social media platform Weibo that its self-developed AV system will be able to compete head-to-head against those by Huawei and Tesla next year. The EV startup in September announced plans to adopt Nvidia’s advanced supercomputer Orin for its second model, scheduled to launch in 2022.

The six-year-old automaker also turned to Chinese AI unicorn Horizon Robotics for help, and the two companies during the show deepened their partnership to an “in-depth cooperation in building upgradable smart and electric vehicles” (our translation). Despite its best efforts, Li Auto may be too late to catch up and gain a competitive advantage, as tech heavyweights venture into EVs, an analyst told TechNode at the show. 

Li Auto in February assured investors that it will triple its R&D spending to RMB 3 billion ($464 million) this year. Since December it has raised around $2 billion from a new share offering and bond sales to ramp up in-house R&D capabilities.

Xpeng Motors is ahead of its peers in driverless technologies, but also failed to wow the crowd during the show, despite unveiling its second sedan, the P5, which it displayed at a press event in Guangzhou a week earlier. Touted as China’s first production model equipped with two Lidar sensors, an expensive and essential component for 3D perception, the P5 is expected in the first half of 2022 to self-navigate driving scenarios such as being cut off on busy streets.

However, Xpeng did not release the P5’s pricing information as planned, spurring concern from industry insiders that the company’s best days are behind it. Several insiders and analysts that TechNode spoke with said that the P5 launch fell short of expectations while the cost of the vehicle’s hardware suite has remained high, pressuring Xpeng in pricing the new product, people close to the company told TechNode during the show.

Xpeng fired back on April 22, saying on its Weibo account that it had secured more than 10,000 orders of the P5 in 53 hours after opening orders (with refundable RMB 99 deposits). “The market feedback was beyond our expectation,” (our translation) a company spokeswoman said to TechNode on Wednesday. 

Big tech disruption

Chinese tech giants at the Auto Shanghai 2021 disrupted the already-breathtaking pace of China’s new energy and autonomous driving world by doing what they were there to do: build consumer brand awareness and deliver advanced car technology solutions. The disruption is boosting the perception of Chinese-built vehicles—no longer synonymous with cheap, low quality cars—up the industry value chain.

This disruption is pressuring Chinese EV upstarts’ lead in the industry. These EV firms will have to convince investors that, after notching early wins, they can maintain their momentum in an increasingly crowded playing field. 

“Big tech’s entry into the market would inevitably erode the influence young EV makers have in the industry. This has created an alternative regarding the competitive landscape in the next five to 10 years,” (our translation) Paul Gong, China auto analyst at UBS, told TechNode on April 21.

Chinese electric vehicle maker Nio on Thursday announced that it will start delivering vehicles to buyers in Norway in September and will open a flagship store there in the third quarter, in its first overseas foray.

Why it matters: Norway is the first stage of Nio’s ambitious expansion plan for Europe, which holds significant growth opportunities for the EV upstart but may prove to be a challenge.

• Nio has only sold cars to customers in China and will need to adapt to European regulations, culture, and consumer appetites in a short timeframe.
• The Europe initiative will run at a loss over the short term as the company is at an early stage of investment, CEO William Li said during a press event in Shanghai on Thursday. “Nio didn’t set near-term sales targets for the Norway team, and instead we will pursue robust growth over the long term,” (our translation) Li added.
• Company president Qin Lihong told Caixin (in Chinese) during this year’s Auto Shanghai expo that Nio’s average selling price will probably exceed similar models from Audi and other international auto brands. 

Details: Nio plans in August to start customer test drives of its large electric crossover, the ES8, in Norway, and start taking orders and delivering cars to customers in September, Marius Hayler, general manager of Nio Norway, announced via livestream during the event on Thursday. Detailed information on pricing was not disclosed.

• Nio has plans to enter five other European countries next year, Li said, without further elaborating. The EV maker has been in talks with government officials from Germany, France, and other countries.
• Li said that he expects annual sales of at least 50,000 units in Europe over an undisclosed timeframe.
• Qin confirmed that the company will adopt the same strategy as in its home market to win over Norway’s consumers—creating a user community and premium experience with a direct retail and service network.
• The first Nio House, its clubhouse-style retail showroom, will be open for business during the third quarter on Karl Johans Gate in downtown Oslo, with four smaller Nio Spaces stores expected to open for business in Bergen, Stavanger, Trondheim, and Kristiansand next year.
• Nio will also build local power infrastructure facilities in Norway from scratch, with plans to first operate four battery swap stations in Oslo and surrounding areas by year-end. It is partnering with European charging network Plugsurfing to widen customer access to more than 20,000 chargers.
• The company expects to deliver more products looking ahead, including the ET7, a premium electric sedan scheduled for 2022, when its sales, service, and charging network expands in at least five Norwegian cities. Hayler said the local team will expand to 50 employees from 15 by year-end.

READ MORE: Chinese EV makers face uphill battle with Europe expansion

Context: Competition in Europe is stiff for Chinese EV makers. Norway is a mature EV market with a number of European brands competing for share.

• Norway became the world’s first country where EVs outsold traditional combustion cars last year, with the market share of EVs growing to 54% from 42% in 2019, Reuters reported in January citing figures from the Norwegian Road Federation.
• Boosted by heavy government tax incentives, Chinese EV makers are marching into the country. Nio peer Xpeng Motors delivered in December the first 100 of its G3 electric crossovers to customers in Norway, followed by another 200 or so vehicles shipped to the country two months later, according to a company announcement.

Geely announced Thursday that it will sell electric vehicles from its new premium brand Zeekr directly to customers, a business endeavor for which it plans to open retail shops and build an online community.

Why it matters: The move is part of a broader plan by China’s largest private automaker to become a frontrunner in the electric and software-based vehicle race.

• Zeekr can sell directly because it operates as a standalone company within the Volvo parent company’s empire. “The goal for Zeekr is to become a technology company,” (our translation), said Geely president An Conghui during a press event at its Ningbo facility on Thursday.
• Direct sales, compared to the traditional model of selling cars through franchised dealerships, is seen as key to Tesla’s success in the global auto industry and has been adopted by a number of Chinese EV upstarts such as Nio.

Details: Zeekr on Thursday laid out plans to join the country’s most competitive mass-premium EV segment by opening two clubhouse-style flagship stores called “Zeekr Centers” and 60 smaller “Zeekr Spaces” in local shopping malls this year.

• The company expects to rapidly expand its sales footprint to a total of 225 branded shops in three years. It is on track to deliver its first model, the Zeekr 001, in October, according to An, who is also the CEO of the new EV unit.
• Equipped with Mobileye’s SuperVision, a hands-free advanced driver-assistance system, the company began taking orders for the four-door coupe on Wednesday at a starting price of RMB 281,000 (around $43,077) after subsidies.
• The Zeekr 001 is priced around 20% lower than Tesla’s locally made Model Y and Nio’s popular crossover, the ES6. It is roughly 20% more expensive than BYD’s premium model, the Han, and Xpeng’s P7 sedan. These models are considered the primary contenders expected to grab share from gasoline cars.  
• Meanwhile, the company will launch a smartphone app in June capable of transacting online sales, and to help with forming a virtual community, An said.
• The management of multiple teams and the expenditure involved in operating a direct sales model is a big challenge for traditional automakers to take on, and is not currently feasible for all of its business units, An explained during the event.

“It’s an emotional play at the high end where consumers buy EVs because they’re high-tech gadgets with premium experience. That’s been a successful play in China and will continue to thrive without government subsidies.”

—Stephen Dyer, managing director of global consultancy AlixPartners, told TechNode during the panel, “EV: What’s next as the industry recovers” at TechNode’s Emerge event in November.

Context: Volkswagen is one of the traditional auto majors which adopted a direct-sales model, opening its first branded shop in December in the eastern Chinese city of Hangzhou. It plans to build 40 stores across China over the next year or so, according to a Reuters report.

• Geely in March announced a RMB 2 billion investment initiative to set up Zeekr Technology and establish a presence in the fast-growing luxury EV segment.

Correction: An earlier version of this story incorrectly identified the EV company as Zeeker, not Zeekr.

Update: added the names of the November TechNode event and panel discussion that Stephen Dyer took part in.

After completing a test drive across China’s eastern coastal region, Xpeng Motors said on Wednesday that its driver assistance technology is the top performer in China, using a technology rejected by Elon Musk: high-definition maps.

At a press event in Beijing, Xpeng executives said its Navigation Guide Pilot (NGP) function, which enables primarily unassisted highway driving, surpassed Tesla’s Navigate on Autopilot (NoA) in several key metrics. Specifically, Xpeng said that it had achieved a lower rate of human driver intervention and a higher success rate for automatic lane changing, among others. The 3,600-kilometer (1,864 miles), eight-day road trip, which included members of the media, ended on Sunday.

The road trip included a fleet of 15 P7 sedans traveling a combined total of around 50,000 kilometers on highways and urban streets through major domestic cities including Beijing, Shanghai, and Guangzhou. Xpeng said it logged 0.71 disengagements per 100 kilometers. This means a human driver was forced to take control of the vehicle after traveling in autonomous mode for 140 kilometers on average. In the meantime, Xpeng claimed several Tesla vehicles in tests conducted by local media experienced 1.03 disengagements per 100 kilometers.

The Chinese EV maker also announced its latest version of NGP, scheduled to launch through an over-the-air update in the second quarter, resulted in a 94.4% success rate for lane changes versus Tesla’s 81.3%. Xpeng vehicles successfully self-navigated through tunnels 95.0% of the time compared with Tesla’s 41.8%. Huang Xin, a director at Xpeng Motors, called it “an overwhelming lead” (our translation).

”NGP completely exceeded Tesla’s NoA regarding all the metrics in our tests… and has become the most advanced driver-assist function for production models,“ (our translation) Huang said while calling out challenges from all of its competitors. Huang added that Xpeng will release all the data collected during the trip.

TechNode took one of the Xpeng sedans on a test drive from a hotel in Shanghai to a highway service zone in neighboring Suzhou city, sitting alongside the driver. During the 45-kilometer, 40-minute test ride, the vehicle drove primarily at around 120 kilometers per hour, navigated safely and responsively including changing lanes a number of times. However, at one point, the driver was required to take over the wheel when the vehicle passed an off-ramp on its right while being cut off by a car from the left.

In another test drive made by Chinese trade publication 42How, the P7 disengaged 19 times over 2,000 kilometers of autonomous highway driving compared with 22 driver interventions for a China-made Model 3 on the same route. The article said that Xpeng’s tech provided a better, more localized experience for Chinese customers, including a smoother drive when guiding its car from a highway on-ramp to off-ramp, and normal operation in tunnels or with heavy rain, which caused Tesla’s NoA to stop working.

Alibaba helps

So far, around 20% of owners of Xpeng’s P7, the company’s first premium model with the hardware necessary for offering advanced self-driving capabilities, have ordered its latest Xpilot 3.0 advanced driver-assist system (ADAS) featuring the NGP function, which launched in January. The Nio Pilot, which has been offering for almost three years, had a 50% take rate. More than 68% of Tesla buyers had reportedly opted in for its Autopilot software back in 2019.

READ MORE: Nio, Xpeng, Li Auto: your cheat sheet to China’s listed Tesla rivals

And yet, Xpeng is considered by many to be a big threat to Tesla in China where vehicle autonomy is concerned. Xpeng has boldly marketed itself as one of few companies capable of developing in-house the entire software architecture for AVs. The P7 currently remains the first and only production vehicle in the market equipped with Nvidia’s Xavier computer dedicated to highly autonomous driving, according to Xpeng’s vice president of autonomous driving Wu Xinzhou.

And now, the Alibaba-backed EV maker is stepping up its challenge against Tesla by working hand-in-hand with Alibaba’s map platform Amap, or AutoNavi. The company is confident that an elaborate, detailed map for real-time self-driving purposes would give it a leg up in luring increasingly savvy Chinese consumers, according to comments during the online press event. Xpeng attributed Amap’s latest high-definition map with providing navigational capabilities in adverse weather conditions or places with poor signal such as tunnels.

“Our vehicles can enter and exit highway ramps automatically and switch highways pretty much all by themselves, because most of the interconnections between highways are mapped by our partner AutoNavi. So we can have a seamless experience when you’re switching highways using NGP,” Wu said during an online conference in late January.

NGP could work properly in benign weather conditions, Wu added, and even under “medium to heavy rains” although it is designed to shut down and require human intervention when the windshield wipers are on the highest setting. Wu acknowledged there are also challenges in snow, which make it difficult for the vehicle’s sensors to detect road lane lines.

Tech dogma

The practice of using HD maps for AV navigation has long been criticized by Tesla’s Musk, partly because maintaining an constantly updated HD map was believed to be an arduous and costly effort. Musk in 2018 publicly stated that dependency on HD maps would cause an AV to fail when real world changes are not reflected on the map. Tesla’s vehicles, he said, have sufficient sensors and processors to drive themselves.

Tesla did not respond to TechNode’s request for comment.

However, most other automakers and AV companies including Waymo and GM Cruise, rely on a suite of hardware stacks comprised of cameras, radar, Lidar, and HD maps—usually viewed as “another sensor.” Xpeng is currently the only car company incorporating Amap’s latest map technologies for on-board navigation, a partnership which Wei Dong, a general manager of Amap, commented requires an automaker have a strong proprietary capability in software development, since map data will be aggregated with sensor data to give AVs a sense of their surroundings.

“We do a very careful checking between what the cameras see and what the map is telling you pretty much all the time. And whenever there is a difference, the system will send a warning to the driver and sometimes just downgrade the AV functionality to make sure it’s safe,” Wu told TechNode.

Chinese tech giant Xiaomi is throwing its hat into the red-hot electric vehicle market with a RMB 10 billion ($1.52 billion) investment to set up a fully owned subsidiary for its auto business, to be led by chief executive Lei Jun.

Founder and CEO Lei at a press event in Beijing on Tuesday said Xiaomi had decided to strike out on its own on EVs in an effort to operate an ecosystem that will provide seamless user experience, and will not consider outside funding. Lei said he was aware of the complexities of making cars with extreme capital intensity, saying that the company is now ready to pour money into the project and face losses over a long-term period.

“We look forward to the day when Xiaomi cars will run on roads across the globe… This would be the last startup project in my career and I shall stake all I have to work this out,” the 52-year-old serial entrepreneur said (our translation). In an announcement published Tuesday, Xiaomi said the company plans to invest a total of $10 billion in the project over the next 10 years.

Following in Apple’s footsteps, Xiaomi has pledged to develop high-quality EVs with a “best-in-class” connected device ecosystem for global customers, according to Lei. The world’s fourth-biggest smartphone maker recorded shipments of nearly 150 million units in 2020 with an annual growth rate of 19%. Sales for competitors Samsung and Huawei shrank a respective 14% and 22%, according to figures from Canalys.

Xiaomi also boasted of having one of the world’s biggest Internet-of-Things (IoT) platforms, connecting 325 million smart home appliances as of last year, excluding handsets and laptops. It has also remained the top-selling television set maker in China since 2019, accounting for around 20% of market share, according to data compiled by Beijing-based consultancy All View Cloud (AVC).

However, the Chinese consumer electronics giant is seeking new sources of growth amid a slowing market. Its IoT and consumer products segment slowed sharply to 8.6% annually last year from 41.7% in 2019. The company also missed analyst revenue estimates for the fourth quarter, according to Bloomberg.

In the meantime, the global automotive industry is undergoing a landmark transition, and the shift to battery-electric, self-driving cars from traditional, internal-combustion vehicles has reached a major inflection point. China is expected to maintain its global leadership in EV production and adoption. IHS Markit forecasted that China will regain growth momentum at double-digit rates in 2021 and beyond, as the government continues to push the EV industry forward and consumer demand recovers.

Xiaomi has long been rumored to be plotting a move into the booming, crowded EV market. Last week it denied a Reuters report that it was in discussions with Chinese automaker Great Wall Motors for contract manufacturing. Shunwei Capital, a venture capital firm formed by Lei, invested in Nio in its Series A back in 2015 and became an early investor in Xpeng Motors two years later.

