Xpeng aims to cut 2024 production cost by 25 per cent as it fine-tunes designs and enhance efficiency to survive competition

The efficiency drive and cost-cut programme would put Xpeng on the road to generate positive cash flow by 2025, said its president Brian Gu
Xpeng’s 13 per cent discounts in January were buffered by a 60 per cent decline in the cost of lithium carbonate, a key material for EV batteries.

Electric & new energy vehicles

Daniel Renin Shanghai

Published: 10:00pm, 16 Apr 2023

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Xpeng said it would fine-tune its designs and improve its efficiency next year, as the electric car (EV) maker slashes costs by 25 per cent to stay ahead of the price war that is heating up in the world’s largest vehicle market.

The efficiency drive and cost-cut programme would put Xpeng on the road to generate positive cash flow by 2025, said the carmaker’s president Brian Gu, during a media briefing.

“The capability of developing attractive products at affordable prices has become more important [in the EV industry],” Gu said. “We want to make sure that the technologies and the platform, or the architecture [we developed] allow us to achieve efficiency and cost reduction.”

The Guangzhou-based carmaker’s 2022 net loss more than doubled to 9.14 billion yuan (US$1.33 billion) from a year earlier, despite its revenue growing 28 per cent to 27.9 billion yuan, as it invested massively in research and development. Xpeng has been lavishing its electric vehicles with digital bells and whistles including laser-guided sensors (LiDAR), high-performance battery packs that can go further on a single charge and sophisticated in-car entertainment systems with voice commands.

He Xiaopeng, the co-founder, chairman and CEO of Xpeng Motors, during a news conference ahead of the Shanghai Auto Show on April 16, 2023. Photo: Reuters.

Xpeng’s founder He Xiaopeng unveiled a technology platform called SEPA 2.0 Fuyao Global Intelligent Evolution Architecture,, promising to shorten the carmaker’s development cycle by a fifth.

Most of Xpeng’s EVs are priced above 200,000 yuan, more than the sticker price of most models made by Shenzhen’s BYD at between 100,000 and 150,000 yuan. The cheaper prices appeal to budget-conscious customers which are drifting down the price range at a time of slowing economic growth and rising unemployment, particularly in China’s technology industry.

Xpeng’s P7 electric car on display during the 2020 Beijing International Automotive Exhibition (Auto China 2020) at the China International Exhibition Center in Beijing on September 26, 2020. Photo: VCG/VCG via Getty Images.

“Smart EV makers need to take a cautious stance on profitability from now on because competition will intensify amid more new model launches,” said Gao Shen, an independent analyst in Shanghai. “Top EV start-ups also need to be thrifty to plan ahead of market turbulence in the coming years.”

Positive cash flow means more money coming in than going out of a company. But it does not translate into profitability because a company cannot post a net profit unless all expenses such as tax payment are subtracted from its revenue.

The nine-year-old carmaker is not the only one to slash sticker prices, or reach for the cost-cutting hatchets. Tesla cut prices in January, following discounts last October, bringing the price tags of Model 3 and Model Y EVs to their lowest since they began rolling off a production line in Shanghai in 2019.

The war for domination in the world’s No 1 electric car market

Xpeng cut prices by up to 13 per cent in January. The discounts had been buffered by the declining cost of lithium carbonate, a key ingredient in the production of EV batteries, Gu said. Battery costs make up as much as 40 per cent the production cost of a typical EV.

The spot price of battery-grade lithium carbonate dropped to 199,000 yuan per tonne in China last week, down about 60 per cent from a year ago.