XPeng Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 24, 2023

There are 13 speakers on the call.

Operator

Hello, ladies and gentlemen. Thank you for standing by for the Q1 2023 Earnings Conference Call for XPeng, Inc. At this time, all participants are in listen only mode. After management's remarks, there will be a question and answer session. Today's conference call is being recorded.

Operator

I will now turn the call over to your host, Mr. Alex Shee, Head of Investor Relations of the company. Please go ahead, Alex.

Speaker 1

Thank you. Hello, everyone, and welcome to XPeng's Q1 20 2023 earnings conference call. Our financial and operating results were issued by our newswire services earlier today and available online. Can also view the earnings press release by visiting the IR section of our website at ir.xiaofeng.com. Participants on today's call from our management will include Co Founder, Chairman and CEO, Mr.

Speaker 1

He Shao Peng Vice Chairman and President, Doctor. Brian Gu Vice President of Finance, Mr. Dennis Lu Vice President of Corporate Finance and Investments, Mr. Charles Zhang and myself. Management will begin with the prepared remarks and the call will conclude with a Q and A session.

Speaker 1

A webcast replay of this conference call will be available on the IR section of our website. Before we continue, please note that today's discussion will contain forward looking statements Made under the Safe Harbor provisions of the U. S. Private Securities Litigation Reform Act of 1995, forward looking statements involve inherent risks uncertainties. As such, the company's results may be materially different from the views expressed today.

Speaker 1

Further information regarding these and other risks and uncertainties is included in the relevant public filings of The company has filed with the U. S. Securities and Exchange Commission. The company does not assume any obligation To update any forward looking statements, except as required under applicable law, please also note that Xpeng's earnings press release And this conference call includes disclosure of unaudited GAAP financial measures as well as unaudited non GAAP financial measures. Xpeng's earnings press release contains a reconciliation of the unaudited non GAAP measures to the unaudited GAAP measures.

Speaker 1

I will now turn the call over to our Co Founder, Chairman and CEO, Mr. He Xiaopeng. Please go ahead.

Speaker 2

Hi, everyone. Beginning in the Q1 of 2023, facing future competition, XPeng has centered around change. With that in mind, I took action to make considerable changes to XPeng's business plan, organizational structure and management team. As a result, some senior management who completed their mission on our journey from 0 to 1 have stepped down. Nonetheless, More new talents full of energy and entrepreneurial passion have quickly stepped up and taken on leadership positions through both internal promotions External recruitment.

Speaker 2

I'm excited to see these new team members have fitted in well in a short amount of time and made remarkable changes. I'm also very encouraged to see the passion and determination of all Xpeng employees to change as of today were Xpeng's day 1 as we shift It is very hard for the manufacturing industry to The declining trend and set off a virtuous cycle, but we managed to start the reform with ourselves and rebuild the fundamentals of the company. Compared with competitors in the industry, such a reform makes me confident that we'll be able to perform well consistently in each battle And create a virtuous product sales cycle, boost team morale, increase customer satisfaction and raise our brand reputation In the face of macroeconomic challenges and more intense competition, we achieved month on month growth of new orders for the past 4 months. More excitingly, order intake for the higher end NCM versions of our new P7i model, which was just launched in March, has exceeded our expectations. The original production capacity we planned was not enough to cover demand.

Speaker 2

Compared with the previous P7 model, the P7i offers more streamlined SKU specifications Aesthetically pleasing style design and distinguishing smart features future drive further driving P7i's sales growth. Our latest production model debuted at the Shanghai Auto Show in April, the G6, which was our first Its debut was met with remarkable enthusiasm from attendees at the Expo. The G6 features a stylish Aesthetic Design and Best in Class Interior Space, ensuring a comfortable ride, Fully equipped with a world class 800 volthighvoltagelogessicplatformanda3cfast Charging battery, the G6 is uniquely positioned within its segment, boasting ultra long range as high as 7 55 kilometers, Ultra high energy efficiency and ultrafast charging. More importantly, upon market delivery, The G6 will be equipped with XNGP, the industry's leading ADAS. I'm pleased to share with you that G6 test drives by media Began last week.

