Sunday, 19 March 2023

XPeng Inc. (XPEV) Q4 2022 Earnings Call Transcript

by Berkeley Lovelace

XPeng Inc. (NYSE: XPEV) Q4 2022 earnings call dated Mar. 17, 2023

XPeng Inc. (XPEV) Q4 2022 Earnings  Call Transcript

Corporate Participants:

Alex Xie — Head, Investor Relations

Xiaopeng He — Co-Founder, Chairman and Chief Executive Officer

Hsueh-Ching Lu — Vice President, Finance.

Analysts:

Tim Hsiao — Morgan Stanley — Analyst

Paul Gong — UBS — Analyst

Bin Wang — Credit Suisse — Analyst

Nick Lai — J.P. Morgan — Analyst

Ming Lee — Bank of America — Analyst

Presentation:

Operator

Hello, ladies and gentlemen, thank you for standing by for the Fourth Quarter and Fiscal Year 2022 Earnings Conference Call for XPeng Inc. [Operator Instructions] Today’s conference call is being recorded.

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

Alex Xie — Head, Investor Relations

Thank you. Hello, everyone, and welcome to XPeng’s fourth quarter and fiscal year 2022 earnings conference call. Our financial and operating results were issued via Newswire services earlier today and available online. You can also view the earnings press release by visiting the IR section of our website at ir.xiaopeng.com.

Participants on today’s call from our management will include Co-Founder, Chairman and CEO, Mr. He Xiaopeng; Vice Chairman and President, Dr. 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 prepared remarks and the call will conclude with a Q&A session. 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 and uncertainties. As such the company’s results may be materially different from the views expressed today. Further information regarding these and other risks and uncertainties is included in the relevant public filings of the company as 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 include the 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.

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

Xiaopeng He — Co-Founder, Chairman and Chief Executive Officer

[Foreign Speech] Hello, everyone. In 2022, XPeng delivered more than 120,000 electric vehicles, a year-over-year increase of 23% and ranking Number 10 among emerging EV makers in China as measured by vehicle insurance registration volume. Throughout the year, a challenging macroenvironment and increasingly intense competition in the NEV market placed pressure on our performance. Amidst this pressure, we saw an opportunity to become a first mover in tackling the challenges faced by industry and examine inhibitors to our business growth, at the same time.

At the end of last year, I rapidly and decisively conducted a review of our strategies and implemented a series of significant adjustments to our organizational structure with a focus on improving areas of weakness. We have decided to start the change with ourselves and revamp XPeng’s business with a start-up mindset on an elevated platform with new angles. I believe XPeng is approaching an inflection point as we have clearly identified what our goals are and what our strengths and weaknesses are. We’re now building recovery momentum in our sales and market share expansion. As we do this, we’re placing a high premium on improving our organization and cost efficiency to fortify our strong foundation and better position our company for sustainable growth over the long term. Our overarching goal is to make XPeng a leader in the Chinese EV market and ultimately win the global EV race.

[Foreign Speech] What excites me is that our strategic adjustment has induced meaningful results in the first quarter of this year which gives me confidence that we will achieve sustainable and greater breakthroughs in the next few quarters. My first step to the organizational restructure started with changes and upgrades in our top leadership. Ms. Fengying Wang has joined our team as President of the company, bringing us more than 30 years of experience in the automotive industry. Fengying is taking full responsibility for our product planning and sales operations and is also in charge of our product platform management scheme. Her extensive industry experience, in-depth market insight and strong execution capabilities will help our product capture customer demand more accurately while greatly improving efficiency in our sales and services divisions.

At the same time, the adaptations to our management organization are geared toward a flatter and more concentrated structure. From February, all design, R&D, production, supply chain and organizational management function directly reports to me. I believe that these shifts will significantly improve our planning capabilities and lift the efficiency of our decision-making and execution in the coming months. More importantly, these adjustments have effectively refreshed our execution and competitiveness.

