XPeng Motors Vice-President and Chairman Brian Gu sat down with Yahoo Finance’s Brian Sozzi to discuss the company’s latest fourth quarter earnings results, how the company is continuing to grow, and competing with local and foreign companies in the electric car market.
BRIAN SOZZI: China-based EV maker XPeng is out with its latest earnings showing a 302.9% increase in deliveries in the fourth quarter. Sales rose 345.5% from a year ago, while losses narrowed. The company is forecasting deliveries to surge 450% in the first quarter.
Let’s get the latest on XPeng from vice chairman and president Brian Gu. Brian, always good to speak with you. Thanks for taking some time here. So listen, the market in China continues to be, I would think many would say, robust. How would you sum things up a couple of months into the year, the state of the market?
BRIAN GU: Yeah, I think the overall momentum in the market is still very strong. I mean, I think you saw the end of last quarter, the delivery numbers from all the players has picked up. And we have recorded our best quarter ever and also a huge increase over the year before.
And the first quarter typically is actually a low season for Chinese auto sales. Because of Chinese New Year, most of the people actually went home on vacation. And a lot of the government agencies are not open for registration of vehicles. That’s why you see a drop in February, which is Chinese New Year. But overall, we see a big momentum continue in March and the months ahead. So we have a very good hope that 2021 will again be a robust year for EVs.
BRIAN SOZZI: So you’re seeing momentum into March?
BRIAN GU: Yes. I think the momentum in terms of both auto and delivery are picking up from February lows.
BRIAN SOZZI: Are you surprised by how the stock prices have reacted this year?
BRIAN GU: Well, I think it is quite a significant drop we’ve seen in recent weeks. I think, obviously, coupled with the overall market that’s hitting the high growth and high value stocks in other sectors as well. But for EVs, I think a couple of things come to mind. One is the first quarter is generally a low season. So the delivery number for Chinese players are low. The other factor is Tesla also has come down quite substantially, which drags down the other stocks with it as well.
BRIAN SOZZI: So much focus here in the US has been on the chip shortage impacting automakers. Have you seen any impact to your business?
BRIAN GU: Well, we have visibility towards the next few months. And we don’t see any problem with our capacity. But obviously, beyond that, I think we are closely watching the development of this situation. Lucky for us is that we don’t really have a large volume like Volkswagen and GM that they actually are requiring a large supplier of those chipsets. So our quantities, I would say, rather more manageable than them. But still, I think this is a development we are closely monitoring as well.
BRIAN SOZZI: Do you think it gets worse in the years to come? It’s not just XPeng here developing these next-generation automobiles, really, essentially, these cars, EVs are rolling computers at this point.
BRIAN GU: Yeah, I think the chips on the vehicles are becoming more and more popular and more and more important. Obviously, there are various types of chips. Some of the chips can be replaced by other manufacturers because they don’t require these high technology manufacturing, whereas some of the AI chips that’s actually more advanced, we’ll probably see a more difficult replacement.
So I think as this develops, I will see there’s more replacement proposals or options for vehicle makers. And that, I think, will ultimately solve the problem.
BRIAN SOZZI: There are a couple catalysts at XPeng coming up right now, chief among them your third model. What can you tell us about that?
BRIAN GU: Yeah, well, for us, 2021 is very exciting because we have, actually, a number of new products that we’re going to introduce to the market. Almost every quarter, we’ll announce something new to deliver. The most exciting product, obviously, is our third model, which is actually a brand new sedan model that incorporates Lidar in its autonomous driving system.
It will be the world’s probably first production level vehicle that has Lidar technology in its system. And we think that will really increase our ability to provide very high autonomous driving experience to our drivers in China because I think Lidar adds to the safety redundancy that’s required for autonomous driving in more city settings.
BRIAN SOZZI: And also to help support your new model, so you ended the year with 160 stores. What’s your goal this year in getting more stores in the ground? And where are you building them?
BRIAN GU: Well, we’ll continuing to expand our sales and services network. So by the end of this year, we’ll probably have over 300 stores in China covering over 110 cities. And I think the stores will continue to increase density of the large Tier One cities as well as build out Tier Two, Tier Three city networks.
So it will be overall growth for our coverage. And more importantly, we will probably be adding more self-owned stores because we found we actually have a much higher efficiency and productivity using our self-owned stores.
BRIAN SOZZI: And how many supercharger networks do you have up and running?
BRIAN GU: Right now at the end of last year, we have over 160 supercharging stations. And we plan to have that number increase to over 500 by the end of the year.
BRIAN SOZZI: And another, I would say, catalyst too, you’re also building another manufacturing plant. What are the details on it?
BRIAN GU: Well, we actually have currently in operation our Zhaoqing plant that’s building our T7 at the moment. And obviously, the new product, the third product will be also built in Zhaoqing. But that capacity is going to be quickly filled up because our increase in vehicle growth.
So we actually have a deal with the Guangzhou government that they actually provided financing and land to give us the construction– start construction of the second plant, which will be in operation by mid next year. That allows us to produce our fourth product in that new plant in Guangzhou. So that is a very nice way to connect the capacity needs we need to increase the volume next year.
BRIAN SOZZI: You briefly mentioned Tesla a few minutes ago. Is Tesla still the benchmark in the Chinese EV market? Because I see what XPeng doing. I see what Li Auto is doing. I see what Nio is doing. And you’re all really, I would say, taking the fight to Tesla.
BRIAN GU: Well, I think Tesla is a very powerful brand. And they have product and technologies that currently is leading China. Their delivery last year was obviously very impressive. But I think we’re all offering something different.
From XPeng, we want our products to have the best in class technology, more suited for the Chinese drivers. So that’s why our in-car experience, our charging convenience, and our autonomous driving capabilities, we want to differentiate compared to Tesla as well because we spent so much effort and focus on improving that for Chinese customers and drivers.
BRIAN SOZZI: How far do you think China is ahead of the US in terms of the EV market?
BRIAN GU: I think it depends on how you compare. I think China definitely has a lot more players that has been trying very hard to develop a business. And I think you start to see emergence of some of the local leaders. But US, I think, still has a lot of the technology. We still have respect for Silicon Valley that has done a tremendous amount of autonomous driving and powertrain and battery technologies.
So I think in terms of market development, I think China, given the government support as well as so many players trying to develop new products, new policy, and faster penetration. But I think US still, I think, where we see a lot of cool and best technologies that will actually power the growth of the industry as well.
BRIAN SOZZI: Looking forward to following this industry a lot more in the months and years ahead. Brian Gu, XPeng vice chairman and president, thank you for joining Yahoo Finance.
BRIAN GU: Thank you, Brian.