Speaker 2

The feedback from media is that G6 is well ahead of other EV models by 1 generation in terms of ADAS capabilities And its 800 volt platform with faster charging and lower energy consumption, which is in analogy to the 3 gs technology replacing 2 gs in mobile phones. The G6 will be officially launched in June and begin mass deliveries in July, Accompanied by a fast ramp up, we believe the G6 will emerge as one of the best selling models in China's NEV SUV market segment within the RMB200000 to RMB300000 price range. We expect this model to drive Substantial growth in XPeng's 3rd quarter delivery volume and significantly outperformed the industry's growth in both year over year and quarter over quarter terms. This will mark the first inflection point in our sales growth following our strategic and organizational adjustment. Additionally, in the Q4, we plan to launch a 7 seat electric MPV model, which we call X9 internally, We also firmly believe that 2023 will mark an inflection point in the development of smart technologies for EV and the starting point of smart technologies widespread user adoption.

Speaker 2

We expect most of our potential customer to recognize value by 2024 to 2025. At the end of March this year, we rolled out our city NGP on max stream of multiple models for customers in Guangzhou, Shenzhen and Shanghai via OTA update. The customer feedback we received has been inspiring. In the 1st month following the OTA rollout, City NGP's mileage penetration rate reached over 60% and has become a assisting driver for users' daily commute. For the first time, I personally have Also gotten used to driving with XMGP every day.

Speaker 2

It made me feel much more relaxed to drive. CityMGP test drives are already available at All XPeng's stores in Guangzhou, Shenzhen and Shanghai. In April, the percentage of order of the max of our P7I and G9 models in a total order of P7I and G9 increased substantially to more than 50%. We also plan to start the rollout of Highway NGP 2.0 in June. Highway NGP 2.0 was developed based on the framework of XNGP, so its code increased by 5 times compared to the original version.

Speaker 2

Equipped with algorithms, trains and complex urban driving scenarios, Highway NGP 2.0 is able to offer highway driver Assistance experienced close to that of L4, meaning high efficiency, consistent performance, no getting stuck, no disturbance And also no intention to take over. By the end of 2023, the number of manual takeovers per 1,000 kilometers By the end of Q3 this year, we'll begin nationwide rollout of our X NGP across more cities with our High definition map coverage. This will be the first time for the mass production of City NGP or equivalent without HD Map in China. Based on our experience, the mass production of city NGP in cities without high definition map coverage is 100 times more difficult than the mass production of highway NGP with high definition map. It sets a new benchmark for our R and D team's However, it's well worth it because it will considerably enhance our user experience once we achieve it.

Speaker 2

At present, our XNGP has the driving abilities equivalent to a novice driver. Moving forward and supported by the large Scale dataset generated in urban driving environment and strong back end closed loop data training systems, we expect to introduce Quarterly OTA updates for XNGP, which we expect to enrich its driving experience by 1 year each time, offering increased safety and generalization capability and incorporate some capabilities of Large Language Model or LMM into XNGP. I firmly believe that as we continue to make breakthroughs In XNGP's experience, scenario coverage and ownership cost based on data in the 3 cities we have launched, Sales of the max stream of our models with XNGP will grow significantly. Good design really matters to young consumers. So since the end of last year, I have been directly managing the styling and design department experience in designing top selling models to join XPeng.

Speaker 2

We also created healthy competition between excellent external design teams and our in house design teams to generate even more creative design ideas for new models. In addition to that, the LMM also is very helpful to our design improvement. I believe these changes will enable our new models Since the Q1, our sales, marketing and service capabilities has been upgraded In a concerted effort under the leadership of our President, Wang Feng Yin and also the whole company is making external and internal customer centric transformation quickly By enhancing our customer experience throughout the entire sales and service process and speeding up our response to customer demand, Since early this year through April, we have achieved consecutive improvement in our NPS, one of our core customer satisfaction indicators. Now as of April, our NPS has rebounded to Tier 1 level in the industry. Looking ahead into the next quarter, Our top priority will remain cleanly focused on rapid acceleration of our sales and EV market share growth.