For the foreseeable future, I will remain focused on lifting the labor efficiency across our organization by multiple times, so as to generate increased customer value with the same headcount and greatly reduce costs across the full range of [Indecipherable] through technology and management innovation.

[Foreign Speech] With regards to our product planning and design, we concentrate on customer perceived value and product differentiation in our innovation. We’ll make substantial changes to future products model configuration mix, full vehicle modularized design and consistency in smart features. In terms of interior and exterior styling and design, to meet XPeng customers’ high standards for esthetics, I am directly running the styling design division and building three teams that compete with each other to generate creative ideas. These initiatives will continuously improve our interior and exterior styling and space design capabilities.

At the same time, I incorporated the net promoter score or NPS into the core performance indicators for a variety of business functions and required feedback collection on a monthly basis. The NPS performance evaluation will anchor the transformation of our product planning, design and development toward a customer-centric pathway. I believe our new products, our OTAs and new services to come will demonstrate substantial progress.

[Foreign Speech] In terms of branding and marketing, we’ll harness our core differentiation in autonomous driving to the full extent and enhance customer perception. We are broadening our addressable market, expanding our penetration from Tier 1 and Tier 2 cities to Tier 3, Tier 4 cities. So far, we have completed a preliminary merge between our branding and marketing teams and refreshed our overall strategy. This will help us improve the quality, effectiveness and flexibility of marketing activities in an effective way going forward, while significantly reducing marketing expenses. We have already flattened out the management hierarchy in our sales network. Furthermore, we are enhancing our network coverage, increasing competitive capabilities in our frontline sales staff and developing XPeng’s powerful data-driven sales touchpoints in order to achieve significant strides in sales growth.

[Foreign Speech] On March 10th, we officially launched the new P7i sports sedan, which is an upgraded version of our highly successful P7 model. Deliveries to customers also commenced in this month. I’m pleased to see our in-store traffic and test-driving volume both hit new highs in recent months following the P7i’s launch. This new product’s smart features, styling, design and performance among other clear advantages primarily with similar products were well received among customers. Amid the market’s prevailing weakness in new order intake, our results outperformed the market. Our new order intake in February increased 100% over the previous month. With the strong momentum of P7i orders following its official launch, we expect to see a considerable month-on-month growth of total new order intake in March. This marks an initial success following our comprehensive transformation, which has also boosted our company morale.

[Foreign Speech] Our second new product model coming up this year: the G6 will make its debut at the Shanghai Auto Show. Its official launch and vehicle deliveries will occur around the end of the second quarter. The G6 will bring the most advanced electrification and smart mobility technologies to the CNY200,000 [Phonetic] to CNY300,000-priced NUV, SUV markets. With unrivaled interior space, range, styling and interior decoration, we believe the G6 will become the top-selling model in its market segment. Following the ramp-up of G6 mass production, we expect G6 monthly sales target to be 2 to 3 times that of its P7 predecessor’s sales. In addition, in the second half of 2023, we’ll launch a brand new BEV seven-seat MPV. This new MPV model is designed to cater to customer cohorts that demand larger interior room while serving the needs of our family customers for a human-machine co-pilot.

[Foreign Speech] Recently, ChatGPT 4.0 and other AI-based applications have created a buzz among hundreds of millions of users on the massive potential of generative AI models. I’m also very excited about this. It represents a brand new phase of artificial general intelligence with on-premise step deployment that does not rely on cloud end, which not only redefines the pathway to realize autonomous driving, but also increases its efficiency. Given this development, there is an even higher possibility that autonomous technology further advances from L4 to L5. We expect to incorporate GPT technology deeply into XPeng’s business across the board to create groundbreaking user experiences and exceptional improvements to our operational efficiency.