Baidu is also accelerating the push into the market. In January it set up a joint venture with automaker Geely. The Chinese search company has set a goal to launch its first own-brand EV within three years, chief executive Robin Li said during an earnings call last month.

Chinese smartphone maker Xiaomi is planning to make electric vehicles, according to a Chinese media report. This move could make it the latest entrant into the country’s exploding electric vehicle market, with founder and CEO Lei Jun reportedly leading the project.

Why it matters: The reported entry of Xiaomi, often dubbed “the Apple of China,” could shake up the entire auto industry. Its success in the consumer electronics market has given it high brand awareness among domestic consumers.

Details: After years of indecision, Xiaomi is about to give its electric car project the go-ahead, Chinese media LatePost reported Friday, citing “people familiar with the matter.” Sources cautioned that the company’s plans are still at an early stage and subject to change.

• LatePost’s sources said that Xiaomi began a project code-named “Micar” in 2018 to explore own-brand cars. The project was launched after founder Lei Jun’s visited Elon Musk in the US back in 2013.
• A Xiaomi spokesperson did not respond to TechNode’s request for comment.

Context: Xiaomi has made investments in home-grown EV brands before, leading the $400 million Series C of Xpeng Motors as a strategic investor in late 2019. Prior to that, Shunwei Capital, a venture capital firm founded by Lei, backed Nio’s Series A in 2015.

• The smartphone maker also boasts an advanced voice recognition technology, reaching partnerships first with state-owned FAW Group in 2018, later with Geely and Mercedes Benz in 2019 for the adoption of its voice-activated virtual assistant. It is still a small player, with iFlytek currently leading with 40% of the in-car voice assistant segment.
• Xiaomi has been looking for approaches to expand its presence in car connectivity, including partnerships with automakers in contract manufacturing, Jin Di, consulting director at market research firm Ipsos, told TechNode on Friday.
• Chinese new energy vehicle market reported strong sales of 1.37 million units in 2020, representing a 11% year-on-year growth despite business disruptions associated with the global pandemic, according to figures from the China Association of Automobile Manufacturers.
• Last month, search engine company Baidu revealed plans to make EVs in partnership with Volvo’s parent Geely.

China’s electric vehicle market posted unexpected growth in 2020 despite a global health crisis and subsequent economic recession, and the industry is anticipating the momentum to accelerate this year, powered by true demand rather than government incentives.

Sales of new energy vehicles (NEVs), which include all-electrics, plug-in hybrids, and fuel cell vehicles, increased 10.9% annually to nearly 1.37 million in 2020, the China Association of Automobile Manufacturers (CAAM) said on Wednesday, after sales fell 4% the year before. The industry group forecasted sales would accelerate to 40% year on year to 1.8 million in 2021; critically, Beijing’s subsidy program will no longer play a key role in driving demand.

Analysts have also weighed in positively on the growth prospects of China’s EV sector. The world’s largest EV market will likely maintain its upward momentum this year, with consumer confidence in EVs on the rise and with it, a willingness to pay for the technology, Paul Gong of UBS said Thursday during an online conference. The Swiss investment bank predicted China’s EV sales would rebound to more than 1.56 million units this year.

Tesla leads the way with price cuts

Electric cars are making their way into the mainstream. Tesla recently kicked off production of its popular Model Y electric crossovers in its Shanghai facilities, after churning out Model 3 sedans for a year. The company has managed back-to-back price cuts since it launched its entry-level model, which experts believed not only makes EVs from the US giant an economically viable choice but also boosts overall consumer awareness and excitement about EVs.

That said, analysts warned that the surprise launch of the China-made Model Y, priced 30% lower than its imported version, could be a short-term hit for NIO and Xpeng Motors, Tesla’s most prominent Chinese challengers. The American carmaker immediately sold out of its Model Y in China and has guided delivery windows in the second quarter for new orders. This followed Chinese media reports that a Tesla showroom in Shanghai sells nearly 200 vehicles per day after releasing its new pricing.  

Some industry watchers believe Chinese EV upstarts should follow suit and slash their prices in order to maintain momentum. In response, NIO and Xpeng bosses voiced confidence about their sales and no indication that they would discount pricing. NIO has gained traction especially among China’s growing middle-to-upper-class families, and delivered 43,728 SUVs last year. Xpeng, in a head-to-head competition against Tesla with its sedan, recorded deliveries of 27,041 vehicles in 2020.

The big race

Chinese carmakers are competing for the same mainstream, luxury customers as Tesla. They are not undercutting prices but rather focusing on value-added offerings—unusual for the Chinese auto industry. From the old guard to young startups, all the major players are racing to use the latest self-driving tech in their EV lineups as vehicle technology undergoes the most significant changes in a generation.

NIO, now emerging as a top contender, last week unveiled a top-of-the-line hardware suite capable of providing high-level autonomous driving functionalities for the ET7, its first mass-production sedan. Prior to that, Xpeng had announced a partnership with Livox, a Lidar maker backed by Chinese dronemaker DJI, in order to equip its 2021 production model with the technology—expensive for mass market use.  

Traditional carmakers are gearing up to rapidly follow Tesla’s lead. SAIC, Volkswagen’s manufacturing partner, and BMW’s Chinese ally, Great Wall Motors, announced plans this month to offer self-driving capabilities in 2021, with a hardware stack integrating multiple sensors and high-resolution map data to navigate road safety.

And yet, few have revealed detailed timelines for when their vehicles will be able to navigate driving complexities such as urban Chinese traffic. Tesla meanwhile announced that its fully self-driving system—a beta version of which is being tested by selected users—can handle both highway and urban driving duties. Tesla has so far maintained a significant lead when it comes to software and self-driving, using its vision-based approach which relies on lower-cost cameras and artificial intelligence for navigation and planning.

“NIO’s long-term strategy for self-driving is to be open to and able to utilize the latest technologies and push the industry forward with our strategic partners. The competition will result in several industry alliances and we will make sure to stay on the winner’s side,” (our translation) William Li, NIO CEO told reporters during an interview last week.

As a tipping point for mainstream EV adoption approaches, NIO and its peers are prying open a window of opportunity to beat Tesla. But time is limited, and every company is sprinting to catch up.

Electric vehicle maker NIO on Saturday released what the company called “its first autonomous driving model” which could prove a game changer in its competition against Tesla and German automakers in China’s premium auto market.

The company’s first production sedan, the ET7, features a top-of-the-line hardware stack for self driving, including 11 8-megapixel cameras, a dozen ultrasonic sensors, and a Lidar which scans the environment at a range of 500 meters.

All of those sensors will be powered by four of Nvidia’s latest AD processors, the Orin, each offering 254 trillion operations per second (or TOPS), versus Tesla’s 144 TOPs for its hardware version 3.0 self-driving computer. Together, the computing power of NIO’s so-called Adam Super Computer exceeds 1,000 TOPS, the highest for current production models worldwide.

The seven-year-old EV maker is now publicly confident about its chances of beating big auto names with this latest offering. Its sales forecast for the ET7 surpasses those of Tesla’s Model S and BMW’s 5 Series sedans, Chinese media reported Saturday citing CEO William Li. In a separate interview with reporters on Sunday, Li said the ET7 could be a big hit in the Chinese luxury market, and that sales will gradually meet its target after production ramp-up with suppliers.

With a price range from RMB 448,000 to RMB 506,000 (around $61,824 to $78,130) before subsidies, the new offering is expected to further differentiate NIO not just from its Chinese peers, but Tesla as well. The US EV giant this month began selling China-built Model Y crossovers with a starting price of RMB 339,900, a price 30% lower than its imported version, following a 25% reduction on the price of its basic version Model 3 last year.

NIO said that it will not take a similar approach, reaffirming its goal to become a mainstream, premium EV brand in China targeting BMW, Mercedes-Benz, and Audi. Tesla is China’s most dominant EV player by sales volume, with deliveries of 113,649 China-made Model 3 vehicles from January to November last year, according to figures from China Passenger Car Association.

Xpeng Motors, another Chinese Tesla challenger, is similarly looking to quickly grow its share of the market. On Thursday the automaker revealed plans to launch in 2021 a new sedan model equipped with a Lidar sensor. The Alibaba-backed EV company has delivered 15,062 of its first sedan, the P7, in six months from late June to December.

Updated: added six-month time frame for Xpeng’s unit deliveries in 2020 in last paragraph.

Walk into NIO’s joint-venture factory grounds in Hefei, capital of China’s eastern Anhui province, and you might mistake it for a sprawling tech campus rather than an auto manufacturing plant. The factory sits next to a cluster of elegant, low-slung glass buildings, surrounded by a large, well-kept lawn.

The campus has become somewhat of a local icon, attracting interest beyond its employees, partly due to NIO House, the company’s expansive, clubhouse-style retail space and gallery located next to the plant. As customers peruse vehicles in the space or wait for a latte in the showroom’s café, a crossover rolls off the production line every two minutes, with the assistance of more than 300 robots, from assembly lines to painting.

Two weeks ago, TechNode paid a visit to NIO’s Hefei plant to view the production process and understand how it works. The plant itself is a scene of bustling activity—giant robotic arms work on production lines to assemble vehicles, while human employees conduct inspections on the final assembly line. Each vehicle varies in model, color, and configuration.

“Sometimes, in a month, no two vehicles leaving the factory are exactly alike,” (our translation) a company spokesperson told TechNode reporters.

When the EV maker received earlier this year a $1 billion funding lifeline led by the Hefei government, the city—a lesser-known automaking hub known for churning out lower-end sedans and trucks—got a major boost in return. Hefei is readying itself to spearhead China’s goal of becoming the world’s leading EV producer and consumer market and NIO, its best-known EV firm, is poised to ride the wave.

Futuristic factory

Located minutes from the city’s downtown, the 16-acre joint plant is the size of nine football fields and employs more than 2,000 workers—mostly technicians from its partner, state-owned automaker JAC Motors, as well as several hundred NIO engineers. Much of the landscaping still looks new after three years of operation. The two companies reached an outsourcing agreement in mid-2016.

The factory is well-organized and spotlessly clean. TechNode saw high levels of automation throughout the factory, with robots of all shapes and sizes waving their arms in various workshops. NIO boasts that all major vehicle components are assembled in a completely automated process.

A seamless human-robot collaboration powers the highly flexible, mixed-model production process and a made-to-order car business that allows customers to configure their cars “in a free style.” NIO said there is more than 200,000 different configurations, around 3,000 of which most popular with its customers. “This [customization process] was highly demanding in terms of error proofing… but we finally did it,” (our translation) Victor Gu, general manager of NIO’s Hefei Advanced Manufacturing Center, told TechNode.

Manufacturing ramps up

After delivering a cumulative 70,000 EVs to customers, the company is preparing an expansion that will increase output by 50% in January, amid rising domestic demand for luxury EVs. “We’ve seen substantial order growth in the second half of this year, sometimes by 30% to 50% in just one month, which is far faster than conventional production acceleration. Normally you need at least two to three months to improve existing production equipment,” (our translation) Gu said.

The company is on track to reach in January a monthly production goal of 7,500 vehicles, Gu added, and has stepped up output by 50% to 30 SUVs per hour starting this month. The Hefei factory has production capacity to build 120,000 vehicles per year with two labor shifts, and is capable of a 25% expansion “without significant investment,” according to CEO William Li during an earnings call in August.

Meanwhile, Tesla has reportedly (in Chinese) planned to more than double the annual capacity of its Gigafactory Shanghai to 550,000 units in 2021. Another Chinese EV maker, Xpeng Motors built its second plant in the southern Chinese city of Guangzhou and will be able to produce 350,000 EVs by the end of 2022, according to a Chinese media report.

Carmakers are aggressively expanding production as Chinese EV sales accelerate, with strong momentum expected in the next few years. UBS analysts estimated in a Dec. 11 research note that Chinese EV sales will surge 55% to 1.6 million units next year and maintain double-digit annual growth to reach more than 5.5 million units in 2025.

EV push in Hefei

Analysts are echoing China’s grand ambitions to hold a commanding lead in the global EV market. In a finalized blueprint issued Nov. 2, the central government said that new energy vehicles (NEVs)—namely electric, plug-in hybrid, and hydrogen-powered vehicles—would account for 20% of total car sales in 2025. This is equivalent to 5.15 million units, according to last year’s sales figures, and Hefei is one of several municipalities which has committed to supporting this vision.

Auto production in Hefei accounted for around 3% of China’s auto sales last year. Now, the local government has set a 2025 output target of 1 million NEVs, according to a document released last month (in Chinese). The government has high hopes for local EV makers, which it expects to “gain influence in the global market.” Hefei is also planning to build a local supply chain with at least 10 “hidden champions“—relatively unknown but globally competitive companies, in segments such as battery, powertrain, and Lidar.

While not unattainable, such a goal will require a hard push, and the city is beginning within its own borders. In Hefei’s recent stimulus program, the city will exempt EV drivers from payment in public parking lots and allow them to travel in the city’s bus lanes during off-peak hours. The government is planning to electrify all public transit starting next year, while the taxi fleet will be 100% electrified by 2025.

Historically known for manufacturing display panels and electronics, Hefei is now considered one of the country’s emerging EV capitals, surrounded by major industry players such as Volkswagen and its two manufacturing partners. Moreover, the city has had its own EV darling, with its RMB 7 billion ($1 billion) investment in NIO in April.

Hefei is not the only city with EV aspirations. Guangzhou, capital of southern Guangdong province, in September promised to be listed among the three biggest EV manufacturing bases in the country by making at least 1.5 million NEVs in 2025. As one of China’s auto manufacturing hubs and a foothold for Japanese auto giants Toyota and Honda, the southern gateway city is determined to stay ahead, and recently doubled down on EV startup Xpeng.

More local governments are playing catchup. Xi’an, the capital of northwestern Shaanxi province last week said it will extend government subsidies and tax exemptions on EVs to the end of 2022. Meanwhile, in central China, buyers of fully electric cars in Wuhan have been eligible since May for an additional RMB 10,000 rebate on top of Beijing’s subsidies.

China Tech Investor is a weekly look at China’s tech companies through the lens of investment. Each week, hosts Elliott Zaagman and James Hull go through their watch list of publicly listed tech companies and also interview experts on issues affecting the macroeconomy and the stock prices of China’s tech companies.

Make sure you don’t miss anything. Check out our lineup of China tech podcasts.

This week, Tu Le from Sino Auto Insights joins the show to discuss the stratospheric rise that electric vehicle stocks have experienced this year, and what those firms will need to achieve in order to justify their share prices. They also discuss the major players on the software side of the EV equation. 

Hosts may have interest in some of the stocks discussed. The discussion should not be construed as investment advice or a solicitation of services.

Watchlist:

• Tencent
• Alibaba
• Baidu
• Bilibili
• Xiaomi
• JD
• Pinduoduo
• Meituan-Dianping

Hosts:

• Elliott Zaagman– @elliottzaagman
• James Hull– @jameshullx

Guest:                   

• Tu Le – @sinoautoinsight

Editor:

• Peter Isachenko

Podcast information:

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• Music: “Hey Ho” by Steve Jackson, Royalty Free Music

Share prices for electric vehicle makers Nio and Xpeng plunged more than 10% on Tuesday despite triple-digit annual growth in November deliveries. Investors were unimpressed with growth numbers bolstered by a very low base in 2019 when China’s EV sales sank by nearly half after government subsidies were slashed.

On the same day, news broke that Congress is likely to pass legislation this week forcing Chinese companies delist from US stock markets with new audit-oversight rules.

Nio delivered 5,291 electric crossovers in November, more than doubling the number in the same month last year, according to an announcement from Monday. However the EC6 drove growth with a 71% month-on-month rise while the ES8 and ES6 declined slightly from a month earlier. The growth rate slowed to 4.7% on a monthly basis.

The EV maker, backed by the government of Hefei city in eastern China, said that it is expanding the manufacturing capacity of its Hefei plant to meet order growth but did not disclose the number of order backlogs. The company in September reached a monthly capacity of 5,000 units on a single shift and aims to increase the number by 50% by January, CEO William Li said during its third-quarter earnings call.