Speaker 2

We have already implemented measures to fatten the management structure across our sales organization and establish a middle office That is more efficient and can more quickly respond to requests that come from the front line. The next step will be to take a more selective approach on our existing sales network in order to strengthen the competitiveness of our channels as a whole. In addition to increasing operational efficiency across Our Tier 1 and Tier 2 cities sales network will also introduce more high quality dealers in Tier 3 and Tier 4 cities to bolster our product roadmap and sales targets over the next few years in the RMB150000 to RMB350000 price range We believe the automotive industry landscape will be transformed by technology innovations and fierce competition In addition to great product proposition and new technology, the key to success also lies in cost reduction to the greatest extent and efficient involvement in R and D and operations. Our next generation technology architecture, CEPA 2.0 boasts powerful competitive strengths in R and D efficiency and technology innovations. With G6 mass production, The SEPA 2.0 architecture represent platform based technology capabilities that we've built through consistent intensive R and D efforts over The past 5 years, which will strengthen our leadership in technology over the next 3 years.

Speaker 2

We are rolling out new products that offer more competitive cost and consistent customer experience based on CEVA 2.0. The new models in our R and D pipeline, which covers the RMB150000 to RMB350000 price segment and a variety of new car types We'll be built on a suite of shared technology platforms spanning powertrain system, electronic and electrical architecture, Smart cabins and ADAS will shorten future models R and D cycle by 20% and up to 80% of architectural components will be compatible between different models, both of which enable XPeng to substantially reduce R and D spending on new models and BOM costs. Over the second half of twenty twenty three through twenty twenty four, we are planning to map out a clear and practical plan to achieve our target of a 25% cost reduction by the end of 2024, and we expect to realize some benefit of cost reduction initiatives in product design, powertrain and vehicle hardware as soon as this year. In this round of industry revolution, I believe that cost core competitive edges to win the ultimate competition. Nowadays, the competition is mainly around volume or scale, The next round of competition requires comprehensive competitiveness in scale, innovation, design, cost, efficiency, In terms of our cash flow, our cash on hand at the end of the Q1 of 2023 amounted to over RMB 34,000,000,000.

Speaker 2

I'll further simplify our operations, concentrate our R and D investment on what customers recognize and build our long term competitive position by advancing our platform based technology approach. At the same time, we'll continue to optimize our organizational structure and management process Significantly to further improve our operating efficiency across the company. Beginning in July was the mass delivery of G6 Along with other new product launches that will fuel rapid sales growth, I expect our monthly deliveries to increase significantly in the 3rd quarter compared with that in the Q2. Furthermore, as our monthly delivery targets exceed 20,000 vehicles in the Q4 of 2023, I expect our cash flow generated from operations to turn positive accordingly. Now moving to our guidance.

Speaker 2

We expect our total vehicle deliveries to be between 1,000,022,000 units in the Q2 of 2023, representing 15% to 21% quarter over quarter growth The revenue to be between RMB4.5 billion and RMB4.7 billion. From the Q3 of 2022, Even though we underwent 4 consecutive quarters of pain in terms of deliveries, I always believed that in every challenge lies an opportunity. It prompted us to reflect earlier on how to win the knockout phase in 2025 and how to get into The semifinals in 2027. Drawing on our more competitive new products and more effective sales channels, We will achieve substantial sales volume growth on a sequential quarterly basis in the 3rd and 4th quarters of 2023. Thank you, everyone.

Speaker 2

With that, I'll now turn the call over to our VP of Finance, Mr. Dennis Lu, to discuss our financial performance for the Q1 of 2023.

