Xpeng Motors Looks to Shake Up China’s EV Market with New Budget Model

Xpeng Motors has priced the first model of its budget brand MONA below $17,000 which could further shake up China’s electric vehicle (EV) industry which is anyway the most competitive globally with a flurry of domestic and global players vying for a share of the world’s biggest market for new energy vehicles (NEVs).

MONA M03 electric hatchback coupe would be Xpeng Motor’s cheapest model. Notably, models priced between 100,000-150,000-yuan ($14,035-$21,052) account for a third of the overall EV market in China. Currently, BYD is the market leader in the Chinese NEV market and sells models for even below $10,000.

However, other companies including Xpeng Motors and NIO have been looking to launch budget models to increase their target market in China. Notably, over half of the vehicles sold in China are either an EV or plug-in hybrid vehicles (PHEV). Last month, of the total 1.35 million EVs and PHEVs sold globally, 0.88 million were in China only.

Xpeng Motors Announces The Price of New Model

In a virtual event, Xpeng Motors’ co-founder and CEO He Xiaopeng said, “We have seen strong demand from first-time car buyers who are young and have a budget of a little more than 100,000 yuan.” He added, “We want to grant them their wish with intelligent cars that can match their budget.”

The model has received a good reception and Xpeng said that it booked over 10,000 orders within the first 52 minutes of its formal launch yesterday.

Notably, China is the cost leader in the EV market and players like Ford and Tesla have praised Chinese companies.

Musk Has Praised Chinese EV Companies

During Tesla’s Q4 2023 earnings call in January, CEO Elon Musk said, “Frankly, I think, if there are not trade barriers established, they will pretty much demolish most other companies in the world.”

The billionaire added, “The Chinese car companies are the most competitive car companies in the world. So, I think they will have significant success outside of China depending on what kind of tariffs or trade barriers are established.”

To be sure, this is not the first time that Musk has praised Chinese EV companies and the world’s richest person had made similar comments a year back during Tesla’s Q4 2022 earnings call.

“I think we have a lot of respect for the car companies in China. They are the most competitive in the world. That is our experience,” Musk had then said.

He added, “And the Chinese market is the most competitive. They work the hardest and they work the smartest. That’s — so a lot of respect for the China car companies that we’re competing against. And so, if I would have guessed, there are probably some company out of China as the most likely to be second to Tesla.”

Ford has also said that the company would need to compete with Chinese EV companies if it wants to be successful in the industry.

How Analysts Reacted to Xpeng Motors’ New Model

Reacting to Xpeng Motors’ new model, Michael Dunne, founder and CEO of consulting firm Dunne Insights, said, “With cars priced under $20,000, China is further cementing its new position as the world center for automotive manufacturing.” He added, “China can produce cars more cheaply than anyone else in the world.”

Didi Took a Stake in Xpeng Motors

Last year, Chinese ride-hailing app Didi took a 3.25% stake in Xpeng Motors in exchange for its electric vehicle and autonomous driving assets. As part of that agreement, Xpeng Motors was supposed to produce budget cars under the “MONA” brand. The company expects annual deliveries of the budget model to be over 100,000 which is quite significant considering its current delivery run rate.

Last year, Volkswagen also partnered with Xpeng Motors to build two EVs on its platform and also buy a stake in the company for a total consideration of $700 million. The deal was a pathbreaker for not only XPEV but also the Chinese EV ecosystem as it reflected the confidence of the German auto giant in a startup EV company.

The two companies are also said to be exploring expanding their collaboration to international markets.

XPEV’s CEO Has Bought More Shares

Xpeng Motors’ shares have looked strong this week after reports that Xiaopeng has bought over 2 million shares for over $13.5 million. XPEV shares are underperforming the markets in 2024 after a strong show in 2023.

The Chinese EV industry is currently witnessing an intense price war amid massive overcapacity and slowing growth. The EV war in China began in Q4 2022 when Tesla lowered car prices. The EV giant’s price cuts were followed by similar announcements from other carmakers including Xpeng Motors, Ford, Toyota, NIO, and Nissan.

Wall Street analysts are getting cautious about Chinese EV stocks amid the intensifying price war and the feared slowdown in sales growth.

Xpeng Motors Is Launching Several New Models

Xpeng Motors is banking on a flurry of new launches to drive up its shipments. During the Q2 2024 earnings call earlier this month, Xiaopeng said, “With our AI technology advancement targeting product innovations and technology-driven cost reductions, coupled with an enhanced global and domestic marketing and sales system, these new products will fuel our sustainable growth trajectory.”

He added, “I’m hopeful that the delivery pace of MONA M03’s fast production ramp-up will set new XPeng records, which will help quickly enhance the reputation of this outstanding product through word-of-mouth and support a strong increase in sales.”

Meanwhile, last year also Xpeng Motors created waves with the launch of its G6 SUV. However, the model’s sales trajectory has been disappointing after the initial momentum, and markets would now look forward to how the MONA models perform.

For now, XPEV shares are looking strong and have gained 16% over the last five trading sessions amid optimism over the MONA brand with reports of its CEO adding more shares also being a cherry on the top for bulls.