Greater Bay Area city Zhaoqing set to form EV industry cluster with over 100 players, Xpeng deputy chairman says
- Suppliers will set up production facilities near Xpeng’s factory to reap cost savings and efficiency gains as EV maker’s capacity grows, Brian Gu tells the Post
- Xpeng will upgrade its existing facilities so that its Zhaoqing plant can double production capacity to 200,000 EVs a year
Component suppliers will establish production facilities in districts neighbouring Xpeng’s factory in the next two years to reap cost savings and efficiency gains as the EV maker’s capacity expands, Brian Gu told the South China Morning Post.
“As our production scale grows beyond a certain level, their logistics costs will start to outweigh the costs of setting up shop near us,” he said.
Inside Chinese electric vehicle maker Xpeng's factory in Zhaoqing city
Xpeng’s Zhaoqing plant has received strong support from the government, including subsidies, tax rebates, land-use rights, supporting infrastructure and facilities in and near the industry park, Gu said.
The company’s suppliers are currently shipping components to its factory from other parts of Guangdong province as well as from other provinces of China. Battery giant Contemporary Amperex Technology (CATL) is, however, constructing a 12 billion yuan (US$1.9 billion) lithium battery factory in Zhaoqing. Gu said it will be able to supply Xpeng next year when the facility is completed.
“With CATL in the process of building up a large-scale battery plant in the development zone, in proximity to Xpeng’s production base, the industry park is clearly positioned as a hub for new energy mobility industry development,” he said.
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CATL, the world’s biggest EV battery maker with about a 30 per cent market share, said in February that it would play a key role in building an industrial supply chain in the city spanning EV battery cells, lithium-ion battery materials and energy storage products, among others. It also said that it aimed to increase initial annual capacity from 25 gigawatt hours to 150 GWh by 2030.
Xpeng, which is backed by Alibaba Group Holding, owner of the Post, and smartphone maker Xiaomi, has adopted a multi-factory strategy after also considering the option of building one mega facility.
It signed an agreement in April with Wuhan’s municipal government for a factory in the city involving an undisclosed investment amount, after starting construction on a 1.2 billion yuan plant in Guangzhou last September. Both plants will have the capacity to assemble 100,000 EVs annually.
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The facilities in Zhaoqing and Guangzhou, both in China’s southern Guangdong province, will allow Xpeng to achieve greater supply-chain efficiency, cost savings and supply stability, Gu said.
“A big plant has higher efficiency and some cost advantages, but these would eventually be offset by higher distribution costs,” he said. “Adopting this strategy [of a single factory] would also mean we would lose out on opportunities to take advantage of the support policies of other local governments.”