Speaker 3

Thank you, Mr. He, and hello, everyone. Now I would like to provide a brief overview of our financial results for the Q1 of 2023. I will reference RMB only in my discussion tonight Unless otherwise stated, our total revenues were RMB4.03 billion for the Q1 of 2023, A decrease of 45.9 percent year over year and a decrease of 21.5% quarter over quarter. Revenues from vehicle sales were RMB3.5 billion for the Q1 of 2023, a decrease of 49.8 percent year over year And a decrease of 24.6 percent from the last quarter.

Speaker 3

The year over year and quarter over quarter decreases were mainly attributable to lower vehicle deliveries And discontinuation of new energy vehicle subsidies. Gross margin was 1.7% for the Q1 of 2023 Compared with 12.2% for the same period of 2022 and 8.7% for the Q4 of 2022. Vehicle margin was minus 2.5% for the Q1 of 2023 compared with 10.4% For the same period of 2022 and 5.7 percent for the Q1 of 2022, the year over year and quarter over quarter decreases were mainly Brent, by increased sales promotions and the expiry of new energy vehicle subsidy mentioned above. R and D expenses were RMB1.3 billion for the Q1 of 2023, representing an increase of 6.1% from RMB1.2 billion For the same period of 2022 and an increase of 5.3 percent from RMB1.2 billion for the Q1 of 2022. The year over year and quarter over quarter increases were mainly due to higher expenses relating to the development of new vehicle models.

Speaker 3

SG and A expenses were RMB1.4 billion for the Q1 of 2023, Representing a decrease of 15.5 percent from RMB1.6 billion for the same period of 2022 And a decrease of 21% from RMB1.8 billion for the Q1 of 2022. The year over year and quarter over quarter decrease is mainly due to Lower commission paid to franchise stores and lower marketing and advertising expenses. As a result, our foregoing loss from operations was RMB2.6 billion for the Q1 of 2023 Compared with RMB1.9 billion for the same period of 2022 and RMB2.5 billion for the last quarter, Net loss was RMB2.3 billion for the Q1 of 2023 compared with RMB1.7 billion for the same period a year ago And RMB2.4 billion for the last quarter. As of March 31, 2023, our company had cash, Cash equipment, restricted cash, short term investment and time deposits in total of RMB34.1 billion. To be mindful of events of our earnings call, I will encourage listeners to refer to our earnings press release For more details on our Q1 financial results, this concludes our prepared remarks.

Speaker 3

We will now open the call to questions. Operator, please go ahead.

Operator

Thank you. If you wish to ask your question to management in Chinese, please immediately repeat your question in English. For the sake of clarity and order, Please ask one question at a time. Management will respond and then feel free to follow-up with your next questions. Today's first question comes from Tim Sout with Morgan Stanley.

Operator

Please go ahead.

Speaker 4

So my first question is about the pricing strategy. So how should we think about the XPeng's price strategy for G6 And the upcoming models. Given the severe pricing competition, we are expecting to price the model more aggressively when bringing the To ensure the company can stay much ahead of peers in terms of price performance ratio, especially I think Mr. He just mentioned The group will happily focus on the volume growth or the company would prefer to leave some room for a cheaper version to follow on after the volume taken off In order to effectively respond to peers' pricing adjustment and to better balance our near term profitability. So that's my first question.

Speaker 4

Thank you.

Speaker 2

All right. Thank you for your question. We've considered Internally, these two possibilities. First of all, we'll prioritize the scale before considering pricing, and we definitely expect to long term stable pricing. Now also we will take into consideration the cost structure of our products, including the inflation, For example, the LFP batteries and other parts, taken into consideration those factors together with our cost control measures, We definitely consider long term stable pricing at a more competitive level for G6 and also other upcoming models.

Speaker 2

But in a nutshell, You will we will prioritize the scale.

Speaker 5

Yes. Tim, let me just add here. So Tim, let me just add here. It's Brian. I think, first of all, the scale, we believe, will lead to a better profitability, ultimately, because Obviously, a number of costs can be amortized and reduced in a more efficient manner.