[Foreign Speech] In late March, we began accelerating the OTA rollout of City NGP compatible with multiple models in several cities including Guangzhou, Shenzhen and Shanghai. Through City NGPs OTA, we took the lead in mass-producing the transformer-based BEV time series network or XNet in China, which achieved a milestone in deep learning algorithm development and application. In the second half of this year, XNGP, powered by XNet’s deep learning algorithms will no longer depend on a high-definition map. That said, XNGP will be supporting drivers on more urban roads across over 10 cities in China. Results from our testing showed the new version of XNGP outperformed peers actual on-road performance in the United States. This leads us to believe XPeng’s autonomous technology and its customer adoption is approaching a pivotal turning point.

[Foreign Speech] We have built notable leadership in smart technologies as well as customer adoption of smart technologies compared with peers. We’re driving our technology roadmap and commercialization pathway to cross over the inflection point and reach an accelerated growth curve. While keeping high safety standards remains a top priority of our technology advancements, we’ll also be focused on rapid development to improve scenario coverage, user experience, and software and hardware cost optimization.

In terms of scenario coverage, we have expanded the usage of the advanced technology from highway scenarios into city scenarios where ADAS are used at high frequency and even the common essential driving tool. Going forward, we’ll strive to further broaden ADAS usage to more end-to-end driving scenarios such as internal compound ways and nonpublic roads and expand our geographical coverage from three cities to more major cities nationwide beginning in the third quarter. In terms of user experience, we have achieved an important psychological barrier. We have achieved an important psychological barrier for customers to use autonomous driving to relieve drivers: that is, drivers can let the machine safely take the wheel, resting assured that they are acting only as a supervisor.

Looking ahead, we expect that through continuous OTA upgrades, XNGP’s driving skills will escalate every year, and in two to three years, reach a level that is equivalent to a human driver with three years of driving experience. We also expect that the number of manual takeovers per 100 kilometers will be reduced to one or fewer. Regarding cost efficiency, we plan to cut XNGP’s BOM cost significantly next year and adjust our sales model from one that bundles sales of software and hardware to one that splits the sales of software and hardware, which is going to enable autonomous driving on all of our new vehicles and allow more customers to use the latest autonomous driving capabilities.

In pursuit of breakthroughs in the aforementioned three realms, we’ll bring great value to our customers and build our competitive edge in technologies, delivering long-term sustainable revenue growth at scale and with improved margin contribution.

[Foreign Speech] It has been said that the past five-year period was the golden age for new energy vehicles. I believe the next five-year period will be the golden age for autonomous driving. During the five years to come, XPeng’s highly advanced autonomous driving technology and our efforts in optimizing our organization and making up for our weaknesses will help XPeng accelerate our ability to gain top market share.

[Foreign Speech] In the face of fierce competition, in addition to our leadership in autonomous driving and esthetic design, while greatly improving our product planning abilities, marketing efficiency and organizational capabilities, I believe more powerful cost control will be the core competitive edge that will enable XPeng to secure its leadership in EV market. We’ll advance the platform-based approach and technology innovation to propel our cost-reduction strategy.

Entering 2023, we’re applying a full platform engineering approach for our BEV vehicle platform, electrical and electronic architecture, powertrain system and ADAS software and hardware development. This signals that we are entering a new phase of car-making in a unified system. In this way, we’re able to develop products with superior product quality and customer experience at a faster pace and at a lower cost. In the past, our R&D strength were primarily manifested by our leading product performance. In the future, our R&D strength will be underlined by maintaining the leading performance, while achieving remarkable cost reductions.

We have mapped out our strategic execution roadmap with associated cost-reduction including an over 50% decrease for autonomous driving costs and an about 25% [Phonetic] decrease for vehicle hardware costs, including powertrain over the 2023 to 2024 period by means such as technology innovation and optimized configurations. I’m pleased to see that the design, technology, R&D, supply chain and manufacturing teams are now working in a synergistic way to make our efforts and products more competitive through innovation.

