China is the largest automotive market in the world, in which over 18.4 million, out of 19.7 million of the passenger vehicles sold in 2020 are powered by internal combustion engines, or ICE vehicles, according to IHS Markit. We believe that the evolvement of core technologies of traditional ICE vehicles has been limited over the last decades. As a result, the evolving customer demand may have not been sufficiently satisfied. In contrast, autonomous driving, vehicle connectivity and electrification are expected to revolutionize the future of mobility, which represents a smart, energy-efficient and environmental-friendly mobility experience.
Since the establishment of our company, we have taken an innovative technology path to our envisioned future of mobility. We intend to empower consumers with our differentiated Smart EVs that can offer disruptive mobility experiences. We believe this can be achieved by fast iteration of software and seamless integration with hardware, which enable us to lead the innovation of Smart EV technologies and provide differentiated Smart EV products to consumers.
Within only six years since our inception in 2015, we have become one of the leading Smart EV companies in China, with leading software, data and hardware technology at our core and bringing innovation in autonomous driving, smart connectivity and core vehicle systems. In contrast to incumbent automotive original equipment manufacturers, or OEMs, and some pure-play EV startups, who generally rely on software solutions from third-party suppliers, our speed of innovation and unique capability to tailor our vehicle software to evolving needs of Chinese consumers and China-specific road conditions are our core competitive advantages. As of the Latest Practicable Date, we are the only automotive company based in China that develops full stack autonomous driving software encompassing localization and high definition map fusion, perception algorithm and sensor fusion, behavior planning, motion planning and control in house and has deployed such software on mass-produced vehicles according to IHS Markit. According to the same source, our latest proprietary autonomous driving system, XPILOT 3.0, represents one of the most advanced autonomous driving technologies adopted on commercially available vehicles. Among China-based automakers, we have delivered the most passenger vehicles with a closed-loop data capability, allowing the accumulation of valuable field data and corner cases to train our deep-learning algorithms and autonomous driving software, according to IHS Markit. As we continue to advance our proprietary autonomous driving technology, we plan to deploy automotive-grade LIDAR technology to further enhance the visual-based perception capability of our third car model, the P5, unveiled in April 2021 which, according to IHS Markit, is expected to become the world’s first mass-produced Smart EV equipped with LIDAR upon delivery.
In addition to our leadership in Smart EV technologies, we are also leading the business model transformation of the automotive market. Enabled by our Smart EV technologies, we are the first and only China-based automotive company to monetize an in-house developed full stack autonomous driving solution, according to IHS Markit. We offer our proprietary advanced autonomous driving system XPILOT 3.0 software as a paid service to our customers, and as of March 31, 2021, over 20% of the car owners of the P7 had purchased and activated such function. Moreover, we work with our ecosystem partners mainly including content providers to expand the content offerings in our Xmart OS system and we have started to monetize certain options and features on a subscription or paid basis.
Our Smart EVs appeal to the large growing base of technology-savvy middle-class consumers in China. We primarily target the mid- to high-end segment in China’s passenger vehicle market, with prices ranging from RMB150,000 to RMB300,000. According to IHS Markit, we were one of the top five best-selling brands in the mid- to high-end EV segment in China based on sales volume in 2020. Consumers choose our products primarily because of attractive design, interactive smart mobility experience, long driving range and advanced technology.
We are building a rapidly expanding, diversified portfolio of attractive Smart EV models to capture the growing demand for Smart EVs and appeal to the differentiated needs of a broad customer base.
‧ We started delivery of the G3 in December 2018, and had delivered 30,102 units of the G3 to customers as of March 31, 2021. According to IHS Markit, the G3 was the second best-selling battery electric SUV in the mid- to high-end segment in China during the period of 2019-2020.
‧ We started delivery of the P7 in May 2020, and had delivered 23,036 units of the P7 to customers as of March 31, 2021. According to IHS Markit, the P7 has become one of the top five best-selling mid- to high-end battery electric sedans in China in the second half of 2020.
‧ In March 2021, we started delivery of the P7 Wing, a limited edition designed to accentuate the sporty and dynamic styling of the sports sedan with scissor-style front doors that are traditionally only available in luxury sports vehicles.
‧ In March 2021, we introduced new versions of the G3 and the P7 that are equipped with lithium iron phosphate battery to provide our customers with a wider variety of options.
