August 22nd, 2020 by Zachary Shahan
“Smart” electric vehicle startup Xpeng filed for an IPO on the New York Stock Exchange (NYSE) a couple of weeks ago (the SEC filing is here), and I essentially broke the news while also diving into the company more than I think any other media site did. There’s now an update on the filing — Xpeng is aiming to raise $1.1 billion.
The aim is to sell 85 million shares American depositary share (ADS) at a price between $11 and $13 per share. “At the top end of the range, XPeng’s valuation stood at $9.17 billion,” Reuters notes.
“The Chinese EV maker said existing investors Alibaba Group (BABA.N), Coatue, and Qatar Investment Authority had indicated interest in buying up to $200 million, $100 million and $50 million, respectively, of the ADSs being offered.
“Backer Xiaomi Corp (1810.HK) had also indicated interest in buying up to $50 million of the ADSs.
“Alibaba will own all of XPeng’s class C ordinary shares, representing 14.9% of the voting power of its total shares immediately after the completion of the offering, XPeng said.”
For much more background on Xpeng, I recommend reading “Who is Xpeng?” I don’t think there’s a more comprehensive piece on Xpeng in English media. The piece comes from exclusive interview and company access over the past few years and digging up almost everything I could find on the internet about Xpeng (prior to this SEC filing).
I also recommend “Xpeng Files For IPO On NYSE — Looking Through Xpeng’s History” because it goes through my personal evolution on what I’ve thought of the company from January 2018 to today.
Jumping off of today’s news (though, I guess if you are east of California it’s yesterday’s news), and before diving further into the details of the SEC filing and Xpeng’s vehicles and technology, below this paragraph is the company’s mission and overview as submitted to the SEC. As I noted on August 7 when Xpeng filed its IPO application, that document is more than 200 pages long. If you want to explore it yourself, go for it and let us know what you discover! Otherwise, I intend to finally go through it this weekend and pull out what I find most interesting.
Driving Smart EV transformation with technology and data, shaping the mobility experience of the future.
We are one of China’s leading smart electric vehicle, or Smart EV, companies. We design, develop, manufacture and market Smart EVs in China. Xpeng was founded in 2015 with a vision to bring Smart EVs to Chinese consumers through innovation in autonomous driving, smart connectivity and core vehicle systems. Today, we are a proven leader in the rapidly growing Smart EV market, producing popular and environmentally-friendly vehicles, namely an SUV (the G3) and a four-door sports sedan (the P7). Our Smart EVs offer attractive design and high performance, coupled with safety and reliability. According to the IHS Markit Report, the G3 was among the top-three best-selling electric SUVs in China in 2019. The P7 offers an NEDC range of up to 706 km (439 miles) on a single charge, which is the longest among EVs that are available in China, based on the MIIT NEV Catalogues.
Our Smart EVs appeal to the large and 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, for our Smart EVs. According to the IHS Markit Report, the mid- to high-end segment represented 30.6% of China’s passenger vehicle market by sales volume in 2019 and had a higher EV penetration rate than other price segments. Consumers choose our products primarily because of attractive design, smart mobility experience, advanced technology and compelling value proposition. As of June 30, 2020, over 90% of purchasers of the G3 chose the versions with autonomous driving capabilities. As of the same date, approximately 50% of customers ordered the versions of the P7 that can support XPILOT 3.0, our upcoming advanced autonomous driving system.
In order to optimize our customers’ mobility experience, we have strategically chosen to focus on developing full-stack autonomous driving technology and in-car intelligent operating system, as well as core vehicle systems, including powertrain and the electrical and electronic architecture, or the E/E architecture, in-house. According to the IHS Markit Report, our XPILOT 3.0 is expected to offer the highest level of autonomous driving capabilities in commercially available passenger vehicles today. Through our proprietary software, core hardware and data technologies, we are able to develop and deploy innovative products rapidly and efficiently, which gives us an advantage over our competitors in China.
We started production of the G3 in November 2018, and as of July 31, 2020, we had delivered 18,741 units of the G3 to customers. We started production of the P7 and began delivery in May 2020, and as of July 31, 2020, we had delivered 1,966 units of the P7 to customers. We plan to launch our third Smart EV, a sedan, in 2021. The table below sets forth certain features of the G3 and the P7.
Our autonomous driving system and in-car intelligent operating system allow customers to enjoy a new smart mobility experience, and our Smart EVs can be upgraded through over-the-air, or OTA, firmware updates.
- XPILOT, our autonomous driving system, provides assisted driving and parking functions tailored for driving behavior and road conditions in China. Currently deployed on the G3 and the P7, XPILOT 2.5 offers adaptive cruise control, adaptive turning control, lane centering control, automated lane changing and automated parking. As of June 30, 2020, our adaptive cruise control function had been used for 25.1 million kilometers of driving cumulatively, and our lane centering control function had been used for 11.1 million kilometers of driving cumulatively. We plan to roll out XPILOT 3.0 by early 2021. XPILOT 3.0 will feature several new functions, including a navigation guided pilot for highway driving and advanced automated parking, in addition to the functions available in XPILOT 2.5.
- 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. Xmart OS enables a broad range of smart connectivity functions, such as artificial intelligence, or AI, voice assistant, smart navigation and an app store. 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, and our customers can enjoy more functions and better user experience.
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 industry-leading driving range as a result of our comprehensive engineering efforts. We collaborated with a top-tier supplier to develop the P7’s prismatic lithium NCM cells, which offer high energy density and low height. Furthermore, we integrated a braking system that offers advanced energy recovery capability, and the P7’s low air drag and three-in-one electric drive system also contribute to its high energy efficiency. Our collaboration with a German engineering and design firm to develop the P7’s chassis allows 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 an omni-channel sales model, which combines a data-driven and targeted online marketing strategy with a physical sales and service network. As of June 30, 2020, our physical sales and service network consisted of a total of 147 stores and service centers, which cover 52 major cities in China. A substantial majority of our stores are strategically located in shopping malls in tier-one and tier-two cities, 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 data-driven and targeted online marketing through a variety of channels to further enhance our brand recognition and acquire customers.
Our manufacturing philosophy centers around 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 produce the G3 through a contract manufacturing collaboration with Haima, which has over three decades of automotive manufacturing experience, at its plant in Zhengzhou, Henan province. The arrangement allows us to retain effective control of key manufacturing and procurement processes and product quality with minimal required capital outlay. In addition, we have built our own plant in Zhaoqing, Guangdong province. We started the production of the P7 at the plant in May 2020 and will also utilize the plant for future models. We are leveraging the manufacturing know-how and experience gained at the Haima plant to quickly ramp up the Zhaoqing plant. The Haima plant and the Zhaoqing plant have annual production capacity of up to 150,000 units and 100,000 units, respectively.
As of June 30, 2020, we had 3,676 employees in China and the United States. As of June 30, 2020, approximately 43% of our employees focused on research and development, of which 66%, 17% and 17% were dedicated to automotive design and engineering, autonomous driving and intelligent operating system, respectively.
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