[Foreign Speech] In terms of cash liquidity, our cash on hand at the end of 2022 amounted to over RMB38 billion. As we have nearly completed our investment in our two manufacturing bases over the past few years, including this year, our capex will decline substantially. We have also established three powerful vehicle platforms that can support a series of new model launches over the next two years. Our R&D will further concentrate on initiatives that best corresponds with long-term trend and further differentiate our products in terms of customer experience and cost. We’ll also pursue improvement in our operating efficiency throughout the entire process. For example, within our sales operations, we strive to improve same-store efficiency by optimizing our store network. We believe these cost optimization efforts will start to deliver material results in the beginning — in the coming several months, including in the second half of this year.

[Foreign Speech] It has always been my intention to build a successful company that can grow in scale instead of a small company in a niche market or just any generic company out there. Expanding our scale and market share to achieve economy of scale in both software and hardware is the primary goal in our long-term strategy. Although the product and management adjustment cycle in the automotive industry is more difficult than other industries, and takes a longer period of time, we are still willing to sacrifice short-term sales and more patiently pursue greater victories in the medium and long-term.

[Foreign Speech] Excitingly, as we rapidly implement adjustments and changes to our management, in addition to instituting a host of upgrades and innovations in our product portfolio and marketing capabilities, we have seen encouraging changes and positive results. I’m firmly convinced that beginning in the third quarter of this year, XPeng’s monthly sales numbers will achieve significant growth, both sequentially and year-over-year as well as be much higher than the industry’s average growth rate.

[Foreign Speech] I would reiterate that our current focus is on building and improving our capabilities in organization, product design, marketing and cost control. Continuous efforts in refining management and accelerated new product launches in an era of autonomous driving will lead us to the next level of exponential growth. We’ll continue to strive for this goal. Lastly, we expect our total vehicle deliveries to be between 18,000 units and 19,000 units in the first quarter of 2023, and revenue to be between RMB4 billion and RMB4.2 billion.

[Foreign Speech] Thank you, everyone. I will now hand over to our Finance VP, Dennis Lu.

Hsueh-Ching Lu — Vice President, Finance.

Thank you, Mr. He and hello everyone. Now, I would like to provide a brief overview of our financial results for the first quarter of 2022. I will reference RMB only in my discussion today, unless otherwise stated. Our total revenues were RMB5.1 billion for the first quarter of 2022, a decrease of 39.9% year-over-year and a decrease of 24.7% quarter-over quarter.

Revenues from vehicle sales were RMB4.7 billion for the first quarter of 2022, a decrease of 43.1% year-over-year and a decrease of 25.3% from the last quarter. The year-over-year decrease were mainly attributable to lower vehicle deliveries for the G3 and P7, while the quarter-over-quarter decrease was mainly due to lower vehicle deliveries for the P5 and P7, with partially offset by the newly launched G9. Gross margin was 8.7% for the first quarter of 2022 compared with 12% for the same period of 2021 and 13.5% for the last quarter. Vehicle margin was 5.7% for the fourth quarter of 2022 compared with 10.9% for the same period of 2021 and 11.6% for the last quarter. The year-over-year and quarter-over-quarter decreases were mainly explained by the increased sales promotion.

R&D expenses were RMB1.2 billion for the fourth quarter of 2022, a decrease of 15.3% year-over-year and a decrease of 17.9% quarter-over quarter. The year-over-year and quarter-over-quarter decreases were mainly in line with timing and progress on new vehicle programs. SG&A expenses were RMB1.8 billion for the first quarter of 2022, a decrease of 12.9% year-over-year, and an increase of 8% quarter-over-quarter. The year-over-year decrease was mainly due to the decrease of the commission paid to the franchise stores associated with lower vehicle deliveries. The quarter-over-quarter increase were mainly attributable to higher marketing, promotional and advertising expense to support vehicle sales.

As a result of the foregoing [Phonetic], loss from operations was RMB2.5 billion for the first quarter of 2022 compared with RMB2.4 billion for the same period of 2021 and RMB2.2 billion for the last quarter. Net loss was RMB2.4 billion for the first quarter compared with RMB1.3 billion for the same period a year ago and RMB2.4 billion for the last quarter.