Xpeng Motors recorded deliveries of 4,224 EVs in November, up by 342% year on year and 38.9% sequentially. A low base in 2019 and a dip in October a result of competition from Tesla’s China-made Model 3 boosted the comparisons. The Guangzhou-based EV maker sold 1,016 G3 sports utility vehicles in the same month a year ago, according to figures from industry group China Passenger Car Association. It forecasted deliveries of around 10,000 vehicles for the fourth quarter.

Li Auto reported November deliveries of 4,646 EVs after market close on Monday, growing 25.8% on a monthly basis. The Beijing-based EV maker, which began vehicle deliveries last December, said the number of deliveries as well as new orders in November surpassed 5,000 units.

READ MORE: Nio, Xpeng, Li Auto: your cheat sheet to China’s listed Tesla rivals

Shares of Chinese electric vehicle maker Xpeng Motors jumped 33.4% to $44.73 on Thursday after the company recorded positive results for the third quarter following bullish analyst comments. Now perceived as a strong challenger to Tesla, the EV upstart is gearing up for an ambitious goal: setting a benchmark for driver assistance technology in China that rivals will have to beat.

In the first report since its August debut on the New York Stock Exchange, the carmaker said it raked in RMB 1.99 billion ($293.1 million) in the third quarter of 2020, making for a 342% year-on-year surge in revenue, boosted by an uptick in vehicle deliveries. Quarterly deliveries grew 266% year-on-year to 8,578 units. That number included 6,210 P7 sedans—the company’s second mass production model directly targeting Tesla’s Model 3.

Xpeng CEO He Xiaopeng said during the earnings call that the company’s goal is to provide “the most advanced” assisted self-driving system in China. The dedication to in-house research and development on autonomous driving, he added, would be the key to build up core competencies and set it apart from its rivals. More notably, more than 98% of all the P7 vehicles delivered were equipped with hardware that supports software upgrades to the latest version of its advanced driver assistance system (ADAS) Xpilot.

The company’s quarterly losses grew to RMB 1.15 billion from RMB 776 million in 2019 but its gross margin shrunk to 4.6% from -10.1% for the same period. Operating expenses climbed 60% quarter-on-quarter, to RMB 1.8 billion. This is even more than the RMB 1.47 billion in expenses that Nio incurred in the second quarter. The rival Chinese EV maker has gained notoriety for its high cash-burning rate.

Boasting of being one of only two automakers in the world to have developed all core self-driving capabilities in-house, Xpeng is the only Chinese automaker taking the same approach as Tesla. However, the cost has been high and the payoff is uncertain, as it has taken much longer than initially promised by industry players to get mature self-driving technologies ready for the road.

How much of an advantage is Xpeng in targeting Tesla in a self-driving race? Here are some of the notable takeaways gleaned from analysts and Xpeng executives, including Wu Xinzhou, vice president of autonomous driving who recently spoke to TechNode.

Upcoming features

Xpeng is currently on track to release its semi-self-driving function, called Navigation Guide Pilot (NGP), in the beginning of next year. The feature enables a car to self-drive on urban highways, including navigating from a highway on-ramp to off-ramp, changing lanes, and taking exits.

The NGP technology is expected to handle real-world scenarios on the busy Chinese urban highways, taking a burden off the drivers, enabling users to remain engaged in driving but without their hands on the steering wheel all the time. NGP is similar to Tesla’s Navigate on Autopilot (NOA), that carmaker’s most advanced driver-assisted offering. Nio launched a similar feature in late September.

The company has set a goal to achieve “a single-digit number” of times per 1,000 kilometers (621 miles) on highways that drivers are required to take control of the vehicles, according to Wu.

On city roads, human intervention will still often be needed, as the company’s current ADAS features are unable to recognize traffic lights and handle requests such as lane merging. Still, a “future-proof” hardware and software architecture would allow the company to push forward more advanced features, Wu said.

Long-term benefits

In reply to an analyst during the earnings call, the CEO said the company plans to launch more driver-assistance features beginning in the second half of 2021. One of these features, called “autonomous following,” will be specifically designed for the complex traffic conditions in major Chinese cities. It will enable drivers to closely follow the cars in front of them to make sure that they are not left behind.

“ADAS is not going to be a major boost to overall sales in the short term. Most consumers are not overly focused on those functions if it’s not standard or part of a luxury package,” said Daniel J. Kollar, head of Automotive & Mobility Practice at consultancy Intralink Group, on Thursday. However, he said the internal focus on self-driving development likely would have long-term benefits as the industry moves towards commercialization of semi- and above-vehicle autonomy.

“China market consolidation will likely favor Tesla and a few surviving EV upstarts,” according to a Thursday report from Chinese online firm Tiger Brokers. The report noted, though, that the release of NGP and continuous roll-out of ADAS functions could “bring a high-margin software revenue stream throughout 2021.”

READ MORE: Tesla’s apprentice: Is Tesla bullying its own biggest fan?

Chinese electric vehicle makers looking to expand to markets in Europe need a localization strategy for the culturally diverse region, although adapting to the various demands of each country could put a strain on their finances, according to an industry expert.

“Europe, like Southeast Asia, is very diverse, and therefore a marketing strategy in Germany might not work in France and Italy. The complexity ramps up significantly for EV makers and that could be a drain on their capital,” said Tu T. Le, founder and managing director of business intelligence firm Sino Auto Insights, on Oct. 29 during the TechNode Emerge 2020 conference.

Chinese carmakers have long sought to expand overseas amid Beijing’s ambition to build a world-class auto industry, and the aspiration has now been passed to young EV makers.

Nio is stepping up its global expansion with plans to begin selling in some European countries in the second half of 2021, according to a Reuters report. A Chinese media outlet reported last week that it aims to open its first overseas showroom in Copenhagen, Denmark and sell 7,000 SUVs within the next two years. Nio declined to comment when contacted by TechNode on Thursday.

Meanwhile, Alibaba-backed Xpeng Motors beat its rivals to the punch with a late-September shipment of 100 crossovers to Norway which were scheduled for delivery in partnership with a local dealer starting this month. 

With deliveries of several thousand units per month, Chinese EV makers have yet to carve out a prominent position among traditional automaker giants in their home markets. Flush from US market listings and investments from local Chinese governments, the companies are looking to establish footholds in Europe, a market where even Tesla has faced tough competition.

The California-based carmaker is losing ground with its EV market share falling sharply to 13.5% in Western Europe in the third quarter from 33.8% in the same period a year ago, industry analyst Matthias Schmidt said in a report earlier this week. Meanwhile, local giants Renault and Volkswagen, the two largest EV makers in the region, grabbed market share from Tesla in the first three quarters of the year.

While investor sentiment sends Chinese EV stocks higher, the companies have a long road ahead to succeed in such a market. In an interview in June, Nio president Qin Lihong acknowledged the barrier for entry to Europe is high and its current approach to build a sales network in China may not apply in the West.

“Chinese EV makers really need to focus on individual European countries as opposed to looking at Europe as one big market. Moving forward, what they do with new funding and where they invest could be an important indicator of how successful they’re going to be,” Le said.

With China’s electric vehicle (EV) sector still reeling from a withdrawal of government support, three companies have emerged as viable challengers to Tesla in the world’s largest car market: Nio, Xpeng Motors, and Li Auto.

The three Tesla wannabes vary in their approaches and development.

Nio is the showiest, led by its charismatic founder, William Li Bin, and boasts the deepest pockets and boldest business plan. The company is known for its grand, customer-centric strategies ranging from a network of luxurious showrooms to a free battery swap service. It was the first of the three to deliver cars to its customers, in June 2018.

Alibaba-backed Xpeng has its targets set on self-driving technology, and began delivering cars just six months after Nio. Led by a former Alibaba executive, its vehicles have been criticized for bearing a close resemblance to Tesla’s—this is no coincidence.

The staid Li Auto is more practical, solving the most urgent issues of early EV adopters, and was the last of the three to begin deliveries, in late 2019.

Comeback story

While EVs may be exciting, investors have doubted the viability of the market as a whole and question Chinese EV makers’ prospects. Even in their home market, these companies are dwarfed by Tesla, whose locally built Model 3 is the country’s top-selling EV. Critics had viewed Nio’s prospects as gloomy, last year speculating that the company was insolvent and wondering if other companies might follow in its footsteps.

But the Chinese government is bolstering a surge in EV adoption and clean energy vehicles are expected to grab a quarter of total car sales by 2025. The state’s efforts to achieve this goal has benefited EV makers, including Nio. The company landed a $1 billion bailout from the government of Hefei, capital of China’s eastern Anhui province. As a result, its shares have rocketed a whopping 470% this year.

Nio, Xpeng, and Li Auto have reported surging deliveries that outperform legacy automakers. As investors reverse their attitudes towards Tesla’s Chinese challengers, we wonder whether they are well-positioned to sustain high growth rates into the future, and even more interestingly: which one has a stronger shot at becoming the “Tesla of China”?

Infection points

Chinese EV makers seemed to be teetering on the edge of collapse earlier this year after Beijing slashed purchase subsidies by half last year to cool the overheated industry. As a result, EV makers saw sales figures sink while cash burn rates stayed high.

Nio—then the poster child for China’s EV industry—saw its cash reserves disappear after years of aggressive spending on its retail strategy, which included building impressive showrooms across China. The market went from around 500 EV companies in early 2019, to fewer than 10 that have managed to deliver cars in 2020.

Then, the EV market quietly began to turn around. Growing consumer demand and extended government support have led to robust sales growth and narrowed losses. As the world’s biggest auto market recovers from the Covid-19 pandemic, analysts expect strong long-term growth for Chinese EV makers, with Nio and Li Auto potentially expanding their lead among the homegrown players.

Deliveries

Nio, Xpeng, and Li Auto recorded surging sales over the past two quarters, illustrating their improving performance. Analysts expect further top-line revenue growth in the second half of this year, as Tesla’s success in China draws more funding to help local EV makers grab a share of the market.

• Nio delivered a record 4,708 vehicles to customers in September, up 133% year on year. The company sold 12,206 vehicles over the summer, a new high in quarterly deliveries. Li Auto came in behind Nio, selling 8,660 of its own EVs over the same period.
• Growth may prove more difficult for Xpeng, which has just recently launched its first sedan, the P7. Some analysts have expressed concern over Xpeng’s near-term prospects considering that the P7 competes head-to-head with Tesla’s Model 3.
• Meanwhile, Tesla is seen as a growth driver for China’s EV market by increasing consumers’ awareness of these cars. The US carmaker this month launched a Model 3 with Chinese-made batteries, bringing the post-subsidy price down by almost 10%, Bloomberg reported. China’s biggest brokerage, Citic Securities, remains bullish, in a note (in Chinese) on Oct. 9 saying Tesla is stimulating the overall market.

Tackling money problems

As China’s EV makers produce and sell more cars, they have also been able to absorb costs more effectively. In the first half of the year, Nio and Xpeng narrowed their net losses by more than 50% compared with the same period a year ago.

• Li Auto improved its gross margin to 13.3% in the second quarter from 8% in Q1, impressing observers. Still, Bernstein analysts warned that future losses are inevitable as the company ramps up development of new vehicles and self-driving technology.

Meanwhile, Tesla’s success in China is good for the company—but also for its competitors. The US carmaker’s growth has local governments scrambling to bail out homegrown competitors.

• Nio’s $1 billion lifeline spurred some analysts to rethink their evaluations of the EV maker, though the company will continue to face pressure to raise more capital. UBS analyst Paul Gong in late August jacked up his target share price for Nio to $16.3 from $1 while upgrading the company to neutral from sell, according to a CNBC report, since the company’s liquidity concerns were “assuaged” by the successful fundraising.
• Xpeng followed soon after. In September, the company secured $586 million from the government of Guangzhou, capital of China’s southern Guangdong province. Analysts said that Beijing-based Li Auto could strike a similar deal with local authorities.

Strategies

Tesla’s Chinese rivals have taken vastly different approaches to gaining a foothold in the market. Nio, the most high-profile and best-financed of the three, had a market cap of $29 billion as of Oct. 14, almost equivalent to that of Xpeng and Li Auto combined (Update: These figures are slightly out of date—Nio’s stock jumped 22.57% in trading Wednesday following publication of a favorable report from J. P. Morgan, coming after this article was published in a newsletter). However, analysts are sharply divided over the company’s ability to improve margins because of its big budget, customer-centric business model, which includes offering battery swap facilities around China.

But Nio’s investment in its costly retail and community strategy appears to be paying off. Deutsche Bank said last month that a growing number of consumers recognize Nio as “a high-quality premium brand with best-in-class technology and customer service.” Meanwhile, Credit Suisse reportedly raised Nio’s price target to a new high of $25 when the company guided a record number of orders last month and expanded its monthly production capacity to 5,000 vehicles.

• Still, analysts warn that Nio sales are likely to fall off following the end of an offer of unlimited free battery swaps in October. Sales may have been artificially high if consumers sought to lock in purchases before the deadline.
• China International Capital Corporation (CICC) expects Nio’s net loss to narrow another 6.8% to RMB 4.4 billion in 2021. In a note (in Chinese) published in August, analysts said the company’s battery-leasing service could significantly lower the cost of EV ownership, while enhancing user experience with upgradable battery technologies.
• Still, bearish researchers including Bernstein think otherwise, warning that the launch of Tesla’s locally built Model Y next year could deal a blow to Nio’s sales.

Analysts are generally more positive about Xpeng and Li Auto, which have more conventional business models. These companies are more circumspect about spending, have strong growth potential, and have successfully tightened manufacturing costs.

J.P Morgan said Xpeng could be the potential winner in China with its in-house self-driving technologies and mid-to-high-end positioning. The company expects Xpeng to break even in 2023 and sell 345,000 cars a year by 2025.

• Targeting more frugal consumers than Nio and Li Auto means Xpeng could find itself locked in a price war against companies including Tesla and BYD, among others, Bernstein noted, adding that autonomous driving technology in general is still in its infancy.

While Nio is seen as the higher-tier brand and Xpeng the cutting-edge competitor, Li Auto’s pragmatic approach is viewed favorably. The company has distinguished itself from competitors by offering extended-range electric vehicles (EREVs), a bridge technology that addresses the pain points of owning a standard EV, including range anxiety and charging point bottlenecks.

Bernstein expects Li Auto to reach a gross margin of 13.5% this year and break even between 2022 and 2023. Goldman Sachs in August classed Li Auto as a “conviction buy,” predicting that the company’s stocks would outperform expectations, and estimated an annual sales volume of 445,000 vehicles in 2025.

• There has been some controversy over EREVs as a transitional technology, as well as doubt about how long it will remain relevant as EV technology improves. Nevertheless, Bernstein and CICC analysts said Li Auto could jump from EREVs to all-electric, since the latter is simpler from an engineering standpoint.
• Li Auto may break even earlier than its peers, while Nio remains a bigger threat to Tesla with a solid reputation in the high-end segment, something no Chinese manufacturer has accomplished before.

Market shifts

China’s EV sales have slumped since last year. Beijing’s subsidy cuts followed by the economic shock of the Covid-19 outbreak have left companies reeling.

More analysts have reversed their initially positive outlook for 2020, predicting a 20% drop in sales compared to last year’s 1.2 million deliveries. In August, the country’s top auto industry body, the China Association of Automobile Manufacturers (CAAM), lowered its 2020 EV sales forecasts to 1.1 million vehicles.

The situation could get even worse for EV companies, as legacy automakers including VW plan to release more EV models from 2022 onwards. This, coupled with Nio, Xpeng, and Li Auto’s relative inexperience in manufacturing, could make for a difficult next couple of years.

However, the transition from internal combustion vehicles to EVs is gaining speed. And Chinese firms are riding the wave of Beijing’s push to maintain its leadership as the world’s biggest EV market. Sales of all-electric and plug-in hybrids vehicles have to make up around one-quarter of total auto sales in 2025 in order to reach China’s mandated EV quotas, according to IHS Markit (in Chinese).

