XPENG Rallies on Plans to Significantly Cut Production Costs

Shares of electric vehicle (EV) maker XPENG (NYSE: XPEV) are moving sharply higher in Monday’s trading session after the Chinese auto firm shared its plans to cut manufacturing costs.

Speaking at the Shanghai International Auto Show, the company’s president Brian Gu presented “SEPA2.0”, described as the next-generation end-to-end integrated technology architecture.

The platform will be used to build future EV models and is expected to cut future models’ R&D cycle by 20%, Gu said. XPENG is due to present its new G6 Ultra Smart Coupe SUV later this week in Shanghai, which is the first new production model built on SEPA2.0.

“We envision that this evolutionary intelligent architecture will lead smart EV technology development for the next three years. It will make rapid advancements in technology available for our customers as standard, with faster software upgrades, stunning cost savings and elevated product experience,” said He Xiaopeng, Chairman and CEO of XPENG. 

The EV maker believes the new platform will slash the costs of its power train by 25% while an additional 50% will be saved on intelligent driving features by the end of 2024. For instance, the SEPA2.0 platform lowers the OS (operating system) software costs by 85% and voice assistant service costs by 50%.

Xiaopeng said XPENG targets annual sales of 3 million EV units if it wants to survive the arms EV race. 

Last year, the company delivered 120,757 EV units to generate 26.86 billion yuan. However, the company’s net loss nearly doubled to 9.14 billion yuan.

“From 2023 to 2027, the industry will move from a phase of rapid EV penetration to an era of accelerated disruption by smart technologies, and we are confident that we will further strengthen our leadership in smart EV technologies,” Xiaopeng said.

Following Monday’s rally, the XPEV stock is now trading approximately flat year-to-date.