As of December 31st, 2022, our company had cash, cash equivalent, restricted cash, short-term deposits, short-term investments and time deposits in total RMB38.3 billion. To be mindful for the length of our earnings call, I will encourage listeners to refer to our earnings press release for further details of our financial results for the fourth quarter and full year 2022.

This concludes our prepared remarks. We will now open the call to questions. Operator, please go ahead.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question will come from Tim Hsiao of Morgan Stanley. Please go ahead.

Tim Hsiao — Morgan Stanley — Analyst

[Foreign Speech] So my first question is about the competition because the market with pricing — price segment of RMB200,000 to RMB350,000 or $30,000 to $50,000 is XPeng’s stronghold and the key volume driver. However, if you look at what happened over the past few quarters, I mean, Tesla, EV start-up [Phonetic], BYD and even traditional carmakers, EV brands, are getting more aggressive in this pricing segment. And I think yesterday BYD just upgraded its Han EV and Tang DM-i to focus on the RMB200,000-plus market and Tesla might consider having another round of price cuts.

So how do we think about the competitive landscape in this pricing segment and how could XPeng make sure that it’s upcoming models including G6 and the model next year could stand out in the crowd of competitors? Will we be more pricing-aggressive with more meaningful cost-down in the following quarters? So that’s my first question. Thank you.

Xiaopeng He — Co-Founder, Chairman and Chief Executive Officer

[Foreign Speech] Thank you for your question. It’s a very good one. Basically, we expect the market to experience a series of price cuts by different OEMs in the coming couple of years because of the very intensified competition or competitive landscape in the current market, especially for traditional OCE carmakers because we expect to see a lot of oversupply, overcapacity in the market as well as some reduction in raw material pricing, which will lay a good foundation for a different price cut to be expected in near future. And as a result, different brands and different players in the market will launch a series of price cuts in order to expand their market share.

Now as I mentioned in the prepared remarks that the current first priorities for XPeng is to optimize our organization as well as to expand our scale and in addition to that, we also will continue to improve our autonomous driving capabilities as well as optimizing our design language. Now next to it, we also will prioritize the cost optimization. In the past, we mainly focused on the development of the functionalities and the overall performance of our products. Now, when we expand our price — targeted price range to cover more than RMB250,000 and RMB300,000 to actually a little bit lower to RMB200,000, we realize there is actually a lot of room for improvement in terms of cost reduction, for example, just to reduce our overall BOM costs in the R&D sector and also to integrate our software, I mean, in aspects of our software and hardware design as well.

That is why in the coming future, we will, first of all, prioritize the scale development as well as improving our autonomous technology and overall product quality and performance, while improving our cost structure in many new areas, especially to be reflected in our newly launched products to be expected. And also, we will expect some strategic price reduction in the near future as well, so as to expand our market share and promote deliveries. Thank you.

[Foreign Speech] Looking back, in 2017, there were about 300 car-making startups and 70 passenger vehicle makers in the market. By now, there is only 50 players left. And in five years’ time, maybe there will be less than 25 and in 10 years’ time, less than 10, which means that by that time, the annual deliveries of each single carmakers will not be 100,000, 0.5 million, or 700,000, it needs to be at least 7 [Phonetic] million in order to survive, which means that we need to have a solid foundation in terms of our hardware and software capabilities as well as our cost-control capabilities as well in order to just survive in the market and the fears in intensified competition, not letting alone becoming the winner in the competition. And that is why in the coming five to 10 years, our priority will be to solidify our leadership in our technological R&D capability as well as our cost-control. Thank you.