Consumer demand for EVs is expected to grow rapidly over the next few years due to increased affordability, with the high-end market seeing a rapid surge in sales. Around 1 million luxury EVs will be sold in China by 2025, according to Bernstein analysts. Half of this total will be made up of sales from smaller EV players like Nio, Xpeng, and Li Auto.

“China’s smart and electric vehicle market will enter the fast lane over the next 10 years, and the hand-to-hand fight between homegrown carmakers and overseas giants has started,” Citic Securities wrote in a note in July (our translation).

While many Wall Street analysts have taken bearish views of the field, Asia-based analysts are embracing the notion that young EV makers could co-exist with Tesla and even benefit from its China success. Nio and its peers collectively accounted for 14% of China’s EV sales in June, a significant rise from 7% a year ago, figures from the China Passenger Car Association (CPCA) show.

The road ahead

Speed is the key to success for homegrown Tesla challengers to carve out a position in the market and avoid getting squeezed out by established automakers.

Bernstein expects that the pace of sales network expansion will be a “critical determinant” for Li Auto’s performance in the coming year. As of Sept. 30, the company currently has 35 retail stores in 30 cities, only a quarter of those of Nio and Xpeng.

Time is also short for Nio and Xpeng to scale charging service networks, which IHS Markit sees as one of Tesla’s early competitive advantages in encouraging consumers to go electric. Nio last month announced a RMB 100 million ($14.9 million) initiative to build 30,000 fast chargers over the next three years. Xpeng is also ramping up with its lifelong free charging for first-time owners program, which launched on Sept. 26.

As costly projects come to life, Chinese EV makers need to continually raise capital to keep funding their ambitions. Any gaps in financing could mean being left behind.

“The combined market cap of Nio, Xpeng, and Li Auto is $50 billion, far below Tesla’s $450 billion. There is still great room for (valuation) growth,” Chinese media in August reported citing Wang Sheng, deputy head of global investment banking at CICC. (our translation).

Updates: An earlier version of this article incorrectly compared the price of Tesla’s Chinese-made Model 3 to competing autos. Additionally, Li Auto has 35 retail stores as of Sept. 30 according to an announcement released earlier this month, not 30. This article was also updated to reflect a jump in Nio’s stock price shortly after publication.

Xpeng Motors said it has reached an agreement securing a $586 million round of financing from a state-owned investment company, as the Chinese electric vehicle maker pursues further expansion with plans to build its second plant.

Guangzhou GET Investment Holdings Co., Ltd, a subsidiary owned by the Guangzhou Economic and Technological Development Zone, part of the city’s municipal government, will inject RMB 4 billion (around $586 million) into Xpeng to fuel its growth, the company said Monday.

As part of the agreement, around RMB 1.3 billion from the financing will be spent on the construction of a manufacturing base, scheduled to kick off production by late 2022, within the development zone.

Xpeng has been mass-producing cars since the second quarter of this year in its first wholly-owned facility located in in Zhaoqing, a city neighboring Guangzhou, according to the SCMP. Previously, the company contracted production to Chinese OEM, Haima.

“With the strong support from the Guangzhou government, we are confident we will execute on our strategic growth initiatives and deliver the highest quality products and services to meet our customers’ needs,” Xpeng CEO He Xiaopeng said in an announcement.

Headquartered in Guangzhou, capital city of southern Guangdong province, Xpeng is accelerating expansion domestically as well as overseas. The company recently kicked off its global sales initiative with a shipment of 100 G3 crossovers destined for Norway. The vehicles will sell at a starting price of 358,000 Norwegian Krone ($37,590). Sales are expected to begin in November, with help from a local dealer.

The EV maker is also attempting to boost domestic sales by offering lifelong free charging, an offer which started Saturday, to individual buyers from 24 major cities, including Beijing, Shanghai, Guangzhou, and Shenzhen.

READ MORE: Xpeng, next up in wave of US IPOs, attracts big-name investors

The company plans to expand its free charging offer more than 60 cities by year-end and the number will more than triple to 200 by the first half of 2021. Xpeng is the first Chinese EV maker to offer free lifetime charging, limited to 3,000 kilowatt-hours (kWh) of charging credits annually, for first-time buyers.

Rival Chinese EV maker Nio has offered a free battery swap service for customers with their first cars, but recently capped the service at six free swaps per month to new owners.

Currently a top seller in the Chinese EV market, Tesla has been capricious with its free supercharging policy. The US EV maker reportedly offered two years of Supercharging for free a year ago in an aim to boost Model 3 deliveries, after it put an end to free unlimited supercharging in 2018, according to a TechCrunch report.

Xpeng has lagged other major EV players in the Chinese market, delivering a total of 4,099 vehicles for the first seven months of this year. Nio handed over 17,702 vehicles to customers during the same period, followed by Li Auto at 12,181 units. Tesla currently dominates the Chinese EV market with 56,762 Model 3 sold during the same period, according to figures from China Passenger Car Association.

Shares for Chinese electric vehicle maker Xpeng Motors climbed more than 40% in its $1.5 billion debut on the New York Stock Exchange on Thursday.

Why it matters: Xpeng’s wild first day of trading reflects a growing demand for EV stocks, as investors become increasingly bullish on Chinese new energy vehicles. However, some analysts warned about the potential for an EV bubble.

• Xpeng’s first sedan, the P7, will be facing tougher competition from Tesla’s China-made Model 3, Bernstein analysts wrote earlier this week in a report. The US EV giant will reportedly release a cheaper version with LFP batteries this year.
• Meanwhile, JL Warren Capital questioned the competitiveness of the P7 compared with the Model 3, given their similar price ranges and the effects of their ongoing legal dispute over intellectual property theft.

Details: The six-year-old EV maker now has a market capitalization of nearly $15 billion, nearing the size of a number of giant Chinese automakers, including Toyota’s Chinese partner GAC Group and BMW’s partner, Great Wall Motor.

• The offering of 99.7 million American depositary shares was priced at $15 per share, higher than the target price range of $11 to $13. The stock opened at $23.1 and rose as high as $25. It closed up 41.5% at $21.22 on Thursday.
• There has been strong appetite for Chinese electric vehicle businesses in the US stock market, helped by Tesla’s strong performance, (our translation) said Wu Tianhua, founder and CEO of Chinese online brokerage firm Tiger Brokers, an underwriter for Xpeng’s IPO.
• Xpeng, backed by Chinese tech giants Alibaba and Xiaomi, followed domestic peers Nio and Li Auto in listing in the US. The three companies now enjoy a market cap range between $15 billion and $23 billion.
• Nio has so far delivered a cumulative 49,615 vehicles as of July over a two-year period. Xpeng began mass deliveries in February 2019 and has delivered a total of 20,707 units, and Li Auto has cumulative deliveries of 12,989 since December. All three are still operating at a loss.

Context: Unlike its counterparts, Xpeng lays claim to a strong capability in developing self-driving technology, positioning its automated driving system Xpilot head-to-head with Tesla’s Autopilot.

• In the latest IPO filing, the company said it is planning to roll out early next year the Xpilot 3.0 version with functions for autonomous lane changing on highways. However, small-scale testing will begin among customers as early as October, according to multiple people familiar with the matter.
• P7 currently has a post-subsidy price range of between RMB 229,900 and RMB 349,900 ($33,470 to $50,945). The standard-range China-made Model 3 is priced at RMB 271,550 after purchase subsidies.
• Tesla in March 2019 filed a lawsuit against a Xpeng employee for allegedly stealing trade secrets related to its automated driver assistance software Autopilot. Xpeng Motors is a third party in the suit.

Xpeng Motors is priming for a public listing in New York where it could raise up to $1.1 billion from a number of high-profile backers, including Chinese technology giants Alibaba and Xiaomi.

Why it matters: Xpeng’s listing is timed to benefit from strong investor appetite for electric vehicle stocks, a spillover effect from Tesla’s massive run this year as it ramped up production of China-made Model 3 sedans.

• The initial public offering (IPO) would also be a test of US investor demand for Chinese stocks amid harsher financial scrutiny and rising tensions between Beijing and Washington.
• Xpeng would be the third Chinese EV maker to list in the US after Nio and Li Auto—currently the most potent local Tesla challengers, backed by Chinese tech giants Alibaba, Tencent, and Meituan, respectively.

Details: Xpeng Motors is offering 85 million American depositary shares (ADS) at $11 to $13 each, according to a Friday filing to the US Securities and Exchange Commission. The company said each share will represent two Class A ordinary shares.

• The high end of the range gives the EV maker a valuation of $9.17 billion. After the closing bell on Friday, Nio closed with a market cap of $16.7 billion and Li Auto with $12.5 billion.
• Chinese e-commerce giant Alibaba, its biggest external shareholder with a 14.4% stake, will purchase up to $200 million in the share sale, followed by US hedge fund Coatue with an expected subscription worth $100 million.
• In the meanwhile, Primecap Management Company, a US investment firm that has held Tesla stocks since 2011, also indicated interest in purchasing $100 million worth of shares in the offering.
• California-based Primecap is currently a Tesla shareholder with a 0.7% stake reduced from 1.8% in 2012, which accounts for 1.22% of its total portfolio, according to online research platform GuruFocus.
• Sovereign wealth fund Qatar Investment Authority will subscribe for $50 million worth of shares, after joining in its $800 million Series C+. Xiaomi, Hong Kong-listed smartphone maker and a long-time backer, will also buy up to $50 million worth of shares.
• He Xiaopeng, CEO of the company and a former executive at Alibaba, will retain 31.6% of the business and 58.9% of the voting power, according to the amended registration statement.

Context: Guangzhou-based Xpeng Motors is currently the only new EV maker that has delivered both electric sedan and SUV models to customers in China.

• Xpeng has delivered a total of 20,707 EVs as of July starting in late 2018, mostly its first production model, the G3, compared to Nio’s 49,615 units which began delivery four months earlier.
• It has sold 1,966 units of its second EV model, the P7, an electric sedan boasting a driving range of 706 kilometers (439 miles) and a proprietary assisted automated driving system XPilot, in the three months ended July 31.
• The company plans to launch its third and fourth models, one sedan and one crossover, based on its existing EV platforms by the end of 2022, according to the prospectus.

Vehicle fires involving electric cars from Xpeng and Li Auto are sparking quality concerns a year after a series of blazes involving Tesla and Nio cars drew widespread media attention.

Why it matters: The incidents come just as Xpeng Motors and Li Auto debut on US stock markets, highlighting issues around EV quality control.

Details: An Xpeng G3 crossover caught fire in the southern Chinese city of Guangzhou on Tuesday, Xpeng Motors reported on microblogging platform Weibo. Local firefighters extinguished the blaze and there were no injuries.

• An initial investigation showed that the vehicle battery pack was severely damaged from bottom impact, which Xpeng said may have caused the fire.
• The brand name of the battery was not disclosed. Xpeng started equipping its cars with the NCM 811 batteries from battery giant CATL in 2019, and had earlier sourced batteries from two smaller domestic battery makers.
• The so-called NCM 811 battery, also used in Tesla and Nio EVs, contains 80% nickel, 10% cobalt, and 10% manganese. It is capable of a longer driving range compared to a lithium iron phospate (LFP) battery, but carries a higher thermal runaway risk.
• The incident was the first combustion report for Xpeng. A company spokeswoman declined to comment.
• A week ago, Li Auto said one of its Li One plug-in hybrid vehicles caught fire on an expressway in the southern Chinese city of Zhaoqing. Two passengers were hospitalized and under observation, according to a company announcement (in Chinese).
• The Nasdaq-listed EV maker blamed the accident on what appeared to be iron bands snagged by the speeding SUV that smashed through the fuel pipe, sparking the fire. The final results from the investigation have not been revealed.
• This was the second report from Li Auto about a fire involving one of its vehicles. There have been a series of quality complaints ranging from brakes to suspension problems over the past few months. Multiple car owners have requested additional plates to protect the vehicle chassis on the company’s online community forum.

Context: Xpeng is the latest in a number of Chinese EV makers which have filed for a US initial public offering, following rivals Nio and Li Auto. The Alibaba-backed company is looking to build up its war chest amid a stiffer competition in its home market thanks to Tesla.  

• Li Auto delivered 2,516 units in July and Xpeng delivered 1,641 EVs to customers during the same time period. Together, the two EV makers have produced less than half the number of China-made sedans that Tesla has delivered, according to figures from China Passenger Car Association.

Electric vehicle (EV) startup Xpeng has raised an additional $300 million as part of the company’s Series C+, bringing the total amount raised in the round to $800 million.

Why it matters: The deal reflects growing optimism in China’s electric vehicle market after a disappointing second half of 2019. Sales of electric cars plummeted after China’s government cut purchase subsidies by around 50% in mid-2019.

• The industry also took a significant hit in the first quarter of 2020 as a result of the Covid-19 outbreak in China. Just 11,000 new energy vehicles were sold in February, down from 137,000 in December, according to figures from the China Passenger Car Association.

Details: Based in the southern Chinese city of Guangzhou, Xpeng is raising an additional $300 million from new investors including the Qatar Investment Authority, the Middle Eastern nation’s sovereign wealth fund, Reuters reported, citing sources. E-commerce giant Alibaba also contributed to the expanded fundraising, according to CNBC.

• Earlier this month, Xpeng announced its $500 million Series C+, with backing from equity investment firm Aspex Management, US tech hedge fund Coatue Management, global private equity firm Hillhouse Capital, and Sequoia Capital China.
• The company may expand the latest fundraising further, sources told Reuters.
• An Xpeng spokesperson declined to comment on the expanded fundraising when reached by TechNode on Monday afternoon.
• With the addition of the new investors, Xpeng’s Series C is now worth $800 million.
• Xpeng is reportedly also pursuing a US IPO after confidentially filing in June, Chinese media reported.

Context: US EV maker Tesla has boosted investor sentiment in China’s EV sector, as a result of the company’s strong deliveries and an expected surge in profits.

• On July 30, rival EV maker Li Auto went public on the Nasdaq. The company priced at $11.50 prior to its IPO, higher than its expected range of $8 to $10. The company closed up 43% at the end of its first day of trading.
• Xpeng raised $400 million in Series C funding late last year, bringing in new investor Xiaomi.

Chinese electric vehicle maker Xpeng Motors on Monday announced it has signed agreements with multiple investment firms for a cash infusion of around $500 million in a Series C+, further signaling a return of investor confidence in the turbulent Chinese electric vehicle market.

Why it matters: The deal reflects a growing optimism from investors that electric vehicles are closing in on competition against gasoline cars thanks to a continuous increase in driving range and lowering ownership costs.

Details: Six-year-old Xpeng Motors that it will receive around $500 million in an extended Series C from institutional investors including Asian equity investment firm Aspex Management, US tech hedge fund Coatue Management, global private equity firm Hillhouse Capital, and Sequoia Capital China, according to a statement sent to TechNode. The latest valuation was not disclosed.

• This comes less than a year after the Guangzhou-based EV startup closed its $400 million Series C from strategic investors including smartphone giant Xiaomi with a valuation of around $4 billion.
• Last month, reports began circulating on Chinese media that Xpeng had secretly filed to float shares on a US stock market with J.P. Morgan the lead underwriter. The company declined to comment.
• The EV maker, also backed by Alibaba, has ramped up efforts in the competition against Tesla with the release of its first sedan, the P7, boasting a range of 706 kilometers (439 miles) and a price one-third lower than the Model 3.
• Nationwide deliveries began late last month. A spokeswoman declined to reveal the number of orders. In November, the company said that more than 15,000 customers had placed pre-orders with refundable deposits.
• One of Tesla’s most high-profile challengers in the Chinese EV market, Xpeng is planning to roll out over-the-air software updates for its assisted driving system XPilot in the fourth quarter, providing self-driving functions including navigating on highways and valet parking.

Context: Thanks to Tesla’s strong deliveries and expected growth in profits, investor enthusiasm is now spilling over into Chinese EV upstarts.

• Beijing-based Li Auto is accelerating itspublic listing on Nasdaq which is expected to happen later this month. The company is rumored to have raised up to $1 billion, the most among US-listed Chinese companies this year, according to Chinese media reports.

