With $17,000 Car, Can Xpeng Reach 500,000 Sales A Year? – CleanTechnica

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Xpeng rolled out a market-shaking electric car today, the M03. It’s a big new entrant for a few reasons.

First of all, simply being as sleek and premium-looking as it is and coming in at only 120,000 yuan ($16,833), one has to think it will sell in high volumes. Note that this very affordable car is coming from one of the leading “smart electric vehicle” companies in the world, one that is often first to roll out new tech or features in China. Even if the M03 doesn’t have all the bells and whistles of its more expensive siblings, the brand carries a lot of weight for such a low price. Not to mention its design!

Secondly, while the cheapest option is 120,000 yuan ($16,833), the higher trim option, the M03 Max, has advanced autonomous driving tech and is actually the cheapest car on the market with advanced autonomous driving technology. It’s the only car under 200,000 yuan ($28,055) that has advanced autonomous driving tech, and its 150,000-yuan ($21,042) price is well below 200,000 yuan.

Like other young startups, Xpeng is still not profitable. (Recall that Tesla didn’t become profitable until it scaled up production and sales of the Model 3 in the second half of 2018, something I’ll come back to.) However, Xpeng reportedly thinks that it can reach profitability on the back of this low-cost, high-volume EV after ramping up production.

Word on the street from the launch event, which was lined up with Xpeng’s 10-year anniversary, is that this new model could help in critical ways. “With Mona, loss-making Xpeng expects to achieve a better economy of scale to break even. The company said previously that it expected annual sales of at least 100,000 MONA cars,” Reuters reports. “Xpeng’s gross profit margin has improved this year thanks to a 20% increase in the number of EVs sold in the first seven months from a year earlier and a revenue boost from offering technology services to Volkswagen.”

Xpeng sold 11,145 vehicles last month. If we multiplied that by 12, we’d be talking 133,740 annual sales. Xpeng’s target of selling at least 100,000 MONA vehicles a year seems like a safe target. It appears MONA EVs like the M03 could easily reach that number. Combining those new MONA vehicle sales (their minimum) and Xpeng’s existing sales rate from more expensive models, that gets us up to 234,000 sales a year.

Tesla became profitable in the 3rd quarter of 2018 when it sold 83,500 cars. Multiplying that by four translates into an annualized sales rate of 334,000. So, Xpeng would still be 100,000 off of that at 234,000 a year. However, my first thought was to consider whether Xpeng could reach a million sales a year with these lower-priced MONA EVs. Perhaps that is too ambitious, but 100,000 MONA EVs seems too cautious.

BYD is selling about 2.5 million vehicles a year in China. It’s also now selling vehicles in dozens of other countries. With Xpeng’s full lineup of EVs in China, including these new mass-market low-cost models, and its EV models available elsewhere, 500,000 sales a year seems highly attainable. And if the company can reach that scale, one has to hope it would be able to reach profitability at that point, joining the ranks of now highly profitable EV makers Tesla and BYD.

Of course, I don’t know the full extent of competition on the Chinese market in this segment, even though I edit our extensive China EV sales reports each month. However, I don’t see any low-cost vehicle that, in my eyes, can genuinely outcompete the Xpeng M03.

How many of these new Xpeng vehicles could the company sell in South America, Africa, and elsewhere in Asia? Furthermore, even if you doubled the price, that would be about $34,000, and you know a large number of people in the US and Europe would be eager to buy even a $34,000 EV from Xpeng!

Xpeng actually acquired Didi Global’s EV development arm, and that’s what led to the low-cost M03. It appears to have hit a home run with this new model, but we’ll have to wait to see.