Speaker 5

And also, as you heard in our previous Description is that we aim to significantly lower the overall cost and bond for our vehicles in the coming months Over the coming year. So with better scale and our aim of achieving better cost saving on these A product, I think the probability will naturally return. So that's how we view the sequence of events in our strategy.

Speaker 4

Got it. Super clear. Thank you, Brian. So my second question is about the supply risk, because the P7i supply bottleneck will be resolved in June. But if there's any negative reacross to the supply ramp up to G6?

Speaker 4

In the meantime, G6 will be the 1st model built on New architecture with unibody aluminum casting, would that result in slower pace of production ramp up after June launch? So should we take that into consideration? Thank you.

Speaker 2

Thank you for your question. Now G6 is different from G9 in a sense that we actually are well prepared for its delivery. We've given it 2 months between the SOP to the final delivery. So we made the announcement in June and we expect to have the deliveries in July. And so in Q3, definitely, we expect a much Faster ramp up for the delivery of G6 compared to P7 or G9 in the past.

Speaker 2

And also G6 is different from P7i in a sense that we have a really well prepared supply chain to support the future delivery. And in terms of the technology application for the integrated aluminum die casting technology, definitely, it's been a challenge for the whole industry Facing the low yield rate of that particular technology. However, we've been in this particular using this technology for over a year. And right now, the development has been very satisfactory, and we expect to have no severe challenge in using this technology on G6. Thank you.

Operator

Thank you. And our next question today comes from Bin Wong with Credit Suisse. Please go ahead.

Speaker 6

My first question is about battery. Recently, the lithium copper price has declined. So what's the impact for your I'm back for sourcing and the margin in the Q2. Thank you.

Speaker 3

Ben, this is Dennis. Thank you for the question. Actually, in the Q1, we see the battery cost reduction compared with quarter for last year, we have about 5 And then in the second quarter, we see further reduction About 10% to 12% over the quarter 4 last year. So that's about 5 to 7 percentage points increase compared with the quarter 1. Having said that, we also have the marketing spending available marketing spending.

Speaker 3

So in terms of material cost, especially for the battery cost, we'll improve the margin by, for example, the battery cost would be We'll account for about 40% of the total cost. So 7 percentage points would translate into Like 3% to 4% margin improvement. That's from the mature side. But the other big chunk would be the Revenue side, that will also impact the margin as well. So this is the brief answer to your questions.

Speaker 6

Thank you. My second and last question is about the full year volume guidance. Previously, you actually guided this year, you target more than 30% growth. And did you maintain the same target if you maintain in prior in the second half this year? The average monthly volume will be 20 ks.

Speaker 6

So just want to know the full year volume target

Speaker 5

Regarding the volume growth, we still expect we're going to be growing faster than market this year. Obviously, the market growth this year is going to be tempered given what's going on in the industry. But what we see most importantly is that the 3rd and 4th quarter, We expect our growth will be significantly higher than the market growth. And also, we believe that With the G6 volume delivery starting in the Q3, we would like to aim to achieve monthly delivery over 15,000 vehicles per month in the Q3 as one of the targets. And then the 4th quarter, given the continuous growth And also additional model sort of a mix favorable changes, we think that we can actually also target Over 20,000 per month in the Q4 is our peak sales.

Speaker 5

So these are our goals in the second half.

Speaker 6

You so much. Thank you. That's all my questions.

Operator

Thank you. And our next question comes from Paul Gung with UBS. Please go

Speaker 7

ahead. Thanks for taking my questions. Two questions as well. The first question is regarding the new orders intake on the my first question is regarding the P7I, the orders versus our preparation on the supply chain. Can Can you quantify a little bit what was the order implied like monthly level?

Speaker 7

What is our production In preparation for that and why we have overestimated G9i demand or underestimated the T7i demand? Thank you.