While China’s overall auto sales have rebounded strongly following the Covid-19 outbreak, the electric vehicle market cratered with a double-digit decline in May.

New energy vehicles (NEV) sales dropped 23.5% year on year to 82,000 units in May, according to figures from the China Association of Automobile Manufacturers (CAAM), while total auto sales leapt 14.5% on an annual basis. The decline continues a nearly year-long dropoff since Beijing announced in July cuts in EV subsidies of up to 60%. The world’s biggest EV market recorded its first-ever annual decline last year, with 1.2 million units sold.

China’s top industry regulator in 2017 set a 2020 goal of 2 million EVs, to reach 20% of new car sales by 2025. Whether China will be unseated as the world’s biggest electric vehicle market seems unlikely, yet bleak auto sales figures are a stark reminder of the chasm between Beijing’s near-term goals and actual sales.

TechNode’s recent conversations with analysts show a sharp divide on that question as well as their views on government subsidies and consumer demand. Let’s look at their estimates first.

Higher prices, tighter budgets

China’s EV adoption is strongly tied to government incentives. The central government began slashing subsidies by up to 60%, or RMB 27,000 per unit, on electric cars late last June. The market has been on a roller-coaster ride as a result, from 80% year-on-year growth to falling into a months-long slump.

Beijing in April announced that it will extend EV subsidies until the end of 2022 in an effort to stem further collapse, though they will be 10% lower in 2020 than 2019 levels, 20% lower in 2021, and 30% lower in 2022. This means for an EV with a driving range of more than 400 kilometers (around 250 miles), the qualifying subsidy is RMB 20,000 (around $2,820) compared with RMB 55,000 at the peak in 2016—leaving many to doubt its effectiveness.

China International Capital Corp (CICC), however, sees value even in a downsized subsidy, saying in an April report that it will have a calming effect by “stabilizing consumer expectations” (our translation). UBS analyst Paul Gong agreed, adding that additional financial incentives from local governments would help with market recovery.

Still, CICC recently cut its 2020 EV sales forecast by a third, to fall between 1 and 1.5 million units, on account of the shattering blow Covid-19 has dealt to economies across the globe. UBS estimated annual sales will continue at the 2019 level this year, without giving specific figures.

The subsidy crutch

The NEV sector is still not a market that can thrive without subsidies, global consultancy AlixPartners wrote in a recent report. It pointed to weak overall demand for autos amid the lowest annual economic growth China has seen in decades due to the pandemic.

This holds even more true for the less affordable electric car relative to traditional gasoline engine vehicles. The EV price differential is at least $8,000 more than an equivalent model with a gasoline combustion engine, owing to the expense of the car battery. This difference will probably deter Chinese consumers who are now more price sensitive, pressured by higher mortgages and lower incomes, AlixPartners Managing Director Stephen Dyer told journalists on June 9 during an online briefing.

Meanwhile, Bernstein estimates 67% of car sales in China last year came from models with a sticker price below RMB 150,000, “far below the prices of most EVs excluding subsidies,” analyst Robin Zhu wrote in a March report. Cui Dongshu, secretary general of China Passenger Car Association (CPCA), expects that sliding oil prices will make internal combustion vehicles more attractive to customers.

UBS, however, maintained that consumer demand for all autos is recovering as the virus outbreak shows signs of slowing. According to two surveys by UBS Evidence Lab, around 27% of 1,000 respondents from across China expressed their intent to buy cars in April, compared with 17% in February when the number of cases started climbing.

Such latent demand will boost market growth in the following months, making up for the loss in sales volume in the first six months of this year, analyst Paul Gong said at a media event on June 4. The year-on-year growth rate could be “pretty positive” in the coming months given the low base in the second half of 2019, and as competitive EV models enter the market, he added.

JP Morgan analysts also expect EV market penetration will continue. The cost of compact EVs is expected to reach parity with that of conventional vehicles as early as 2021, and larger EVs with bigger battery packs in 2024.

Competition for share

“All OEMs—foreign and local—are pushing out new models to the market to grab shares in this rapidly growing opportunity and at the same time comply with China’s strict emission requirements,” JP Morgan analyst Nick Lai wrote in a report.

Still, analysts expect Chinese EV brands will face more intense competition as foreign automakers accelerate local production in China. Tesla continues to expand its Shanghai plant and Volkswagen is eyeing the market with two jumbo investments.

Tesla has cemented its position as a market leader by delivering 11,095 China-made Model 3 vehicles in May, making it the top-selling EV model for the month, according to CPCA figures. Tesla challengers Nio and Xpeng Motors countered with new models to be delivered later this year.

Meanwhile, local EV major BYD made a big move, launching in March its new blade battery with 50% higher energy density and a 30% reduction in battery cost. Bernstein and Credit Suisse expect BYD’s profitability will improve on a sequential basis, as the local EV major will soon begin mass production of the battery as well as deliver the “Han,” the first EV model equipped with the battery, in mid-2020.

A federal judge in California on Wednesday rejected a request from US electric vehicle giant Tesla Motors to access grand jury materials related to a former Apple employee charged with stealing trade secrets before joining Chinese electric vehicle maker Xpeng Motors.

Why it matters: The ruling is the latest chapter in the legal battle between Tesla and an employee of Xpeng, a Chinese company that has been involved in two protracted legal disputes in the US over trade secrets.

• Tesla in mid-January subpoenaed XMotors, Xpeng’s US business unit, in bid to gather evidence in its civil lawsuit against Cao Guangzhi, a former Autopilot engineer and now Xpeng employee charged with misusing Tesla’s intellectual property for the benefit of his new employer.
• Tesla requested access to a wide array of materials such as the entire repository of Xpeng’s autonomous-driving source code and clones of its senior executives’ hard drives.
• The US EV giant also sought court records related to a criminal charge against former Apple employee Zhang Xiaolang for stealing trade secrets while switching jobs and joining Xpeng in May 2018. Xpeng terminated Zhang’s employment after the criminal charges were filed.

Details: US District Court Judge Vince Chhabria on Wednesday denied Tesla’s request to access grand jury materials related to Zhang and information related to Zhang’s conduct, saying the relevance of those materials to Tesla’s claims against Cao was “speculative and tenuous.”

• “Discovery of this information is not proportional to the needs of this case at this time, especially given the potential for interference with an ongoing criminal prosecution, a concern raised by the US Attorney,” Chhabria wrote.
• Xpeng also does not need to provide images of the work computers of several executives including CEO He Xiaopeng and president Brian Gu since they are employed by its Chinese operation Xiaopeng Motors, rather than by XMotors.
• However, the Chinese EV startup must produce its self-driving source code and related log files as requested by Tesla, which requested those dated from November 2018 through the present. Cao joined XMotors in January 2019 and was placed on leave when the investigation began two months later.
• The two companies will discuss using a neutral third party to review the source code from both companies.
• “The ruling highlights Tesla’s gamesmanship and use of discovery as an improper measure to stop with its competitor from competing successfully in the self-driving industry,” Xpeng said in an announcement.
• Tesla did not respond to request for a comment.

Context: Alibaba and Xiaomi-backed Xpeng is running at full tilt to produce and deliver on time the carmaker’s first electric P7 sedan, a model in direct competition with Tesla’s made-in-China Model 3 with assisted driver functions including highway lane-changing and valet parking.

• The Guangzhou-based EV maker last month was granted a government license to produce cars in a revamped plant which it previously acquired from a local automaker in the southern Guangdong province.
• Delivery of its P7 cars is scheduled for late June but the latest version of its advanced driver assistance system Xpilot will be available in the fourth quarter of this year, the company said.

Read more: Tesla’s apprentice: Is Tesla bullying its own biggest fan?

Chinese electric vehicle startup Xpeng has never been shy about its Tesla fandom.

Xpeng founder Henry Xia took Musk up on his offer. That same month, he and two friends started their own autoworks in Guangzhou.

Tesla v. Cao

Today, Tesla’s attitude has changed. It argues that Xpeng crossed the line from imitation to theft. Tesla is suing its former employee Cao Guangzhi, alleging that the engineer misappropriated code for its Autopilot driving assistance function before leaving to take a job at Xmotors, Xpeng’s US-based sister company. At stake is Xpeng’s reputation, the limits of competition, and the ability of Chinese companies to hire leading engineers from Silicon Valley.

As TechNode wrote last week, Tesla is using the case against a former employee to justify a broad hunt through a competitor’s files to find proof of its IP theft suspicions.

Neither Xpeng nor Xmotors has been named in the lawsuit, but Xmotors has been listed as a third party in the proceedings. The company has argued that Tesla’s moves are aimed at “bullying and disrupting” it.

Tesla has asked a San Francisco court to allow it access to its competitor’s entire repository of autonomous driving code and clones of its executives’ hard drives—including those of He, its CEO. A hearing on the matter was due to take place on May 7 in a San Francisco federal court, but has been delayed until May 28.

If Tesla wins its motion, Xpeng will have to hand over much of its most sensitive information. Even if Tesla ultimately loses the lawsuit, it would send a message that engineers who switch jobs to Chinese employers are automatically suspected, which could chill recruiting for years.

How did it get so bad?

TechNode reviewed public court documents, spoke to industry insiders, interviewed Chinese lawyers about the case, and attempted to reach Cao’s friends. What emerged was the story of a tragic relationship—a group of Chinese EV enthusiasts who loved Tesla so much they tried to become it, and an American company that went from nurturing competitors to accusing them of theft.

Tesla and Cao’s attorneys did not respond to TechNode’s requests for comment.

Bidding for talent

To compete in self-driving technology, Xpeng began recruiting engineers from top Silicon Valley companies, including Tesla and Apple, in 2017. For years, Tesla engineers have been sought after as some of the most capable leaders in the future of driverless mobility. These employees have been chased by US tech companies hungry for self-driving talent, as well as by Chinese tech firms with US operations.

When Xpeng hired Gu Junli, a young engineering manager from Tesla, they made her vice president of autonomous driving. The promotion allowed Gu to jump three ranks up from her previous job—equivalent to 10 years in the career of a typical engineer. Xpeng also issued a press release boasting that she was a “leading figure” in Tesla’s machine-learning technology.

But Gu’s Tesla resume did not automatically lead to success. One year after joining the company, Chinese media reported, she was missing her targets. Two persons close to Xpeng told TechNode she was just too inexperienced to build a team that could compete with the giants in a field like self-driving.

In December 2018, Xpeng replaced Gu as head of the team with a hire from Qualcomm, Wu Xinzhou. It was Wu who would later recruit Cao from Tesla.

Gu was given another job as a leader for development of “advanced” technologies, but was later sidelined. She left the company in March.

Sincerest form of flattery

In 2018, Xpeng launched its first production vehicle, the G3. At the time of launch, the vehicle had a range of around 350 kilometers and shipped with driver assistance features. Observers noticed several similarities between the G3 and Tesla’s Model X and Model S—from the front profile of the car to the interior dash design.

This influence came as no surprise, given how open Xpeng had been about where it had drawn its inspiration.

Xpeng had a lot in common with the Chinese smartphone giant Xiaomi, one of the company’s recent investors. When Xiaomi began operating, it took many of its cues from Apple—so much so that it was often called an Apple clone. The company adopted the same minimalist aesthetic as its US counterpart, but quickly began developing its own signature line of devices, from smart home equipment to computers, clothing, and cookware.

But copying an idea is not against the law. “The reason Apple won’t sue Xiaomi is that, while their products look similar, they don’t necessarily constitute copyright infringement,” Fang Chaoqiang, a lawyer at Beijing-based Yingke Law Firm, told TechNode.

Xiaomi is the poster child for an argument that critics of IP law have made for years—if the Chinese company had not been able to learn from Apple, dozens of innovative products would never have come on the market.

Allegations emerge

If Tesla took issue with the G3’s similarities to its own vehicles at the time of launch, it didn’t say much. In Musk’s 2014 patent blog post, he wrote that manufacturers of gasoline-fueled vehicles were the company’s main competitors, not rival EV companies. Indeed, the 16,608 vehicles Xpeng shipped in 2019 were a drop in the ocean compared to Tesla’s sales.

But after US-based Xpeng engineer Zhang Xiaolang was arrested by the FBI for stealing Apple IP while switching jobs in July 2018, rumors simmered that the Chinese company was cheating to catch up. Zhang was arrested on July 7, 2018, after Apple accused him of downloading sensitive information before he resigned to take a job with Xmotors in China.

Xpeng leaders deny that they encouraged Zhang to misappropriate Apple’s IP. The company added that there is no evidence Zhang transferred sensitive information from Apple to Xpeng, and that the engineer’s contract has been terminated.

The fallout for Xpeng’s reputation was immediate. Now, the company faces challenges in hiring talent, as US-based Chinese engineers have reportedly distanced themselves from the company.

In the 29 reviews about Xmotors to be found on job search website Glassdoor, three employees addressed concerns that their career prospects might be affected by these lawsuits, since “no one wants to hire someone from a company with all the public news about FBI investigation.”

An Xpeng spokesperson told TechNode that the company has not had trouble hiring new engineers in the US or China.

Cao, then an engineer at Tesla, condemned Zhang, the former Apple employee, in text messages that have since become public in the course of the lawsuit. Zhang’s case would cause a “bad impression on us Chinese,” he said, according to translated message transcripts.

Xpeng hires Cao

When Wu Xinzhou, Xpeng’s new self-driving team leader, interviewed Cao about a job as “head of perception” in late 2018, the Tesla employee was concerned about how the job switch would look. Cao later told the court that Wu had soothed his worries by saying Xpeng “did not get involved at all” in Zhang’s actions.

Cao was a high-flying computer vision expert and a natural fit for the perception job. With both a bachelor’s and master’s degree in electrical engineering from Zhejiang University—one of China’s top schools, which houses an entire startup accelerator in an ultramodern egg-shaped building at the center of campus—and a Ph.D. from Purdue University, he’d worked on medical applications of computer vision at GE and Apple before working at Tesla.

Cao joined Xpeng in January 2019.

Just two months later, he was in court.

Xpeng’s work on autonomous driving had begun long before Cao joined them. The company was developing its driver assistance technology as far back as 2015, three years before its first mass-produced vehicle was released. Level 2.5 autonomous driving capabilities were included in the G3 upon delivery in early 2019. Xpilot includes assisted lane changing, cruise control, lane centering, and automatic speed limitations.

But in December 2019, Musk aired suspicions on Twitter that Xpeng was copying Tesla’s code. When a Twitter user with the moniker “The Cyber Pope of Muskanity” suggested that Xpeng had stolen Tesla’s software, Musk replied, “That’s certainly our impression.”

When Cao left Tesla in January 2019, the company suspected another engineer, surnamed Zhang. In addition to a shared nationality, both engineers had previously worked at Apple—though Cao has testified that they worked in separate divisions located at different buildings and campuses.

When Tesla found out that Cao had copied files to a personal computer, they decided that he had taken the code for his new employer. In March 2019, the company filed a suit against Cao, formally accusing him of misappropriating code by copying it to his personal iCloud account.

Fool me twice?

Tesla is trying to paint Xpeng as a repeat offender that poached engineers in order to gain access to IP, said a Chinese lawyer who spoke to TechNode under the condition of anonymity. Successfully linking the cases could have serious reputational implications for Xpeng.

Tesla admits that it can’t prove the theft.

Unlike smartphone design, in the world of self-driving software, it’s difficult to tell if someone has copied your product without actually getting your hands on the code. Tesla claims, in essence, that the fact that Cao had the code when he left Tesla is so suspicious that they should be allowed to rifle through Xpeng’s files in an effort to prove that the Chinese company used it.

Tesla’s case is built heavily on parallels between Cao and Zhang, but the company argues that its document requests will allow it to find proof. Cao has admitted to downloading files to a personal computer, but claims it was common practice at the company.

Other evidence submitted by Tesla is weaker. For example, an edited translation of Cao’s text message exchange about the Zhang case made it appear that Cao was speculating about how much money Zhang had gotten from Xpeng—when in fact this message was sent by his friend. Cao had responded by condemning Zhang’s actions.