‧ In April 2021, we have unveiled the P5, our third Smart EV, which is expected to be the world’s first mass-produced Smart EV equipped with LIDAR upon delivery, according to IHS Markit, and plan to commence mass delivery in the fourth quarter of 2021.
‧ We have a strong pipeline of new Smart EV models. We plan to start the delivery of the G3i, the mid-cycle facelift version of the G3, in the late third quarter of 2021. We plan to launch our fourth Smart EV, an SUV, in 2022, featuring advanced autonomous driving system and enhanced core vehicle systems.
Our autonomous driving system and in-car intelligent operating system allow customers to enjoy a differentiated smart mobility experience, and our Smart EVs can be upgraded through OTA firmware updates to introduce enhancements and new functionalities. Continuous innovation in software is one of the key factors that differentiate our Smart EVs and has become a critical value proposition appealing to customers. We have started to monetize the software and content offerings on our Smart EVs.
‧ XPILOT, our proprietary autonomous driving system, provides assisted driving and parking functions tailored for driving behavior and road conditions in China. XPILOT 2.5 offers adaptive cruise control, adaptive turning control, lane centering control, automated lane changing and automated parking. We rolled out navigation guided pilot (NGP) for highway driving, a function of XPILOT 3.0, in January 2021, which marked the start of monetization of XPILOT 3.0 with options for customers to purchase lifetime or annual services. We also rolled out the Valet Parking Assist, an advanced automated parking function of our proprietary XPILOT 3.0 in June 2021.
According to IHS Markit, XPILOT 3.0 represents one of the most advanced autonomous driving technologies adopted on commercially available vehicles. It had cumulatively assisted our customers in approximately 2.3 million kilometers of highway driving as of March 31, 2021. In March 2021, we conducted an autonomous driving expedition with a fleet of P7s from Guangzhou to Beijing, covering a total distance over 3,000 kilometers across six provinces in China to showcase the capability of NGP for highway driving.
Further updates to XPILOT 3.0 will be released later in 2021 to further enhance capabilities available for customers. According to IHS Markit, our third model, the P5, which was unveiled in April 2021, is expected to be the world’s first mass-produced Smart EV equipped with LIDAR upon delivery. Leveraging our visual-based perception capability, complemented by LIDAR, we plan to roll out XPILOT 3.5 which will support NGP for major urban roads.
Leveraging field data and corner cases accumulated from our fast-growing number of Smart EVs on the road and our closed-loop data capability, we can continuously train our algorithms and implement frequent upgrades, and provide our customers with an advanced and evolving autonomous driving system.
‧ Xmart OS, our in-car intelligent operating system, supports a smart cockpit that delivers a seamless, easy-to-use, and voice-controlled smart mobility experience. It enables a broad range of smart connectivity functions, such as enhanced capability of AI voice assistant, smart navigation and an app store. The AI voice assistant is able to engage in continuous driver- vehicle dialogs and execute requests covering a broad range of scenarios. In 2018, the utilization rate of our AI voice assistant was approximately 97%. Such utilization rate remained over 99% in 2019, 2020 and the first quarter of 2021. The in-car app store allows our customers to conveniently access third-party services and infotainment, and allows us to develop our smart connectivity ecosystem and create value for all participants.
‧ Our technological capabilities in software and hardware integration and E/E architecture enable us to effectively deliver OTA firmware updates. Through such updates, we are able to frequently upgrade our Smart EVs throughout the product lifecycle, which enables our customers to enjoy more functions and a better user experience. As of March 31, 2021, we had completed 22 OTA firmware updates with 128 new features added. In January 2021, we released the first OTA update of XPILOT 3.0, which included NGP for highway driving, and in June 2021, we rolled out the Valet Parking Assist, an advanced automated parking function.
We design, develop and engineer our core vehicle systems in-house, including the development of key technologies relating to powertrain and E/E architecture to deliver superior and reliable vehicle performance. For example, the P7 has achieved an industry-leading driving range as a result of our comprehensive engineering efforts. We collaborated with a top-tier supplier to develop the P7’s battery cells, which offer high energy density and low height. Furthermore, we integrated a braking system that offers advanced energy recovery capability, which coupled with the P7’s low air drag and three-in-one electric drive system enable high energy efficiency of the P7. Our collaboration with a German engineering and design firm to develop the P7’s chassis allowed us to offer a superior driving experience in terms of performance, drivability and handling. As a result of our efforts in modular design across key aspects of Smart EVs, we have strategically established two Smart EV platforms. These platforms are scalable for both SUVs and sedans with different wheelbases within a wide range, which allows us to develop new models in a fast and cost-efficient manner. We have commenced development of a new Smart EV platform.