Tim Hsiao — Morgan Stanley — Analyst

[Foreign Speech] So my second question is about the sales network. Could you please help to update us XPeng’s channel strategy this year where Tier 1, 2 cities were stated as strategically critical? The growth in lower-tier cities in China outpaced the higher-tier cities and became a key growth driver. So quite a few EV makers are targeting to penetrate into the lower-tier cities and so how is XPeng going to grow its presence in the lower-tier cities? And in the meantime, will the company change its hybrid business model consisting of the direct sales in the dealership? Will there be any material changes in upcoming quarters? That’s my second question. Thank you.

Xiaopeng He — Co-Founder, Chairman and Chief Executive Officer

[Foreign Speech] Thank you. Our newly recruited senior management member, Ms. Wang Fengying actually is way more experienced than me in terms of channel distribution. And since one month after her enrollment, she already had numerous discussions regarding our distribution channels and our network development. So for this year, we have several strategies in place already. First of all, we will maintain our current model of having directly run and franchise our stores in order to promote our sales and distribution. However, the mix from franchise stores will increase. And the second point is that we have and we’ll continue to flatten out our management structure, so as to improve the overall service quality as well as to improve the profitability and efficiency of our distribution channels.

And the third point is that we will actually expand the functionality of those kind of channels to include not only sales purposes or functionality, but also to increase 4S function as well so as to provide a more comprehensive set of services to our customers. Now, one of our upcoming next steps, which I can reveal right now is that we don’t believe that it would be very effective to have a large number of small distributors or small channels. Rather, we prefer to prioritize the development of quality channels to improve our overall service and distribution efficiency. Thank you.

[Foreign Speech] Regarding the second part of your question, which is the channel network in Tier-3, Tier-4 cities, first of all, we will work with our partners to expand the channel and network. In addition to that, we will also design and curate appropriate products suitable for Tier-3, Tier-4 cities. And we do have some face-lifted products upcoming to be expected. Thank you.

Tim Hsiao — Morgan Stanley — Analyst

[Foreign Speech] Thank you very much for all the insightful update.

Operator

The next question comes from Paul Gong of UBS. Please go ahead.

Paul Gong — UBS. — Analyst

[Foreign Speech] My first question is regarding the — on the arrival of Ms. Wang Fengying’s new role as President. What has been her biggest criticism on the XPeng moat [Phonetic] or for the current situation and what is her plan to change it?

Xiaopeng He — Co-Founder, Chairman and Chief Executive Officer

[Foreign Speech] Now, this is a very interesting question. Ms. Wang has been with us — has arrived for more than one and a half months. Her biggest criticism for the company is twofold. First one is on the planning side and the other is on sales and marketing. I mean, this is definitely a very positive sign, because it is better to see the problems and have solutions rather than being fully complacent without seeing the root cause of the problems. And so right now, we are in full force to correct some of the mistakes that we previously had. And personally, I feel a lot of pressure from Ms. Wang because she is working seven days a week. And right now we are all following this trend of being very, very diligent at work. So that is a lot of pressure on me.

Paul Gong — UBS. — Analyst

[Foreign Speech] So my second question is regarding your interesting comments on the GPT’s application into the smart vehicles. Can you give us some kind of some example how to imagine such kind of technologies to be used in the long-term in the smart vehicles? And if so, shall we pay for some kind of technology royalty or kind of technology servicing fee on that?

Xiaopeng He — Co-Founder, Chairman and Chief Executive Officer

[Foreign Speech] Thank you for your question. Now definitely ChatGPT and related AI technologies will provide a lot of values for our mid-term and long-term development. Now when we look at autonomous driving technology or capabilities, the lower level or medium level kind of autonomous driving technology always faced the conundrum of being not smart enough as human drivers because cars definitely can be very capable as a driving vehicle. But in terms of decision-making, a lot of it comes down to the intelligence level. So the fact that ChatGPT AI technology allows on-premise deployment as well as cloud and connection, will actually be a catalyst in terms of the development of autonomous driving technology all the way from Level 4 to Level 5.