Tesla’s case against Cao and the US authorities’ move to indict Zhang are two independent lawsuits, at least for now, said Lin Hang, a lawyer at Guangzhou-based F&P Law Firm. There are different parties involved in each case; moreover, Cao’s is a civil case, while Zhang’s is criminal. Xmotors is a third party in both. 

Lin questioned the grounds of demonstrating a pattern of misconduct by Xmotors in its operations and recruiting. “You can’t just say C stole from D because A allegedly stole from B,” he said.

Another counsel, who wished to remain anonymous, was pessimistic about Xpeng’s chances, as the US has increasingly treated all Chinese companies as potential IP thieves. Tesla’s move against Xpeng may trigger more US tech companies targeting Chinese competitors for intellectual property theft, he said.

Whether he wins or loses, Cao’s life has been permanently changed. Xpeng placed him on administrative leave “until further notice” in March 2019, when the investigation began. His position has since been filled by a subsequent hire. The damage to his reputation will likely last much longer.

A non-compete by any other name …

In 2014, Musk wrote that Tesla’s leadership was defined by its ability to “attract and motivate the world’s most talented engineers.” Nowadays, he’s less willing to compete for talent.

In its complaint against Cao, Tesla cited Xpeng’s pursuit of its engineers as part of a pattern of “copying,” writing that “at least five former Tesla Autopilot team members including Cao have gone to work for Xmotors.” Xpeng, and other Chinese EV startups, are known in the industry for recruiting Chinese employees from US tech giants with highly competitive salaries and stock option plans.

If Tesla wins its suit, it could have broad effects on the market for tech talent, scaring off engineers who had been considering working for Chinese companies.

Hiring away a rival’s staff is a normal part of competition, and Silicon Valley was built on disloyal employees. In the US, California is the only state that bans non-compete agreement—contracts are common throughout the rest of the US—and this fact is often credited with spurring the state’s culture of entrepreneurship.

Nevertheless, as tech giants turn into corporate behemoths, they’ve taken a more possessive attitude in regard to their employees—and the US’s Department of Justice (DOJ) has taken notice. In 2010, the DOJ alleged that companies including Apple, Adobe, Intel, and Google had made a deal not to recruit each other’s employees, limiting competition in the labor market and holding down salaries for coding talent. The measures effectively barred rivals from reaching out to potential employees at competing companies to offer them new positions.

In 2011, the companies settled with the DOJ, promising to end the practice. Subsequently, in 2015, they agreed to pay $415 million to settle a related class-action lawsuit in order to compensate around 64,000 employees.

While tech firms can’t use non-compete agreements to retain their employees, if Chinese engineers who start jobs at rival companies face probes or life-altering lawsuits, they are effectively bound by fear of repercussions from moving to better jobs.

Is Xpeng ready to leave the nest?

For most consumers, an Xpeng is still just a cheaper version of a Tesla. But as the company fights in court to prove that it’s not stealing IP, it is making moves in self-driving in an effort to find its own identity.

Xpeng has seen several changes in its self-driving team since Tesla began its legal offensive. Gu, the young Tesla hire who previously led autonomous driving, finally left the company this March due to “personal career and family reasons,” after reportedly being idle from any management roles for a couple of months.

Meanwhile, Cao’s position has been filled by Wang Tao, the co-founder of Drive.ai, the self-driving startup acquired by Apple in June 2019, according to Xpeng slides that were shared with the media last year.

Xpeng is forging on. In March, the company launched its first electric sedan model, the P7. The vehicle is equipped with Xpilot 3.0, Xpeng’s latest driver assistance system. The EV startup is attempting to follow the path set by backers Alibaba and Xiaomi—from copycat to Chinese original. It’s promising self-driving technology software and hardware that is different from Tesla, with executives claiming that its systems are optimized to better handle China’s crowded roads.

“I strongly believe that P7 will provide the best driver-assist experience in China,” Xpeng’s He said during the sedan’s launch event last month.

As the legal battle between Tesla and Xpeng heats up, the P7 could allow Xpeng to show that its days of imitating Tesla are over. But the stakes are high. EV leaders expect bankruptcies to dominate the headlines. Li Xiang, the founder of rival EV firm Lixiang, recently warned: “Given the hardship in the Chinese auto market, there is a possibility that only three out of more than 100 EV startups could survive … and I hope Nio and Xpeng can be with us.” It may all come down to a judge in San Francisco.

In an unprecedented move, US-based electric vehicle maker Tesla has made a request to examine a competitor’s entire repository of autonomous-driving source code and senior executives’ hard drives as part of a lawsuit against a former employee.

Cao served as head of perception at XMotors, though he has been on leave since the investigation began. Tesla alleges that Cao copied Autopilot source code during his time at Tesla, and that the software could have benefited Xpeng.

Now, one year after filing a suit against the Chinese engineer, Tesla is attempting to gain access to a vast array of Xpeng’s internal communications and proprietary code in a push to indict Cao. Court documents reviewed by TechNode reveal that Tesla is taking an extraordinarily aggressive approach to the dispute with its smaller rival.

Tesla argues that Cao’s arrival at XMotors mirrors that of former Apple engineer Zhang Xiaolang, who was arrested in the US on charges of stealing proprietary information related to Apple’s self-driving car project before joining XMotors.

Xpeng is hardening its stance in the escalating legal battle with Tesla in an uncharacteristically public way.

Tesla’s offensive

Tesla first filed a civil complaint against Cao in March 2019, claiming the engineer had copied Autopilot-related source code to his personal iCloud account in a nine-month period before leaving Tesla. Neither Xpeng nor XMotors have been charged in Tesla’s suit.

In July 2019, Cao acknowledged that he had downloaded and stored Tesla source code on his personal laptop, but pleaded not guilty to theft charges. The dispute remained at a deadlock.

In November of 2019, Tesla issued its first subpoena to XMotors, seeking a broad array of information, including “all non-privileged” internal communications involving Cao. The request included any correspondence on the popular messaging app WeChat that was related to Tesla and Autopilot.

Tesla also requested Cao’s personal messages to XMotors employees, as well as his compensation and employment terms with Xpeng. XMotors responded to Tesla’s request in December by filing 6,333 pages of documents. An initial investigation found no evidence that XMotors encouraged Cao to exploit Tesla’s source code for its benefit. 

After nearly a year of litigation, Tesla issued a second subpoena to XMotors this January, requesting an array of documents as well as XMotor’s entire repository of autonomous-driving source code from before Cao was recruited, to after he was placed on leave in March 2019.

Tesla’s request extended to images of entire hard drives from various Xpeng employees’ work computers, including those of the company’s CEO He Xiaopeng and president Brian Gu. The request also demanded that Xpeng make an employee available for an interview.

Tesla’s latest requests have infuriated the domestic EV startup. This is “just a fishing expedition meant to bully and disrupt a young competitor,” Xpeng said in an announcement released April 24, just two days before the company launched the P7, its first sedan model, which competes with Tesla’s China-made Model 3. The Chinese EV maker said that Tesla’s request to broaden the scope of the investigation is “based on nothing more than sheer speculation.”

Most notably, Tesla asked XMotors for documents related to a case against Apple’s former employee Zhang Xiaolang, looking for a pattern of misconduct by XMotors in its operations and recruiting. What has caused the American EV giant to prolong its campaign against its Chinese rival? Here are some of the key findings revealed in the recent documents filed by XMotors in US courts.

Opposing views

Tesla’s arguments: The US EV giant is seeking to connect a previous employee accused of stealing trade secrets before joining Xpeng and the latest case against Cao. Tesla is also suspicious about the conditions under which Cao left the company.

• Cao copied more than 300,000 Autopilot files from a working computer to his personal iCloud account before starting at XMotors in January 2019, Tesla said in the lawsuit filed last March. The Silicon Valley carmaker also raised suspicions about Cao transferring confidential information to his new employer by noting that he gave only one day’s notice before leaving his job at Tesla.

• Tesla claims that Cao copied its Autopilot source code onto a Sandisk thumb drive, a popular brand of USB storage device. According to information gathered during Tesla’s investigation, a Sandisk drive was then inserted into an Xpeng-issued laptop. Cao’s personal device “could be the same” as the one inserted in Xpeng’s computer, Tesla argues.
• Tesla’s latest demands for documents related to the arrest of former Apple employee Zhang Xiaolong were made on the grounds that Cao texted a friend saying, according to a disputed translation from Chinese, that “I guess they [Zhang and Xpeng] agreed on the price before to get the documents.” Cao’s work experience at Apple had also caught Tesla’s attention, causing the EV giant to wonder if Cao knew or had contact with Zhang—and whether the two engineers had acted in concert.

Xpeng’s testimony: Meanwhile, Xpeng and Cao have contradicted Tesla’s claims, arguing that conversations between the engineer and his colleague had been mistranslated.

• Cao cloned the entire Autopilot source code repository to his personal computer, without telling anybody or asking if he was permitted to do so, according to his testimony in a deposition held earlier this year. Cao said he thought it was “common practice” for engineers at Tesla. “Everyone was using personal devices, personal storage, cloud storage to access Tesla information,” Cao said.
• Cao’s testimony contradicts Tesla’s claims that he only gave one day’s notice before leaving the company. Cao said he told his then-supervisor in late December 2018 that he planned to leave and expressed willingness to stay as long as necessary to ensure a smooth transition. “I don’t know who made that lie intentionally or unintentionally,” Cao said of his disputed resignation date.
• Xpeng challenges Tesla’s translation of the text message exchange. According to a certified translation, it was the friend who first brought news of Zhang’s arrest to Cao’s attention, not vice versa. It was also Cao’s friend who sent the text message about payment for documents to Cao. Cao rebuked the friend, saying, “It creates really bad impressions of us Chinese people.”
• Cao denied knowing Zhang, the defendant in Apple’s pending criminal case. “He and I did not work in the same division at Apple … and our respective engineering groups were located in different physical buildings and different campuses,” Cao wrote in his testimony.

In competing with their US counterparts, Chinese companies have long been known to seek shortcuts by poaching their employees. However, it is also true that not every job switch amounts to trade secret misappropriation. At the moment, Tesla’s suspicions remain mostly hypothetical: XMotors has not been named or charged in either the criminal case against Zhang or the civil action with Cao.

“We have engaged in no wrongdoing and we have fully cooperated with Tesla for months, including voluntarily providing our own confidential information. However, Tesla’s latest demands crossed the line, seeking to rummage through our IP on Tesla’s terms,” the company said in an announcement issued last week. Tesla did not respond to a request for comment.

Is Xpeng a threat?

In its court filing of last week, XMotors said Tesla’s latest demands are an attempt to “obtain competitive information” in order to make their rival less competitive. On the other hand, Tesla claimed it had no interest in the substance of XMotors’ source code but rather wants to ascertain whether there is anything resembling its intellectual property.

Given Tesla’s dominant position in the Chinese EV market, the argument is plausible. The US carmaker delivered more than 16,000 EVs in China during the first quarter of this year, representing nearly a third of market share—even as domestic EV giant BYD faltered amid the Covid-19 outbreak. Tesla’s first-quarter sales in China are on par with nearly all of Xpeng’s annual deliveries, a margin wide enough to solidify Tesla’s leadership in the market.

Tesla’s dominance could be challenged by companies like Xpeng, which launched its first electric sedan this week. Xpeng claims the P7 is the first “L3 autonomy-ready” production vehicle with the longest driving range in China.

The company also claims that its assisted-driver system Xpilot differs from those of its rivals because it is tailor-made for congested Chinese traffic situations. CEO He Xiaopeng promised to offer the “best user experience” with features that include autonomous lane changing on highways—to be made available via an update next year.

At a third of the price of Tesla Model S, Xpeng’s newest vehicle has elicited strong interest from some Chinese EV enthusiasts. “The P7 could be the most cost-effective EV sedan available in the market,” said one netizen in a WeChat group for EV fans after Tuesday’s press conference.

Although it’s still unclear whether the P7 could be a “Tesla killer” that may also help Xpeng outperform its Chinese rivals, the two companies’ escalating court battle and the fight for pole position in the world’s largest EV market is only just beginning.

Correction: A previous version of this newsletter incorrectly stated that two former Apple engineers joined Xpeng after leaving the US tech giant. Only Zhang Xiaolang joined the company. This text has also been amended to clarify that Cao Guangzhi was placed on administrative leave in March 2019. 

Xpeng Motors on Monday launched its first sedan model P7, boasting a range of 706 km (439 miles) and what it claimed the best-performed autonomous driving hardware stack among locally-produced vehicles.

Why it matters: One of the few sedan models launched by Tesla’s major Chinese challengers, P7 is now placed in direct competition against the China-made Model 3. It also brings the company one step closer to the premium market.

• This comes in the midst of a legal battle over a former Tesla employee who allegedly stole trade secrets for the Alibaba-backed EV maker.
• Tesla in January asked a judge to force Xpeng to disclose its entire autonomous driving source code and images of computer hard drives from various employees.
• Tesla has not brought a lawsuit against Xpeng due to insufficient evidence.

“I strongly believe that P7 will provide the best driver assist experience in China.”

—He Xiaopeng, Chairman and CEO during the online press conference

Details: The electric sports sedan P7 is available for order with a price tag of RMB 244,900 ($34,600) after subsidies.

• The car has a 439-mile range on an 81 kwh battery pack custom-built by China’s CATL.
• This makes P7 by far the mass production EV with the longest-driving range available in China, according to information revealed by the Ministry of Industry and Information Technology last month.
• In a video review made by Chinese media and revealed by Xpeng during an online press event, P7 achieved a range of 567 km in a test on urban roads and express highways, versus the 509 km of an imported long range version of Tesla Model 3.
• P7 was also touted China’s first “L3 autonomy-ready” production vehicle, equipped with Nvidia’s self-driving supercomputer Drive Xavier, as well as a perception suite including 14 cameras, 12 ultrasonic sensors, and five millimeter-wave radars.
• Featuring a detection distance over 200 meters and a 360-degree field of vision, the stack would enable Level 3 autonomy via a consistent over-the-air (OTA) software update for its Xpilot system.
• He added more advanced assisted driving functions will be available next year, including navigation guided pilot (NGP), a feature similar to Tesla’s navigate on autopilot (NOA) allowing autonomous lane change on highways.

Context: Ranging from RMB 229,900 all the way up to RMB 349,900, the P7 is Xpeng’s second mass production model.

• Xpeng in late 2018 released its first production model G3, an entry-level sports utility vehicle with a starting price of RMB 135,800 after subsidy.
• The company has delivered a total of 16,608 cars as of 2019, around half of Nio, which started delivery half year earlier.
• Nio president Qin Lihong said the company was accelerating the release of a sedan model by the end of this year in an livestream on the company’s app.

Electric vehicle maker Xpeng Motors is working to secure a production license to deliver its first sedan in July with the recent acquisition of a domestic automaker.

Why it matters: Owning a factory allows Xpeng to retain control over quality and minimizes risks from outsourcing production such as delivery delays and price increases.

• Beijing has essentially halted issuing EV production licenses since early 2019, when the National Development and Reform Commission released new rules aimed at cooling the country’s overheated new energy vehicle market.
• The China’s top economic planner said its will not approve new manufacturing sites until existing makers have reached their production capacity in the respective provinces and municipalities. Struggling EV company Nio shelved plans to build its own plant in Shanghai, giving way to Tesla.

Details: Guangzhou-based EV maker Xpeng Motors has fully acquired Friday, a local commercial vehicle and auto parts manufacturer, according to information (in Chinese) released Thursday on business research platform Tianyancha.com.