Speaker 2

All right. Thank you for your question. Now regarding our supply chain For P7i, definitely, we experienced some challenges due to, for example, the supply chain and also, for example, The ups and downs of the pricing for NCM batteries, but right now, we have well prepared because for May June, we already Expect a ramp up in battery production capacity to supply in to prepare for our deliveries of P7i in the future. Now looking back for the past several quarters, basically the whole industry experienced challenges in terms of estimated their deliveries and preparing for that kind of market demand due to a number of factors, including the supply of different parts, the cost of different parts and also the overall environment of the industry. As a result, starting from Q4 going into Q1 this year, we have actually started a series of policies In our guidance and also estimates, that is more cautious and reserved in order to work better with our suppliers to reduce the gap in between the estimate of the deliveries and the actual preparation of the capacity.

Speaker 2

Going forward, we also will do better in optimizing our The matching with the future delivery estimates with our suppliers in terms and also our production capacity overall, so that we can actually do better In integrated, there's several aspects. Thank you.

Speaker 5

Paul, just to obviously, your question on the color of P7i, clearly, we our order momentum is far exceeds our capacity increase In the last couple of months, we think you can actually tell by the average wait time for the product in our Stores is stretched to over 6 weeks or even longer. We actually think with now hopefully the supply ramping up by June, they will alleviate some of these wait time pressure, which also in turn will help generate further momentum for the sales. So that's what we see today.

Speaker 7

So my Second question is regarding the brand image. We understand XPeng is pretty popular among young people. And right now, we are facing the young people with unemployment rates over 20%. Does that impact our demand? And also when you come out with NPV end of this year, normally, NPV are either for the commercial use For the older families, more mature families, so how shall we match the young brand image

Speaker 2

All right. Thank you for your question. Now XPeng's positioning is to really target young consumers, which is who is also tech oriented. And our sweet spot is really consumers between 25 years old to 35 years old. Right now, I mean, if I remember this correctly, the unemployment rate is really talking about fresh graduates from colleges that is over 20 I don't recall seeing I don't recall reading anywhere that it's 20% unemployment rate for young people.

Speaker 2

So That is the differentiation here I would like to point out. Another thing is that right now, among the targeted group of 25 to 35 years old, we really don't see a lot Impact on ourselves towards this particular consumer group regarding the overall the market environment. The second thing the second part of your question, how do we really connect the 7 seater NPV with younger consumers? This is a very good question. We have A lot of thinking and discussion internally.

Speaker 2

And as of the I mean, by the end of this year, when we roll out this new model, you can expect to hear about our answer by that time. Thank you.

Speaker 7

Thank you very much. Thank you.

Operator

Thank you. And our next question comes from Nick Lei with JPMorgan. Please go

Speaker 8

Just the first question is really about the sales and marketing and the channel strategy. Given you have the new model G3 In the Q4 ramping up and also new NPV starting to ramp up in 4Q, we talked about the new product strategy at NGP and so on. Can you elaborate a bit more on our sales channel strategy? And the second question is really about GP margin trend I understand you do not provide any guidance, but how should we think about the margin level in second half given the competition and given our pricing and

Speaker 2

All right. Thank you for your question. Let me take the first one. Regarding the changes that have been brought about by President Huang Since end of January, I mean, it has been really tremendous. She joined us as of the end of January, and it's been about 4 months now, and she's done a lot of changes.

Speaker 2

For example, starting from the organization, we've grouped together the trading team and also the sales team together, and we have also changed Our big middle office into a more swift and adaptable kind of smaller front office that allow us to be more agile. And the second change is that we used to have multiple lines running different operations. And right now, we have one big line of business operational team That actually coordinates different projects in different lines of business that allow us to actually improve our Net Promoter Score or NPS for several months in a row. Another big change happened actually to our marketing team. We have been doing a lot of things to improve the overall efficiency by using multiple kneeler tools, Doing different project base, operation and also flatten our organizational structure overall.

