Before the MONA M03 launch, when I met with Xpeng representatives, the first thing they said was, "This time, we won't make mistakes."

Again, full of confidence. The fourth cycle in two years, with the same rhetoric and a familiar price surprise—over 10,000 orders in 52 minutes.

Indeed, two major mistakes were made in the past two years. From being a top-selling new energy vehicle brand to falling outside the top 10, He Xiaopeng essentially has no room for error.

The first mistake was the unreasonable pricing and SKU strategy for the Xpeng G9, which disrupted the momentum of the Xpeng P7 and failed to reach higher price points. The second mistake was that despite the G6's success in capturing the market upon launch, insufficient production capacity and preparation led to a wave of cancellations. Orders could have supported monthly sales exceeding 10,000, but the highest monthly sales figure in the past 12 months was only 8,750 in November 2023.

"No snowflake in an avalanche feels responsible." This perfectly describes Xpeng. Just ten days before the launch, the auto insurance industry announced that Xpeng had lowered its vehicle damage insurance prices. High accident rates due to advanced driver assistance systems and issues with the zero-to-total loss ratio made insurance companies hesitant to cover Xpeng vehicles. At the launch, He Xiaopeng expressed gratitude for support, especially during difficult times.

However, Xpeng P5, the earliest model to use LiDAR, now has the worst intelligent driving performance within the Xpeng lineup. Continuous price adjustments since 2023 have come at the expense of customers. Additionally, in November 2023, over a thousand Xpeng P7 owners inquired about OTA issues.

Frequent minor mistakes, such as the 10th-anniversary celebration and the MONA M03 launch, which were announced to start at 7 pm but delayed by 10 minutes.

The final path: Learn from Huawei, BYD, and NIO

The only way for Xpeng to save itself is with a big move. The technical and market strategy for the MONA M03 borrows from the operational logic of Huawei HarmonyOS, BYD, and NIO.

During the two-hour launch event, He Xiaopeng spent 30 minutes reflecting on a decade of vehicle manufacturing. The core message was that Xpeng is an innovator, pioneer, and perseverer. It aims to create unique and fun vehicles, leading the way in cabin design and intelligent driving technology. After the event, in polls asking which quote from He Xiaopeng stood out the most, many chose, "Xpeng is crossing the river by feeling the stones, while others are crossing by feeling Xpeng."

Using a youthful metaphor, this can be interpreted as high emotional intelligence (EQ) demonstrated by He Xiaopeng's stubbornness and persistence at the launch, or low EQ if seen as unwavering even when making decisions that inconvenience long-term customers or the market.

"We've been working on flying cars for nine years. Many said it was impossible, but now more companies are interested," said He Xiaopeng, exemplifying his persistence. Internet companies often follow the logic of incubation and venture capital investment, continuing to wait if initial attempts fail. This mindset applies to flying cars but not necessarily to the automotive consumer market. Xpeng's claims of being first in various categories, such as high-speed intelligent driving and city intelligent driving, do not necessarily translate to market leadership given the departure of the initial team, frequent changes in senior management, and underwhelming market performance.

Many, including myself, hoped Xpeng would emulate companies like Intel or Amazon, gaining a first-mover advantage. However, the reality is that Huawei leads in intelligent driving in both public opinion and actual capabilities, while Xpeng struggles to reach monthly sales of 10,000. This undermines Xpeng's claims of being first in various areas.

In contrast, other new energy vehicle makers have successfully leveraged first-mover advantages. NIO has established itself in battery swapping and premium branding, while Huawei's HarmonyOS Intelligent Driving is also gaining traction. All three have expanded their initial advantages.

What does Xpeng have?

The answer is that with limited options, Xpeng must compete on cost-effectiveness and marketing.

"The price is fine; I've already placed an order. It's a steal!" When the MONA M03's starting price was announced at no more than 135,800 yuan, Zhang Lei hesitated at the dealership, considering whether the M03's price would justify buying it over the P7 or G6.

However, as the prices of 119,800 yuan, 129,800 yuan, and 155,800 yuan were revealed, Zhang Lei immediately placed an order. He was swayed by He Xiaopeng's statement that "at 130,000 yuan, most vehicles offer less than 600 km of range."

Zhang Lei's consumer behavior reflects that of many. Current order data shows that the mid-range 620km ultra-long-range version priced at 129,800 yuan accounts for over 70% of orders. While impressive, He Xiaopeng likely feels a mix of emotions.

At the launch, He Xiaopeng highlighted the MONA M03's advanced intelligent driving capabilities as its unique selling point within the 200,000 yuan price range. However, early order data suggests that consumers may not yet fully appreciate this feature as Xpeng's strongest attribute.

Still, some made different choices based on their experiences and perspectives, opting to wait and see.

A common critique among observers is, "If a McPherson strut and torsion beam suspension can lead to a bestseller, does that mean Chinese automaking has regressed, and we should abandon independent suspensions?" This reflects the long-standing Contempt Chain in the automotive industry.

Many potential customers with a science background question the MONA M03's specifications. For instance, it uses BYD's Blade Battery (unmentioned by He Xiaopeng at the launch) with a 62.2kWh capacity and a 218hp, 250N·m electric motor. In comparison, the BYD Dolphin Knight Edition, also using a Blade Battery, has a 204hp, 310N·m motor and a 60.48kWh battery yet offers less range than the M03. This discrepancy raises questions about either BYD or Xpeng's technology.

