Xpeng heads for Germany

The Chinese EV pure play targets Europe’s biggest market

Xpeng heads for Germany
Xpeng is aiming to leverage what it needs to compete in China's cut-throat market to make a big splash in Europe

China’s Xpeng will launch two vehicles into the German market in 2024: the Xpeng 7 sports sedan and the Xpeng G9 SUV.

The firm already sells in Scandinavian markets and the Netherlands. But it is setting significant store by its entry into Germany.

"Germany is the most important market defined by size and by the standards set by all carmakers," says Xpeng president, Brian Gu. "Success in Germany will define our success in continental Europe."

German OEM Volkswagen will take a minority stake in Xpeng as part of a partnership announced in late July. But there is no evidence yet that this China-focused relationship will extend to VW seeking any sort of collaboration with the Chinese OEM in Europe.

As with many of the Chinese players turning their gaze to exports, and Europe in particular, Xpeng's strategy owes something to ever-increasing competition at home. “China is actually quite competitive,” say Gu. “We need to figure out how to really differentiate in this group.”

Lessons learned

But the advantage of China’s crowded market is that the lessons learnt there should stand firms in good stead when they aim to go elsewhere. Chinese customers do not “really hold onto legacy brand equity as much” says Gu, rather “they embrace new technology, new brands and trying new markets”.

“At the same time, these are the pickiest consumers you can imagine — they demand everything. They demand the best features, the lowest prices, delivery immediately. So there are things that you have to really hone in on to be able to compete in that market.

“If you are successful in China, I think that you will probably be quite successful outside of China as well,” Gu predicts. “All these capabilities that you are really forced to develop to compete in that market will give you the runways for international markets.”

European pushback

But he does not expect Europe’s established OEMs to simply sit back and let new entrants eat their lunch in their home market, even if the continent’s “pace of development probably is slightly behind China”. “I see there is a huge commitment by European companies to really make sure that they are not behind.

“I think a lot of OEMs are finding new ways to develop capability by working with companies like ourselves, partnering with other names, and also… investing large amounts of dollars into areas that really matter, like electrification and smart software. I will never discount the capability of the large OEMs to try really hard to come back,” says Gu.

Xpeng is hoping that the groundwork it has put into its German entry will pay off. “We have had a small team of our people in the German market for two years, looking at the vehicle with consumers and asking what consumers were thinking about and what they need,” Gu continues.

“What was the overwhelming feedback is that the level of technology in the product and the design, particularly the interior design, is very much what we are looking for in the future.”

No-go areas

Certain countries are much less on Xpeng’s international expansion radar, in particular the US, and perhaps Japan and the UK too. “North America is a hugely attractive market, providing significant opportunities for intelligent manufacturers.” Gu admits But I think, so far, I do not see any chance of entering into that market. It must be something to study harder to make sure that we are comfortable to enter this market.

“It is going to be a very competitive market and also it is not an easy market to enter, he continues, noting that it took South Korean OEMs “decades to establish themselves there”.

The firm has no plans to retrofit any of its existing models with right-hand drive (RHD) capabilities, which will limit its abilities to penetrate markets that drive on the left. It will consider RHD for new models, but not every launch will have those capabilities.

“We want to think about the bulk of the right-hand driving market. What are the sizes and types of vehicle that are popular? We want to make sure that, when we design right-hand model products, [we do] not simply just copy everything that we do on the left-hand drive, because the markets are different,” Gu says.

This means that markets with the great potential for RHD drive sales will be prioritised. And that most likely means a focus on models that would sell well in South and Southeast Asia, rather than the more premium markets of Japan or the UK.

“We are not in a position to design a product for a specific country yet,” says Gu. “It has to be a product for the overall market, the largest market you can target.”

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