Speaker 2

Now also in our sales end, we have done a lot of training to really improve the skill of our salespeople, especially in terms of introducing different SKUs and different variation of our models in the market. Another big change also happened in the or to be expected is on our channel sales channel and distribution, both in China and also in the overseas market. And in Q3, you could expect to hear more about those big changes to come. And also in terms of our branding Yes. Well, we are going to actually instill more of the warmth and also the youth into our brand so that you can hear more Xpeng and be more clear about our positioning.

Speaker 2

So overall, I would say that definitely we have done a lot of changes overall And it all originated from our DNA of XPeng, but at the same time, you are seeing a new sort of a facelift version of our brand as well.

Speaker 5

And Dick, this is Brian. For your question on the margin, so for the Q2, we think given the modest volume increase as well as the older product mix Continue to be selling. I think there's still going to be margin pressure despite some of the battery cost savings that Dennis mentioned. But with the second half, the increased delivery volume increase was P7I, G6 as well as The new NPV by the end of this year, we think the overall gross margin will improve gradually with obviously changing of these product mixes. But the most significant margin increase will happen, I think, next year, given all these cost reduction measures as well as The further volume and scalability come into play.

Speaker 5

That's where we see the trend.

Speaker 8

Yes. Thank you.

Operator

Thank you. And our next question comes from Ming Li with BofA. Please go ahead.

Speaker 3

Okay.

Speaker 9

My first question is regarding the your expectation on the Reasonable listing company price in next 1 to 2 years if supply is more than a demand? And will you consider to change your battery repricing frequency to follow closely to a But raw material price and also what is your current volume sales breakdown by LIFO and NZM battery? Do you think that LIV battery sales cars will continue to increase?

Speaker 2

Thank you for your question. Now it's really hard to estimate the future ups and downs of the lithium pricing. But in the short term, I believe that the inflation of the lithium pricing should be temporary. And by the second half of the year, we expect to have a lower pricing For this material, but what is going to be the targeted or the right range price range for this material? It's very hard to But personally, I believe that within RMB 200,000 should be a reasonable range for it.

Speaker 2

Now right now, we are working with our supplier partners in a very manner, meaning that we actually take into consideration the inflation or the fluctuation of raw material We will launch a series of technological innovations to actually reduce the use of batteries, but supporting a wider or longer driving range, Which means that we are going to use more of LFP or other similar battery technologies in order to reduce our overall raw material costs while increasing or enhancing the safety of our products and driving up the driving range of our products to a satisfactory level of our customers. Thank you.

Speaker 9

So my second question is regarding your new software, the XMGP. How it help to increase of your more orders or more foot traffic to your stores. And besides that, since you mentioned that you will roll out the ex MGB service to more than 10 cities in second half This year, so do you think you can also get approval from each city government very quickly or there

Speaker 10

This is Charles here. I will address the question. First of all, I think as you know that we launched the CDN GP in 3 cities in China at the end of March, Namely Shenzhen, Guangzhou and Shanghai. So I think that's why I think, if you visit our stores in those cities, Right now, our customers can all drive the XN GP. And also we heard that also customers actually Requested to test drive the Xtend GP, which drive up the penetration rate of the Max trim of our P7I and G9 to more than 50% in those three cities in April.

Speaker 10

And we believe that as we're rolling out SNGP to more cities And also we continue to improve our X and GBC customer experience every quarter And we continue to see the upside of the penetration rate of the MaxStream of the our new models. To answer your second half of your question, think our clients to decouple our XMGP from HD Map starting from the end of Q3. So therefore, I think that because we our ability to decouple our XNGP from HD Map, so therefore, I think that we are Able to roll out our XNGP without the requirement of the government approval, etcetera. So therefore, I think we are expecting that Towards the end of the year, we can offer Xpeng GP services probably in a few dozen cities in China and more cities over the next couple of quarters.

Speaker 9

Thank you, Charles.

Operator

Thank you. And our next question comes from Pingyou Wu with CPIC Securities. Please go ahead.