Potential Xpeng customers wonder if the brand has truly addressed past issues like insufficient production capacity, price drops soon after launch, and delayed deliveries. He Xiaopeng addressed these concerns, stating that significant efforts have been made to improve production capacity and that the standard M03 will be delivered in September. However, the MAX version, the only model within the 200,000 yuan price range with advanced intelligent driving capabilities, will be delivered five months later in early 2025, leaving uncertainty about its competitiveness.

Ultimately, it's evident that the MONA M03 borrows from BYD, Huawei, and NIO. Its competitors will undoubtedly include these same brands.

A Decade of Automaking, but He Xiaopeng's Business Model Remains Unproven

The MONA M03 follows BYD's cost-effectiveness strategy and aligns with Huawei's HarmonyOS intelligent driving ecosystem, similar to NIO's top-down approach.

However, the issue is that He Xiaopeng claims profitability for the MONA M03 despite its low pricing, attributing this to cost reductions through technological innovation.

Yet, Xpeng has never demonstrated outstanding cost reduction capabilities, unlike BYD, Geely, or Changan. Its sudden parity with industry leaders in this regard raises questions. Aligning with Huawei is understandable, but mirroring NIO's strategy by offering advanced intelligent driving capabilities at lower price points could soon lead to competition with NIO's third brand, Firefly, which also offers battery swapping and comparable pricing.

Li Bin, NIO's CEO, emphasized in 2023 that by leveraging NIO's technology and infrastructure, prices would become increasingly competitive. Xpeng follows a similar logic by developing and manufacturing its own AI chips for large models, enhancing in-vehicle computing power and leveraging customer data to improve AI capabilities. These will be integrated into the upcoming Xpeng P7+ and other models.

"The challenge lies in the two ISP algorithms; we'll see how they perform," said an engineer after the launch, referring to the chip's development. He Xiaopeng chose not to disclose the chip's manufacturing process, leaving room for speculation. Enhanced in-vehicle computing power allows continuous learning and improvement of AI models, potentially rewarding customers who contribute data.

Technological advancements translate into intense competition with BYD, Huawei, and NIO.

At 129,800 yuan, the MONA M03's main selling point is its competitiveness against BYD models in the 100,000-150,000 yuan price range, offering lower prices, longer range, and higher specifications. However, BYD dominates this segment with models like the Yuan PLUS, Dolphin, Qin PLUS, and Qin L, which are sales champions in their respective categories.

In the first half of 2024, BYD held over 50% market share in the 100,000-150,000 yuan price range, contributing over 600,000 sales. For Xpeng to reach its goal of over 10,000 monthly sales, it must compete with BYD, Geely, GAC, Changan, Chery, Volkswagen, and Leapmotor.

In addition, it has also formed direct competition with Huawei-affiliated companies. At present, the slogan of Deep Blue Automobile is "left hand super-range, right hand Qiankun intelligent driving." The upcoming new car, Deep Blue L07, also emphasizes intelligent driving, and aims to surpass Xiaopeng's XNGP and Huawei's ADS3.0 Qiankun intelligent driving, albeit in its basic version. The current guidance price range of Deep Blue SL03 is between 139,900 and 209,900 yuan. The emergence of Deep Blue L07 is bound to lead to competition with Xiaopeng, and a battle is inevitable.

Of course, the most fundamental issue is the business closed-loop. According to Xiaopeng's public information, they have jointly invested 4 billion yuan over four years. Earlier reports indicated that Didi had already invested over 1 billion yuan in basic research and development, meaning Xiaopeng's investment is approximately 3 billion yuan.

Based on estimates from relevant institutions in 2023, the Qin PLUS, priced at 99,800 yuan, is expected to have a gross profit of 20,000 yuan per vehicle, with expenses and research and development accounting for 15% and net profit accounting for 5%, resulting in a net profit per vehicle of 5,000 yuan.

Therefore, if Xiaopeng can match BYD's costs and profits, and with a 3 billion yuan investment in research and development, MONA M03 would need to sell over 500,000 units just to cover the costs in the R&D field alone. According to its officially announced target of selling over 100,000 units annually, how much competitiveness it will retain after five years remains uncertain.

Closing Remarks

The first half is electrification, and the second half is intelligence; this is a consensus among many industry leaders.

He Xiaopeng clearly stated in a communication meeting that after 10 years of car manufacturing, Xiaopeng's primary focus has been on technology and innovation. Nowadays, the focus is gradually shifting to users, and efforts will be intensified in developing business models.

This, in fact, is the biggest problem facing the company at present. Achieving high sales in both intelligence and pure electric vehicles requires not only breakthroughs in products and technology but also the growth of supporting facilities. To ensure unhindered sales growth and market share, BYD quickly established an auto insurance business to avoid potential issues such as insurance rejection and significantly increased vehicle usage costs.

Similarly, Seres recently registered new insurance services. The increased accident rate due to advanced intelligent driving and the high maintenance costs of new energy vehicles will simultaneously pose new challenges for Xiaopeng.

Entrepreneurship and innovation are indeed challenging, and Xiaopeng's contributions to China's automotive industry are commendable. However, judging from MONA M03, there are still too many incomplete loops, and it may have only one last chance to avoid further mistakes.