• Xpeng did not disclose the price it paid for Foday and must still file for final approval from regulators, which may take several months, before starting production in its newly built plant in Zhaoqing in southern Guangdong province.
• The company late last year completed construction of the plant, which it kicked off in late 2017. It has annual production capacity of 100,000 units and required an initial investment of RMB 4 billion ($560 million). The plant is currently trial producing cars and has not started full operation.
• The Xiaomi-backed EV startup in late 2017 outsourced production to Haima Automobile, a Hainan-based automaker and former Mazda partner. Haima posted a RMB 990 million loss from mismanagement in 2017, followed by RMB 1.64 billion in losses the next year.
• Partnering with Haima, Xpeng began mass delivery of its first electric SUV, the G3, in early 2019. It handed over nearly 17,000 units over the past year, closely trailing Nio and WM Motor, and is about to deliver its first sports sedan, the P7, in July.
• Xpeng and Haima have not disclosed the duration of their collaboration agreement, though it probably won’t end soon—Shenzhen-listed Haima told investors in February that it will produce the Xpeng P7, according to Caixin (in Chinese).

Context: Several young EV makers have obtained production licenses through investments in smaller, struggling automakers in order to operate their own manufacturing facilities.

• Baidu-backed WM Motor bought Huanghai, a Dalian-based automaker in early 2017, and began operating its first production facility a year later. The Baidu-backed EV maker early this year announced completion of its second plant in Huanggang, a city in central Hubei province.
• Would-be EV maker Byton invested in debt-laden Huali, a subsidiary of state-owned automaker FAW, for just RMB 1 in late 2018. The real cost was to cover its debt totaling RMB 850 million.
• Nio is one of the few EV companies that has a contract manufacturer to produce its cars, having formed an agreement with Hefei-based JAC to form a joint venture in May 2016.
• The cash-strapped EV maker is also pivoting to self-production with an investment plan of RMB 1.5 billion to set up its second production facility in Hefei, one of the conditions in a major financing project from the government.

Chinese carmaker Haima Automobile, a manufacturing partner of Xiaomi-backed electric vehicle (EV) startup Xpeng Motors, plans to enter the Indian market amid sluggish industry sales at home.

Why it matters: Haima’s move comes after China’s biggest automaker SAIC launched in the Indian market, racking up 27,000 orders for its MG Hector SUV model in just 45 days.

• Other firms are following suit. BMW manufacturing partner Great Wall Motor and Chongqing-based Changan Automobile are also reportedly considering building cars in the country, reported Reuters.

Details: Hainan-based Haima Automobile said late last month that it is in the process of making its EVs available in India.

• A company spokesperson confirmed talks with Indian governments and local suppliers as part of the plan. Haima has teamed with Bird Electric, part of authorized BMW dealer Bird Group.
• Originally formed as a joint venture between Mazda and Hainan provincial government in 1992, Haima stopped manufacturing for the Japanese maker in 2006.
• The company later sold vehicles resembling the popular Mazda 2 and Mazda 3 for years after, achieving record sales of 220,000 units in 2016.
• Sales have declined for the past four years with only 25,610 units sold in the first 11 months of 2019. It forged alliances with EV startup Xpeng Motors to help it build cars, with the establishment of a RMB 2 billion ($287 million) plant in Zhengzhou, provincial capital of central Henan Province, in 2017.

Context: Chinese auto sales have slumped since mid-2018, falling 3.6% year on year to 2.5 million units in November.

• The China Association of Automobile Manufacturers estimates an overall annual fall of 8% to 25.8 million units in 2019, with no turnaround in sight until 2022.

China NEV sales decline extends in November

Nio and Xpeng Motors are joining forces to expand their vehicle charging networks in a bid to address a vulnerability in electric car adoption as struggling Chinese automakers look to boost growth.

Why it matters: The collaboration—aimed at widening the charging pile network—highlights a lack of support for the EV industry from China’s slow pace of public charging facility construction. Low charging facility penetration rates is seen as a significant barrier for EV purchases.

• China on Tuesday reported a mere 3.6% monthly increase in November for its EV infrastructure network with a total of 496,000 public charging piles.
• The number of new charging facilities in November rose 45% compared with the number in January, according to figures from Chinese Electric Vehicle Charging Infrastructure Promotion Agency (EVCIPA).
• Growth in China’s charging station network has slowed to around 50% year on year over the past three years, after a short-lived surge in 2016 when the number of charging piles doubled to more than 150,000.

Details: Nio’s recharging service Nio Power and Xpeng Motors have signed an agreement to share their country-wide networks and connect payment processing systems to enhance user experience, the two companies said on Wednesday.

• Xpeng will “gradually” integrate its charging network and payment system with Nio Power, and car owners across the two brands will be able to access to one another’s supercharging piles across the country using the mobile apps for each carmaker, according to the plan. The two companies have not revealed a specific timeframe.
• Nio Power will also become one of the suppliers to offer Xpeng customers charging pile home installation services, for which the Xiaomi-backed EV maker currently charges no fee.

China’s EV darlings left stranded as VCs look elsewhere

Context: Rather than independently building out charging infrastructure, Chinese electric vehicle makers are collaborating to expand the power network amid a prolonged slump in the world’s biggest auto market.

• Following full integration of the two charging networks, Nio said that more than 90% of China’s fast charging facilities will be available to its customers, around 180,000 charging piles. Owners of non-Nio cars accounted for 55% of all Nio’s charging map users, company president Qin Lihong said in August.
• A Xpeng spokeswoman said it is running nearly 200 supercharging stations in around 30 Chinese domestic cities, following a partnership with China’s largest charging network TELD in October. Nio did not disclose the number of supercharging stations in its network when contacted by TechNode on Wednesday.

As electric car brands struggle, the government has released a 15 year plan for the industry’s development. Since subsidies were withdrawn in June, industry darlings like Nio and SAIC have seen sales flatten out, as Chris Udemans wrote in July. Some analysts expected this plan to be more targeted in upgrading the industry—so when I saw it was out, I dropped everything to ask experts what it meant.

I thought I was going to write about cars. But after a week of reporting, I’m convinced the real story is tuktuks. Low speed electric vehicles (LSEVs) are taking over rural China without subsidies—in fact, experts are not even asking if they can be saved, but if they can be stopped.

They are “so underrated,” says David Li, Executive Director of the Shenzhen Open Innovation Lab. Li helps international entrepreneurs interested in mobility access resources in China. While people talk of an EV downturn, he said, “go to an LSEV company—they say they are still growing 30 percent per year.” 

Bottom line: No rescue line for Nio is in sight. While some new energy vehicle (NEV) brands scramble to keep profit margins, other segments of the supply chain see opportunity from the disappearance of subsidies. The most interesting story in the market may be what Beijing decides to do about golf cart-like low speed electrics on rural China’s roads. 

What’s new: The 2021-2035 New Energy Vehicle Industry Development Plan draft doesn’t mention subsidies, but does promise support for the industry.

• Insiders all commented on the hard, higher sales target of 25% market share by 2025 (which analysts estimate would mean hitting 6 million in sales) and the scrapping of the 2030 target. 
• State-owned enterprises in China have KPIs, and for the first time, the plan explicitly requires R&D investment into NEVs to be part of them. An employee from state-owned NEV-bus manufacturer Shenlong Keche told TechNode he expected R&D money to go towards battery endurance and storage. China’s state-owned mining, refinery and chemicals enterprises are likely to focus efforts on lithium extraction and refining. 
• The plan aims to speed up building charging infrastructure.
• Analysts flagged a link between EVs and the carbon trading market. While it’s not yet clear what form such a mechanism would take, it could have implications for every part of the supply chain. 
• Hydrogen fuel cells get more attention.
• All of the above is vague on details—like most national plans, implementation is left to local government. 

Life after subsidies: Electric car brands have been relying on subsidies to make their cars cheaper. Without subsides, cars are more expensive to the average consumer who was already hesitant about limited range. But remember, these car brands assemble cars—they don’t make them. Other parts of the supply chain don’t think the future looks all bad. 

• Swappable battery companies expect to see more adoption of their technology. They have been “waiting for subsidies to end,” Li told TechNode. Fixed battery NEVs have no viable used car market. Buying one forces owners to bear the battery cost (the most expensive and short-lived part of the car). Swappable battery make NEVs cheaper to buy and also mean they retain value as other car parts live longer than batteries. 
• More companies have introduced models around the size of a Smart car, to target cost-conscious consumers.
• Startups are providing services around NEVs like swappable battery stations, ride hailing (see Xpeng’s Pengster), parking, and charging space. Problems that will need solutions are edging closer into view. Once this round of electric cars are on scrap heaps, who’s going to dispose of the batteries?
• If car brands can’t make themselves profitable, the state is happy to see some die. There are over 500 standard-size NEV companies and over 1000 low-speed electric vehicle (LSEV) companies. The state can afford to cull a few. China already makes half the world’s NEVs.

Forget about cars—think small: While Tesla-likes suffer, there are other EV companies that are doing just fine without subsidies: makers of low-speed electric vehicles, a category that includes everything from a one-person pod on three wheels up to four-seaters only slightly smaller than a standard electric car. Their speeds generally top out around 45km/hr. 

• Think tank GGII says (in Chinese) by 2018, LSEV inventory exceeded 3 million. GGII predicts that the total number of low-speed electric vehicles in China will reach 4-5 million by end 2020. 
• Growth slowed in 2018 but mainly due to bans and policy uncertainty.
• “Even companies with small market share are making hundreds of thousands of cars,” says Li. 
• Large LSEV brands are getting out of the grey area and moving in on standard-size EV companies. Last year, Levdeo bought Yema Auto, obtaining permits to produce fuel and “real” NEVs as well as plants in Chengdu and Mianyang. Rumours say it plans to go into car sharing. 
• Shandong Automobile Industry Association says that (in Chinese) Shandong province produced 695,900 low-speed electric vehicles in 2018, up 2.23% year on year. Exact numbers are hard to pin down (Liaocheng city in Shandong, for instance, has said that most of the LSEVs on their roads are illegally produced). Low technical thresholds mean it’s really the kind of car you can make in your backyard.
• The industry is not concentrated, but leading players include Levdeo, Yogomo, Shifeng, and Lichi.

Winning in Pinduoduo territory: Go down to China’s third and fourth-tier cities in provinces like Shandong and Hebei, or rural towns. There’s no buses, let alone EV charging poles. “Rural China is not going to spend RMB 200,000 (about $28,000) on an electric car,” says Li. “Elon totally missed the market.” While Tesla and other high-end EV brands fight over China’s well-heeled urbanites, LSEVs are catering to a huge market who are not swapping out their old cars, but keen to buy their first. 

Moving violation: Central government wanted China to create Teslas. Instead, they find themselves confronting golf carts, and a terrifying phenomenon—China’s elderly who’ve never taken a driving lesson, on wheels. 

• Since you don’t need a license to drive them, they’ve been crashing all over China’s small towns. 
• With no technical standards to limit size or control quality, some LSEVs are as big as standard vehicles and aren’t that much slower. 
• Some of them are bad for the environment due to poor-quality lead-acid batteries.
• They cause headaches for police, who have no way to punish traffic rulebreakers. 
• For all those reasons, Beijing has been trying to regulate the industry since 2015, and there have been efforts to ban vehicles locally (both preceding links in Chinese). 

But rural China loves them, as do local governments: LSEVs are still “sneaking around,” a father-of-one from Hebei’s provincial capital Shijiazhuang told TechNode. He bought an LSEV for his parents three years ago for RMB 7,000. This consumer segment doesn’t have range anxiety. They just want to be able to pick up their grandkids from school and do some grocery shopping. Also, LSEVs don’t need charging poles: they can be charged on 220V at home. 

Local governments are not encouraging LSEVs just because they are anti-carbon crusaders. Their primary concerns are money and jobs. Under the pretext of developing NEVs, some local governments have built industrial parks which are really for LSEVs. They know they aren’t going to get domestic NEVs to set up shop in their jurisdiction and see LSEVs as a development shortcut. It’s no surprise that bans are not enforced harshly as Beijing is asking local governments to kill off a profitable industry, and sometimes their largest taxpayers and employers.

Legitimizing contraband: Industry insiders say the policy they’re watching is not the top-line EV plan, but LSEV technical standards slated for release in 2021. Set too stringent, they could cut away at an industry built on low price points; set too low could mean perpetuating low quality and safety. Reports say some producers are putting off further production until their release. 

Overtaking on non-Chinese roads: As John Artman pointed out in this space a few weeks ago, global doesn’t mean US. Li, who works with international entrepreneurs who are looking at sourcing vehicles in China, told TechNode he gets more interest from places like Kenya and India than the global North: “It’s much easier for me to talk to someone from Ghana than London.” The latter, he finds, see EV markets exclusively through the prism of Tesla. 

China wants to sell NEVs to the world. LSEVs could find huge, hitherto untapped markets, especially where there is little besides roads in terms of transport infrastructure. If China’s EV tech is to go global, LSEVs may be what really go far along the Belt and Road. 

Additional research by Coco Gao.

Preorders for the premium P7 sedan from Chinese electric vehicle (EV) maker Xpeng Motors have climbed to more than 15,000, the company said, a sedan which it launched to compete directly with Tesla for upscale auto buyers in the world’s biggest auto market.

Why it matters: Xpeng Motors has expanded product offerings targeting both entry-level buyers and higher-end niche customers in an effort to head off competition from Tesla amid a months-long slowdown in the EV market.

• The Alibaba-backed EV maker debuted its first model, the G3 SUV, with a 351 kilometer (218 mile) range at a starting price of RMB 155,800 ($22,100) at the Consumer Electronics Show in January last year.
• The company has sold 12,466 units since it began delivering late last year. G3 monthly sales peaked at 2,709 units in May, a month before Beijing slashed purchase subsidies, a figure which fell to 1,015 units in October, according to data from China Banking and Insurance Regulation Commission.

Details: The price range of its second mass-market offering, the P7 sports sedan, is between RMB 270,000 and RMB 370,000 ($38,400 – $52,600) for a maximum range of 650 kilometers (403 miles), the company announced at this year’s Guangzhou Auto Show on Friday.

• The four-door sedan features a technology stack including Nvidia’s most advanced autonomous vehicle chip, the Drive Xavier, and Qualcomm’s top-line processor, the Snapdragon 820A, powering its Level 3 (L3) autonomy. The Society of Automotive Engineers (SAE) defines L3 as “conditional automation” in which the car does most of the driving but a person must be on-hand to intervene.
• The Guangzhou-based automaker said that its advanced driver assistance system Xpilot 3.0 is adapted specifically for congested Chinese cities with features such as automated cruise control and lane selection for highways, enabled by 12 ultrasonic sensors, five high-precision millimeter-wave radars, and 13 cameras.
• The company said it has received 15,431 P7 preorders since its debut in April this year. Preorders require a fully refundable minimum deposit of RMB 99.
• Xpeng expects to begin P7 deliveries in the second quarter of next year.

Context: The P7 announcement follows days after Xpeng Motors secured a $400 million Series C from investors including smartphone maker Xiaomi, which valued the company at $4 billion, more than double the size of rival EV maker Nio.

• Tesla last month began selling its made-in-China Model 3 with an autopilot function starting from RMB 355,800 ($50,310), with an expected delivery date in the first quarter of next year.

Xpeng brings in Xiaomi as strategic investor in $400 million Series C

If you can’t see the YouTube player above, try watching here instead. 

China’s electric vehicle (EV) market has seen a four-month slump in deliveries since purchase subsidies were slashed over the summer. The move has left the industry reeling, while startups battle for funds and investors become increasingly wary.

“The whole industry obviously has seen a significant slowdown after the subsidy cuts,” Brian Gu, Xpeng president and vice-chairman told TechNode at TechCrunch Shenzhen this month.

EV subsidies are expected to decrease by a further 50% next year, and completely disappear in two years. The Chinese government has sought to counter automakers’ reliance on the subsidies to sell their vehicles, hoping the reduction will force these companies to innovate.

Despite mounting troubles in the industry, Xpeng recently closed its $400 million Series C. “We need a war chest to tackle the Chinese consumer market in order to build up our brand,” Gu said. “We have a lot of things planned, and we see this capital as being instrumental in achieving these goals.”

Founded in 2014, Xpeng is one of the few EV makers in China that has begun delivering vehicles. The company launched its first car, the G3 SUV, in 2018, subsequently releasing an enhanced version with a longer driving range. Xpeng also plans to begin deliveries of its P7 sedan in the second quarter of 2020.