Speaker 11

Thank you for the question. And I have a question for autonomous driving. And a lot of Chinese and foreign OEMs are doing the research and to produce autonomous driving. How do we see the Leadership of XPeng. And also we know that data is very important and well the Short term sales pressure are burdened on our technology improvement.

Speaker 11

Thank you.

Speaker 2

Thank you for your question. One thing that I would like to make clear is that for X NGP when it's used within a city in urban scenario, it's actually Quite different than highway NGP when it's used on a highway setting, especially within the cities. We're talking about areas without high definition maps. It's very hard to really judge how much ahead in the competition we are compared to our peers. Because right now within the industry, We only see a couple of companies that are able to claim that they have similar technologies, but they're really limited to scenarios where there is a high maps available, whereas for XPeng, we are actually able to roll out our X NGP software In areas without high definition maps and we also have the capability to actually roll out it further to 50 200 cities.

Speaker 2

So that is definitely very, very advanced. That's the only thing I can say. And typically, it It takes about 12 to 18 months to be able to use the X NGP Simulance functionality from the testing Phase of the grayscale testing to the actual rollout. So it's quite challenging to reach that milestone of the actual rollout. And so I believe Definitely for XPeng, we have very solid technology in our architecture that actually support multiple self cycle, including data cycle within the XNGP software itself.

Speaker 2

And so I would say, XPeng, on average, is leading ahead to competition by about 12 months' time. And the second part of your question is about the significance of data to the actual performance of the technology. Now I would say data definitely means a lot and it's very valuable to a ton of striving. However, right now, based on our current sales scale and Because right now, we are still doing vision based or vision centric kind of data gathering. And in the future, we expect to have Actually more data coming from, for example, language processing and language input and that will also help us to actually have a better performance in the software execution.

Speaker 2

And I think that right now, our capability to support that kind of data processing is sufficient. Definitely, in a longer term, data will Really means more when you have more autonomous driving cars on the road that can actually contribute to your data set, but It's in a much longer future. And so right now, it's very hard to say where or when the inflection point will be. Thank you.

Operator

Thank you. And our next question today comes from Jing Chang with CICC. Please go ahead.

Speaker 12

So my first question is about, as Mr. Hu Xiaoping has just mentioned that we hope to sell more than 20,000 units Per month, in the Q1, can you help us to break down our major model structure, including Sales percentage of G6, P7 and G9. So what do we think is the successful sales volume Of G6 and how to further improve the sales performance of P7 P9? And my second question is about can you help us To explain further explain the overall product planning by 2025, so how many models Our strategy and the main focus price range and what our new ideas about the premium market above RMB300000 and MRP below RMB 150,000. Thank you.

Speaker 2

Thank you for your question. But it's really hard to provide a very Definitive or clear answer since it has something to do with our future planning. Now what I can only say about Q4 is that, I think would only be satisfied if we can achieve, for example, for G6 deliveries, we expect it to be a 2x of P7s. And also, we Back to wrap up our G9 deliveries as well. So right now, we really cannot provide a clear sales breakdown for the monthly sales target of 20,000.

Speaker 2

Now going forward into 2025, we definitely already have the pipeline in place. We have Very clear plans for our future portfolio. What I can only say for now is that we are going to optimize our cost structure Also, we are going to a lot of modularized we're going to launch a lot of modularized sort of development on the same platform. We expect to have about 10 models in our 2025 lineup. And we still really prioritize the RMB200000 to RMB200000 price range and that will be our main We will have very limited number of offerings in below RMB 200,000 and also above RMB 300,000 price segment.

Speaker 2

Thank you.

Operator

Thank you. This concludes our question and answer session. I'd now like to turn the call back over to the company for closing remarks.

Speaker 1

Thank you once again for joining us today. If you have further questions, Please feel free to contact XPeng's Investor Relations through the contact information provided on our website or the peers in the financial communications.

Operator

Thank you. This concludes today's conference call. You may now disconnect your lines. Thank you.

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Earnings Conference Call
XPeng Q1 2023
00:00 / 00:00