Now, in terms of the potential fee or cost of adopting the technology, first of all, we will look at the near-term application in the software side, which will be much sooner than its application on the hardware side because its application in the hardware, we are talking about integrating the software together with the hardware, which is quite a different story from just applying it on the software side, and we mainly will look at some of the key areas in, for example, education and also document processing, language processing, etc. And definitely we expect to see a lot of variations related to ChatGPT technology in China, and we will select the right partners for XPeng in the future according to our developmental pathway. And right now, we are in conversation actually with a lot of potential partners and in regards to the potential cost, we believe it’s quite minimal. Thank you.

Paul Gong — UBS. — Analyst

Thank you very much.

Operator

The next question comes from Bin Wang of Credit Suisse. Please go ahead.

Bin Wang — Credit Suisse — Analyst

[Foreign Speech] I actually got two questions. Number one is about your cost reduction. You have mentioned about 25% cut in the vehicle component cost, which is very amazing. Can you give me more detail about how you can achieve that? For example, do you use integrated die casting to the cost-cutting, that is very important? The second question is about G9. G9 actually has been doing not good recently, but previously you have seen kind of G9 volume be even higher than P7. How you can maintain the G9 sales momentum and what’s your maintenance patterns for G9? Thank you.

Xiaopeng He — Co-Founder, Chairman and Chief Executive Officer

[Foreign Speech] Specifically speaking, the cost reduction target of 25% is not amazing per se, but it definitely indicates that in the past, we definitely still were not doing good enough. There’s a lot of room for improvement in terms of cost reduction. And right now, we are seeing multiple ways to actually reduce our cost of manufacturing and overall production. For example, as you mentioned, we have some new technologies in our hardware, the integrated stamping techniques that can help us to reduce the cost of manufacturing the whole car and also in terms of pack of the whole vehicle as well. We have some viable methodology that can help us to reduce the cost by about 50% to 60%. In addition to that, in terms of the overall chip and battery, we are now employing or adopting the whole vehicle platform engineering technique that can also help us to drive down costs.

So as a result, there is a mix of methods and arrays of ways for us to reduce cost in terms of our powertrain overall, our whole vehicle platform, engineering, our architecture, scale and also different configuration as well. So overall, in the coming periods, in the second half of the year, first half of next year and also the second half of next year, we have a set of different developmental stages goals in terms of our cost reduction and the effect can be expected. Thank you.

[Foreign Speech] Now in regards to the deliveries of G9, definitely in the price range of RMB300,000 [Phonetic] among all the BEV rivals, there’s been a lot of challenges in pushing its sales. However, in the near future, we do have several moves in place to boost its sales deliveries. The first one is that we are ramping up several configurations. And the second one is by implementing the XNGP function on G9 as well as on P7i, which we believe will greatly enhance the effectiveness of G9 as a product.

In addition to that, we are now gathering a lot of positive feedback from our customers who have received their G9 in terms of the product quality and overall performance. In addition to that, we believe that the launches of P7i,as well as G6 will boost foot traffic in our stores as well as encourage interest in G9, as well as part of the product line. In addition to that, we are now already seeing reinvigorated sales or deliveries in March compared to the months before which was February in the market. And so we are still very confident that we can — we are on the right trajectory to meet our delivery target for G9 for the year.

Bin Wang — Credit Suisse — Analyst

Thank you.

Operator

The next question comes from Nick Lai of J.P. Morgan. Please go ahead.

Nick Lai — J.P. Morgan. — Analyst

[Foreign Speech]

Xiaopeng He — Co-Founder, Chairman and Chief Executive Officer

[Foreign Speech] I think what you mentioned in your questions may be viable 15 years ago, which was that you can basically sell anything as long as they are cheap enough. However, it might not work today. We still believe that product quality speaks volumes. So for this year, in terms of our overall marketing and pricing strategy, we have a set of different aggressive goals, for example, the second half of the first quarter as well as with the upcoming several quarters of the year. So we definitely expect a lot of reinvigorated deliveries or sales outcome for the rest of the year.