Meanwhile, rival Chines companies Nio and Byton have struggled to secure new funds amid a macro-economic slowdown and flagging auto market. Nio has yet to finalize a RMB 10 billion ($1.42 billion) deal with Beijing E-T0wn, a state-backed capital fund, that the company announced in May.

Gu believes that the government’s investment in charging infrastructure and a focus on innovation will help the industry reach an “inflection point,” where EVs become more competitive than gas-driven cars.

“We would like to see the industry become more product-focused, competing on product merit rather than just subsidy levels,” he said.

With contributions from Chris Udemans

Xpeng Motors has brought onboard smartphone maker Xiaomi as a strategic investor, as the Alibaba-backed new energy vehicle (NEV) startup announced $400 million in Series C funding.

Why it matters: Xpeng’s hefty haul comes against a macro-industrial backdrop of falling sales after subsidies for electric vehicles were cut over the summer, creating an increasingly difficult funding environment for NEV startups.

• Major players including Nio are struggling to get close to sales targets as NEV deliveries stalled in the second half of the year.
• Sales fell sequentially for three consecutive months beginning in July, while year-on-year rates of decline deepened from 4.7% in July to 34.2% in September.

“The business definitely needs capital to grow. It is a business that is still very much in the ramping up stage and we have to invest in research and development, in building our sales and services network, and completing our manufacturing plant, which we aim to have built by the end of this year. We have been working closely with Xiaomi on smart devices and they have the IoT leadership in China, and even globally, and smart auto could be a very good extension of the ecosystem.”

—Xpeng President Brian Gu, speaking to TechNode at TechCrunch Shenzhen on Tuesday

Details: Xiaomi is among a group of strategic and institutional investors to take part in the funding round. Xpeng also secured several billions of RMB-denominated unsecured credit lines from Chinese and commercial lenders including China Merchants Bank, China CITIC Bank, and HSBC.

• Company Chairman He Xiaopeng again invested some of his own funds in this latest round.
• Xpeng previously raised RMB 4 billion ($587 million) in Series B+ funding in August 2018, led Primavera Capital and Morningside Venture Capital, along with Chairman He.
  
• The Guangzhou-based NEV maker set out plans in June to raise new funding by the year-end.
• Xpeng Motors started delivering the 2020 version of its first mass-market SUV model, the G3, in September. The car features an NEDC range of 520 kilometers.
• Last month, the firm announced plans to expand its infrastructure through a partnership with TELD, the operator of China’s largest charging network.

Decline in China’s NEV sales sharper than expected: report

Context: China’s total NEV deliveries are expected to remain flat this year compared with 2018, according to a report from China International Capital Corp.

• CICC attributed the prolonged slump to consumer unwillingness to buy NEVs. Many have been put off by a spate of vehicle fires that took place over the summer.
• Xpeng plans to launch its second vehicle, the P7 sedan, next year, and begin deliveries in the second quarter.

Xpeng Motors has announced a partnership with TELD, the operator of China’s largest charging network to jointly build supercharger stations nationwide, just days after the NEV maker started deliveries of an updated version of its first mass-market model.

Why it matters: The partnership marks a significant step forward. Xpeng is accelerating plans to run 200 supercharging stations across 30 Chinese cities by the end of this year.

• It also comes after sales of its G3 five-seater SUV model tumbled from a record 2,989 units in June to only 231 units two months later. The company attributed the drop to consumers holding out in expectation of the new version.

Details: Xpeng car owner will gain access to more than 50,000 TELD charging piles in 183 Chinese cities via Xpeng’s app or in-vehicle platform, the EV maker said in a statement late last week.

• Xpeng is the first young Chinese EV maker to form an alliance with the country’s largest charging infrastructure operator. The pair will share data on user charges and payments.
• The Guangzhou-based EV maker also plans to grow its supercharging network by converting some existing TELD facilities to meet its technical requirements as part of an ambitious plan to have 1,000 supercharging stations around the country within three years. Xpeng is far from its goal at present, with only 76 operational supercharger stations in 18 cities.
• The pair’s first jointly built station, equipped with 20 charging piles, entered operation in late September in the eastern city of Qingdao, where TELD is headquartered.
• The majority of charging stations will be located in first and second-tier cities, Xpeng said without revealing specific details.
• Shenzhen-listed electrical components maker TGOOD, the parent company of TELD, declined to comment when contacted by TechNode on Tuesday.

“Xpeng Motors and TELD are pioneering a new model and the partnership represents a win-win opportunity, leveraging the strength and capability of frontrunners in the smart vehicle sector and new energy power sector.”

—He Xiaopeng, Chairman and CEO of Xpeng Motors

Context: Beijing is adopting a dual-track approach of both charging and battery swapping facilities as it continues to accelerate the deployment of EV infrastructure nationwide.

• China has built the world’s largest EV charging network with over one million public and personal charging piles in operation as of the end of July, a rise of 71.9% year on year, according to figures from the China Electric Vehicle Charging Infrastructure Promotion Alliance.
• The central government also encourages local municipalities to move first, making more battery swapping stations available for consumers, and Nio is betting on the technology with 122 swapping stations and just four supercharging stations across the country as of now.

Electric vehicle maker Xpeng Motors has started delivering the 2020 version of its first mass market SUV model, the G3, timed for what experts foresee will be a pickup in Chinese new energy vehicle market at the end of the year.

Why it matters: The delivery of XPeng’s newest model follows a July backlash from consumers over the unexpected release of the G3 2020 version, which features an extended driving range and lower price tag.

• Customers who had just ordered the G3 2019 edition parked outside of the company’s Guangzhou headquarters on July 13 in protest of the new model launch. Some had placed orders for the older model days earlier at full price, and were demanding a replacement or refund.

Details: Xpeng Motors began delivering its updated G3 model on Friday at a trade event in the southwestern city of Chengdu. The 2020 edition boasts an extended 520 kilometer range meeting New European Driving Cycle (NEDC) standards—a widely used measurement for vehicle emissions and fuel economy—and a self-developed operating system with assisted driving features tailored for domestic road conditions and driving habits.

• More than 9,200 Xpeng vehicles were registered with the mandatory automobile insurance for the first seven months of this year, just dozens of units more than the number of WM Motor models reported and about 300 units fewer than those reported by Nio, reported Chinese media citing government figures.
• Xpeng also showcased its first four-door coupe, the P7 equipped with Level 3 autonomous driving features with a driving range exceeding 600 kilometers NEDC, which is planned for delivery in spring 2020.
• The company shed more light on its market expansion, saying that it is on track to open more than 120 retail stores nationwide and 200 supercharging stations in around 30 cities by the end of this year.
• Five days after the July protest, the company announced measures to counter growing anger, offering either RMB 10,000 ($1,400) coupons for vehicle charging, repairs, and maintenance, or an opportunity to trade in their cars after three years of use for a new model at a 60% discount.
• Customers who had ordered the older model but had not yet received them were told they could transfer the order into one for the new edition, the company said in a statement sent to TechNode on Monday.

Context: China’s new energy vehicles (NEV) sales declined in July for the first time since 2017, weakening 4.3% year on year to 80,000 units, but analysts expect that the market could recover in coming months.

• Sinolink Securities said sales had likely bottomed out in July, a result of reduced government subsidies taking effect. However, because refinements to the dual credit policy encourages innovation in extended range and product enhancement, it expects a turnaround after “market adjustments” in July.
• Shanghai Securities forecasted a rebound in NEV demand beginning in September after reaching lows in July and August, in addition to growing opportunities from an accelerated car electrification in overseas markets.
• China auto exports increased 3.1% year on year in the first six months of this year. The Ministry of Commerce said Thursday that the government is working on new policies to further promote trade in automobiles.

Electric vehicle maker Xpeng Motors is facing a backlash from customers of its 2019 G3 model after it introduced a lower-priced, revamped version boasting a longer driving range just half a year after the launch of its first commercial model.

Why it matters: The incident is yet another hit to Xpeng’s credibility, following long delays in its production and accusations of intellectual property theft leveled against one of its executives by Tesla, his former employer.

• Chinese media reported that hundreds of customers parked their cars in a long line outside the company’s Guangzhou headquarters over the weekend,  asking for replacements or refunds using signs and banners.

Details: Some XPeng customers had just ordered the older G3 2019 edition days ago, and accused Xpeng sales staff of cheating them by hiding the impending new release.

• The China’s Tesla wannabe launched the G3 2020 edition, a revamped version of its first commercial model G3 SUV, on July 10. The new version has an extended New European Driving Cycle (NEDC)—a metric used to calculate how far electric vehicles can run on one charge—range of 520 kilometers with a starting price of RMB 160,000 (around $23,300).
• Users complained that the price for the 2020 model is thousands of RMB lower than the sticker price of the premium version of its 2019 edition, though the driving range in the new model is higher by nearly half.
• The July 10 release immediately sparked dissent among users on Chinese social media. Some customers said they were pressured by sales staff into buying the older model to take advantage of purchase subsidies which Chinese regulators are drastically reducing. The company sales personnel also reportedly kept silent when asked about new model releases.
• Xpeng’s CEO He Xiaopeng later apologized on microblogging platform Weibo, offering a RMB 10,000 credit to buyers of the 2019 model good for purchase for the next three years. The EV company said it had offered a nearly RMB 20,000 discount for the 2019 model beginning late May, and therefore all the actual prices of G3 2019 edition are lower than those of the new models.
• According to a survey on Weibo, more than 13,000 users voted against the compensation for “lack of sincerity,” nearly 50% of all the participants.

Xpeng is currently carefully looking into customers’ feedback. If any alleged misleading sales conduct is confirmed, we will take all necessary steps to address any misconduct issues. We will protect the rights of our customers. Our customer service team is actively reaching out to customers to address their concerns and issues.

—Xpeng Motors spokeswoman response when contacted by TechNode on Monday 

Context: Backed by big names including Alibaba, Xiaomi founder Lei Jun, and IDG Capital, Xpeng is one of the new EV makers dubbed “Tesla Killers” in China.

• The company says it is top-ranked among Chinese EV startups in sales, having delivered an excess of 4,900 units in April and May, more than double the output of rival Nio, which reported about 2,200 units delivered over the same period.
• Xpeng’s head of perception, Cao Guangzhi, was sued in March by his former employer. Tesla accused Cao of stealing trade secrets related to Tesla’s self-driving system, Autopilot, before joining Xpeng’s research division in the US.
• Unhappy customers also took aim at another embattled EV maker, Nio, after the release of its ES6 with a NEDC range of 510 kilometers late last year. The range for the new model was much higher than that of its first, more premium model, the ES8 which had a maximum range of 355 kilometers, but the sticker prices were the same.

Xpeng has made quite a few ambitious announcements recently, including plans to secure a total of RMB 30 billion by the end of 2019 and that it is expecting its first model, the “G3”, to hit the market by the end of the year. However, signs are pointing to a more negative outlook.

Latest local media reports suggest that Xpeng might still be at least 6 months away from actually delivering the G3 to the hands of Chinese car owners and that the startup has not placed an order for the specific spare part since March.

An auto parts supplier told 36Kr (in Chinese) that Xpeng’s last order of parts is only sufficient for manufacturing 95 G3 vehicles, hinting that it is a long shot for the new model to go into mass production anytime soon.

The source revealed that Xpeng signed an exclusive contract with the supplier for producing the specific parts. According to the usual timeline for order and delivery, G3’s mass production will start no earlier than October. The G3 is reportedly still in the inspection phase—manufacturing the vehicle in small batches solely for examining and testing purposes. The process from inspection to mass production usually takes up roughly 6 months. Xpeng recently announced at its brand day on August 15 that the G3 will announce its final configuration and price in November, and then it will “soon” take delivery.

The source also revealed that Xpeng has more production plans ahead. According to Xpeng’s bidding documents, the “next model” is scheduled to go into mass production next year.

Xpeng today responded (in Chinese) reaffirming that the G3 has completed the trial assembly phase and will go into mass production in time for launch before the end of the year. The company said it is now allocating orders among its suppliers, noting that the production of “non-core components” is usually shared by multiple suppliers for security reasons. The company said the production of Xpeng’s next model is going smoothly, adding that the quantity of  delivery will be “determined by market conditions.”

Earlier this month, Xpeng announced that it secured RMB 4 billion ($587 million) in a fundraising round, valuing the four-year-old startup at close to RMB 25 billion. Xpeng’s ambition to take on Tesla in China’s lucrative electric vehicle market is obvious, however, it is also no secret that the startup disassembled Tesla vehicles to aid the development of its own vehicles. Despite impressive fundraising results, Xpeng’s relative inexperience in car manufacturing often draws public skepticism over its ability to deliver and meet its plans.

小鹏汽车计划到 2019 年底融资约 300 亿元 – 动点科技

What happened: Chinese EV startup Xpeng is planning to raise RMB 30 billion in funds next year, Gu Hongdi, president of Xpeng, has revealed. The purpose of the mega-fundraising is to prevent the company from pursuing a public listing at an unsuitable timing due to funding pressure, Gu explained. In November, Xpeng will announce the retail price of new vehicles, which will be ready for delivery soon after launch.

Why it’s important: China, the biggest EV market in the world, accounted for over half of the global EV sales last year. Investors have high hopes for the still rapidly growing sector. Xpeng, also known as China’s Tesla, is among the slew of EV startups that have sprung up in recent years after the government began granting special manufacturing permits to help Chinese EV manufacturers. Earlier this month, Xpeng raised RMB 4 billion in a funding round at RMB 25 billion in valuation.

Xpeng Raises USD588 Million to Start EV Production, Build Charging Network -Yicai Global

What happened: Chinese electric carmaker Xpeng Motor has secured RMB 4 billion ($588 million) in B Plus round from Primavera Capital Group, Morningside Venture Capital and Chairman He Xiaopeng at an RMB 25 billion valuation. The latest round follows an RMB 2.2 billion round received earlier this year, bring the company’s total fund raised to over RMB 10 billion.

Why it’s important: China’s booming electric vehicle industry has attracted attention not only from entrepreneurs but also the investors. Top internet giants and venture capitals all bet on the trend. Other leading players in the field such NIO and WM Motor all passed the RMB 10 billion funding milestone. With abundant funding, the next goal for these companies is to ship products at scale. Xpeng’s new funding is going to be invested for production and sales of the G3, which is scheduled for first deliveries at the end of this year.

Chinese electric vehicle startup Xiaopeng Motors (Xpeng) is reportedly in talks with Alibaba and other investors to raise $600 million to $700 million, our sister site is reporting (in Chinese). The investment would put Xpeng’s valuation close to $4 billion. Xpeng’s spokesperson declined to comment on the company’s fundraising plans.

In April, He Xiaopeng, co-founder of Xpeng, revealed in an interview at Boao Forum for Asia that the company expects to raise over RMB 10 billion this year and that it will be announcing fundraising plans soon. He said the future investment will be devoted to three main areas: first, team expansion and R&D; second, production base and supplier partnerships; third, branding, market, sales, and after-sales services.

Xpeng is planning to expand its team from the current 700 to 3000 by 2019. The startup also recently opened a research center in Mountain View after setting up a US-based R&D team last December to focus on autonomous driving technologies.

In January, the four-year-old startup raised a total of RMB 2.2 billion ($350 million) in a Series B funding round led by Alibaba, Foxconn, and IDG. After the completion of the fundraising, Xpeng has raised over RMB 5 billion from the capital markets.

Xpeng, often compared with Tesla, is hoping to build a quality low-priced smart vehicle for young buyers in China who can’t afford a Tesla. The car manufacturer is among the slew of Chinese EV startups that have sprung up in recent years after the government started granting special manufacturing permits to help electric car manufacturers in China.

According to BloombergNEF forecast, more than half of all new car sales will be electric by 2040. Having poured billions of dollars into Chinese electric car manufacturers, investors have high hopes for the EV sector in China—the world’s largest auto market.

However, also according to Bloomberg, China is considering further cutting EV subsidies next year in hope to push the innovation front of domestic EV industry rather than having car manufacturers rely on fiscal policy.