Investors commit $500m to China EV maker Xpeng

The round comes at a time of uncertainty for China's homegrown EV makers. Sales took a hit in the second half of 2019 due to a reduction in subsidies for end-consumers and then plummeted 60% year-on-year in January and February due to COVID-19. Meanwhile, global carmakers are aggressively targeting China. In May, Volkswagen committed $2.2 billion to its local EV joint venture and to a state-owned battery manufacturer.

The latest investment takes Xpeng's total funding to approximately $2.3 billion. This includes the first tranche of the Series C, which came in a $400 million last November. Primavera Capital Group, Morningside Ventures, Eastern Bell Capital, IDG Capital, Yunfeng Capital, GGV Capital, and Matrix Partners China are among the company's other financial backers. It also has strategic support from the likes of Alibaba Group, Foxconn Technology Group, Ucar, and Xiaomi.

Xpeng was established by Chinese entrepreneur Xiaopeng He in 2015, a year after he sold web browser UCWeb to Alibaba Group. A longstanding Tesla fan, He backed an EV development team that spun out from Guangzhou Automotive Industry Group, which led to the creation of Xpeng. He nurtured this interest while serving as president of Alibaba's mobile business group.

The company became one of the first Chinese EV manufacturers with production model cars on the roads. It launched the G3, a sport-utility vehicle, in 2018 and followed up with the P7, a sports sedan, in April. The P7, which starts at RMB229,900 ($32,900), has the longest single-charge cruising range of any China-made EV. It is also defined as "the second generation of smart cars," capable of over-the-air (OTA) updates of most functions.

"I like Tesla, but I don't think Tesla is in line with China's local conditions," He previously told AVCJ, while predicting the P7 will deliver better first-year sales in China than Tesla's Model 3. "In China's large cities, parking spaces are often small and difficult to park in. Car companies can continuously improve the success rate and ease of use of automatic parking through OTA iteration. On this line, Tesla did not actually do much."

Xpeng looks to introduce new features to its cars every month. The assisted parking function has proved one of the most popular features on the G3.

Delivery of the P7 began at the end of June. This came shortly after the company received a production license for a new factory in Guangdong that will boost annual capacity to 100,000 units. The P7 is available through Xpeng's offline network of 99 experience centers, 64 service centers, and 27 sales outlets across 57 cities. There is also a 199-station charging network with a presence in 61 cities, as well as access to 200,000 third-party charging piles nationwide.

Xpeng sits alongside Nio, WM Motor Technology, and Li Auto among China's most well-funded independent EV manufacturers, but there is a long tail of start-ups in the space that have received PE backing. Daniel Li, a vice president at Lighthouse Capital, a local investment and advisory firm, expects many of these to close over the next 12 months.

Even the market leaders have struggled. Nio's stock has lost 30% in value since its US listing in September 2018, partly due to poor cost controls and overly ambitious expansion plans. It received a RMB7 billion government bailout in April. Meanwhile, WM has yet to close its $1 billion Series D, with COVID-19 blamed for the slow progress. On the flip side, Li Auto - previously known as Chehejia or CHJ Automotive - recently filed for a US IPO.

Local EV makers also face increased competition from Tesla, which delivered its first batch of China-made Model 3 vehicles last December, having previously relied on imports. The company has reduced its prices as well.

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• Topics
• Greater China
• Expansion
• Technology
• Cleantech
• China
• automobiles
• Hillhouse Capital Management
• Sequoia Capital