Nick Lai — J.P. Morgan. — Analyst

[Foreign Speech]

Xiaopeng He — Co-Founder, Chairman and Chief Executive Officer

[Foreign Speech] Now in regards to battery supply, first of all, in January last year, we thought this pricing inflation happened in the industry, which really encouraged the development of hybrid vehicles in the market, but hurt a lot of development in the EV sector. However, this year, we are happy to see that the pricing of batteries have come down and these newly launched price war in the industry led by a lot of battery makers, especially the leaders, is definitely a very good sign or very beneficial for the development of BEV and can help us to improve our pricing competitiveness as well.Now, so far, based on our conversation with our battery suppliers, we are confident that the price reduction — the degree of the price reduction by Xiaopeng supplied by our supplier partners will be more aggressive than the industry average and that’s just from the outside.

Looking internally, we also have discovered different ways to optimize our cost structure to reduce our costs in terms of the powertrain, batteries as well as our pack by, for example, integration as well — integrating some of the parts, as well as replacing traditional NCM or NCA batteries with LFP batteries also by extending the usage or the driving range that it can support per battery by about 10% to 20%. All of these ways can help us to further drive down our battery costs, and you can actually see the effectiveness or outcome in the coming 12 months.

Nick Lai — J.P. Morgan. — Analyst

[Foreign Speech]

Operator

The next question comes from Ming Lee of Bank of America. Please go ahead.

Ming Lee — Bank of America. — Analyst

[Foreign Speech] My first question is regarding product competitiveness of G6, because management just mentioned that you expect G6 in the future to stabilize, monthly sales could be 2 to 3 times of P7, but because G6 is in a similar price segment of P7, so what is product competitiveness to give you the confidence? [Foreign Speech].

Xiaopeng He — Co-Founder, Chairman and Chief Executive Officer

[Foreign Speech] I really cannot review too many details regarding our yet-to-launch models. But you can expect to learn more about G6 in mid to low [Phonetic] April this year in Shanghai Auto Show. But something that I can mention about some highlights of G6 is, first of all, it has a longer driving range, supported by our optimized weight of the whole vehicle, driven by our integrated stamping technology as well as better heat management and wind resistance management technology as well. In addition to that, the interior space of G6 is amazing, especially if you are looking at the second row of the car, the seating area is pretty spacious. And another characteristic the G6 will highlight is its esthetics, the design language follow the XPeng style which is going to be very appealing to our customers. Thank you.

Ming Lee — Bank of America. — Analyst

[Foreign Speech] So my second question is related to the battery technology. So in the future where you can see that we use different type of battery for example later a cylindrical type of battery. And besides that, regarding your current orders backlog, G9 you already provided the high voltage charging battery. What is the — is that ratio high enough or if it is not high enough, is this because the charging infrastructure is still not at max or consumer feel comfortable based on the current normalized battery pack size? [Foreign Speech].

Xiaopeng He — Co-Founder, Chairman and Chief Executive Officer

[Foreign Speech] Regarding G9 and all of our upcoming new models and face lift versions, all of them will be equipped with the fast-charging capabilities suitable for 800 voltage and also silicon carbide fast-charging technology and we will also expand the construction of this fast-charging infrastructure as well.

Now what I would like to mention is that this fast-charging technology will not only work on the dedicated charging pile, but also in the original charging pile as well. So you can actually speed up the charging by using the technology on both charging piles. In addition to that, we also have put in place our modularized optimization technology to optimize the batteries as well as the chip in the design of those new vehicles. So we are open to the possibility of adopting cylindrical batteries in the future.

Ming Lee — Bank of America. — Analyst

[Foreign Speech]

Operator

Due to time constraints for this call, I’d like to turn the call back over to the company for closing remarks.

Alex Xie — Head, Investor Relations

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 Piacente Financial Communications.

Operator

[Operator Closing Remarks]

The post XPeng Inc. (XPEV) Q4 2022 Earnings Call Transcript first appeared on AlphaStreet.

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