We seek to continuously expand our customer reach by extending our online and physical sales and service network. We have an omni-channel sales model, which combines a data-driven online marketing strategy with a physical sales and service network, and we strive to ensure consistent brand image, customer experience and price across all sales channels. As of March 31, 2021, our physical sales and service network consisted of a total of 178 stores and 61 service centers, covering 70 cities in China. A substantial majority of our stores are strategically located in shopping malls, as we believe such locations enable us to raise our brand awareness and attract customer traffic in a cost-efficient manner. In addition, we actively engage in online marketing through a variety of channels to further enhance our brand recognition and acquire customers.
We aim to offer our customers a convenient charging and driving experience by providing them with access to a vast, rapidly-growing charging network. Our customers can choose to charge their Smart EVs using home chargers, at XPeng-branded super charging stations or at third-party charging piles, many of which are connected to our charging network. As of March 31, 2021, there were 172 XPeng-branded super charging stations, covering 60 cities in China. Each XPeng-branded super charging station has about six to seven super chargers, which has a peak power output of 120kW. We will continue to expand the XPeng-branded super charging network coverage to provide greater accessibility and enhanced charging experience to our customers. In September 2020, we launched a free charging program to provide qualified car owners with free charging services at XPeng-branded super charging stations and certain third-party charging stations, and, as of March 31, 2021, such program had covered 140 cities in China.
Our manufacturing philosophy centers on quality, continuous improvement, flexibility and high operating efficiency. We take a lean production approach, with the aim of continuous optimization in operating efficiency and product quality. We started production of the P7 at our plant in Zhaoqing, Guangdong province, in May 2020. We produce our G3 through a contract manufacturing collaboration with Haima, at its plant in Zhengzhou, Henan province. Such arrangement has allowed us to retain effective control of key manufacturing and procurement processes and product quality with minimal required capital outlay at the initial stage of our development. The Zhaoqing plant and the Haima plant have annual production capacities of up to 100,000 units and 150,000 units, respectively. To further expand our production capacity, we are planning to construct new Smart EV manufacturing bases in Guangzhou and Wuhan, with an expected annual production capacity of up to 100,000 units each.
Our total revenues grew rapidly from RMB9.7 million in 2018 to RMB2,321.2 million in 2019, and further to RMB5,844.3 million in 2020. For the three months ended March 31, 2021, our total revenues were RMB2,950.9 million (US$450.4 million), representing a significant increase compared to RMB412.1 million for the three months ended March 31, 2020. Our Smart EV deliveries increased from 29 units in 2018 to 12,728 units in 2019, and further to 27,041 units in 2020. For the three months ended March 31, 2021, our Smart EV deliveries were 13,340 units, representing a significant increase compared to 2,271 units for the three months ended March 31, 2020. Along with strong revenue growth, our gross profit margin increased from (24.3%) in 2018 to (24.0%) in 2019, further to 4.6% in 2020, and further to 11.2% for the three months ended March 31, 2021.
As of March 31, 2021, we had 6,132 employees in China and the United States. As of the same date, 39.8% of our employees focused on research and development, of which 62.1%, 16.3% and 21.5% were dedicated to automotive design and engineering, autonomous driving and intelligent operating system, respectively.
According to IHS Markit, in the NEV industry, there were 54 automotive OEM brands that sold 1,000 or more units of NEVs in China in 2020, and in aggregate they accounted for 99.1% of the market share in the China NEV market. The top 5 OEM brands by NEV sales volume accounted for 46.4% in China in 2020. According to IHS Markit, XPeng had a market share of 2.0% in the China NEV market and 4.7% in the mid- to high-end segment of the China NEV market in 2020 and was not among the top 5 OEM brands in either segments.
According to IHS Markit, there were 45 auto OEM brands that had sold 1,000 units or more EVs in China in 2020, and in aggregate they accounted for 98.7% of the market share in the China EV market. The top 5 OEM brands by EV sales volume accounted for 51.4% in China in 2020. According to IHS Markit, XPeng had a market share of 2.8% and ranked 12th in the China EV market and market share of 6.6% and ranked 4th in the mid- to high-end segment of the China EV market in 2020.
Source: XPENG-W (09868) Prospectus (IPO Date : 2021/06/25) |