Author | Meng Xiao

For more financial information | BT Financial Data Hub, Total word count: 3875, Estimated reading time: 10 minutes

"Lei Jun visited Xpeng Motors' Guangzhou headquarters, and He Xiaopeng displayed the slogan 'Innocent Childhood Friends.'"

Recently, Lei Jun visited Xpeng Motors' Guangzhou headquarters and personally experienced the Xpeng MONA M03. The slogan welcoming Lei Jun read: 'Innocent Childhood Friends, Warmly Welcome President Lei.' "Innocent Childhood Friends" undoubtedly refers to Xiaomi and Xpeng. Lei Jun conducted a live broadcast on that day and bluntly stated his opposition to car manufacturers 'messing around' with each other. However, considering the current sales performance of Xpeng Motors and Xiaomi Motors, this statement is quite nuanced.

According to Hexun.com, on August 27, the launch event for the Xpeng MONA M03 was successfully held, with He Xiaopeng attending and delivering a speech. Lei Jun had just visited Xpeng Motors a few days prior, perhaps to warm up for the new car's launch.

He Xiaopeng introduced that the Xpeng MONA M03 was a significant investment, costing 4 billion yuan and taking 4 years to develop, aiming to become a super classic in the 200,000 yuan category. According to data, the Xpeng MONA M03 received over 10,000 orders just 52 minutes after its launch. Notably, although the Xpeng MONA M03 and Xiaomi SU7 are in different price ranges, they are both considered viable alternatives to the Tesla Model 3 in the industry, both being pure electric sedans touted as the first car for young people.

Lei Jun's visit to Xpeng and the Xpeng MONA M03 launch event may have contributed to a consecutive rise in Xpeng's share price. After Lei Jun's visit on August 22, Xpeng's US stock price increased from $6.91 to $8 at the close on August 27, a 16% increase. Xpeng's Hong Kong stock also rose continuously, with the share price increasing from HK$27.15 to HK$30.90, a 14% increase.

As of August 28's close, Xpeng's market value was $7.589 billion in the US and HK$58.62 billion in Hong Kong. Xiaomi's share price also showed a notable increase recently, rising 13% in August, with a total market value of approximately HK$473 billion. However, both Xpeng and Xiaomi have seen significant declines from their peak prices. Xpeng's US stock price has fallen by nearly 90%, and Xiaomi's Hong Kong stock price has halved.

1

Are He Xiaopeng and Lei Jun Truly 'Innocent Childhood Friends'?

The slogan welcoming Lei Jun to Xpeng read 'Innocent Childhood Friends.' It's not surprising that He Xiaopeng invited Lei Jun to lend his support. As a top influencer in the automotive industry, Lei Jun and He Xiaopeng actually have deep roots.

In Lei Jun's fifth personal speech recently themed 'Courage,' he spent considerable time narrating the story behind Xiaomi's entry into the automotive industry. Lei Jun stated that Xiaomi's decision to build cars stemmed from an accident—Xiaomi's sudden sanction by the US in 2021. Xiaomi quickly convened an emergency board meeting to discuss how to respond. At the time, some directors asked what would happen to Xiaomi's tens of thousands of employees if the company could no longer produce phones. One director suggested considering car manufacturing.

It was likely friends like He Xiaopeng and Li Bin who solidified Lei Jun's belief in car manufacturing. Lei Jun has publicly acknowledged that He Xiaopeng and Li Bin strongly encouraged him to pursue this path.

After Lei Jun's third visit to Xpeng's Guangzhou headquarters, He Xiaopeng tweeted that August marked the 20th anniversary of UC and the 10th anniversary of Xpeng. He described Lei Jun as both a mentor and a friend. Photos shared by He Xiaopeng showed the two in their younger days, indicating their close relationship back then.

Lei Jun hails from Xiantao, Hubei, while He Xiaopeng is from Huangshi, Hubei. Their hometowns are only about 200 kilometers apart, making them fellow countrymen. Whether in business or casual friendships, a shared hometown can quickly bring people closer, which might explain why Lei Jun and He Xiaopeng have grown close.

In 2014, He Xiaopeng sold UC to Ali Group for $4 billion, making him financially independent at age 35. He bought large houses for himself and his parents and even a yacht. With such financial freedom, He Xiaopeng could have easily retired, but he chose to start a new venture in car manufacturing instead.

When He Xiaopeng first embarked on car manufacturing, attracting investment was challenging. Few investors were willing to fund an internet entrepreneur with no prior experience in the automotive industry. Lei Jun came to his aid with a timely investment of $1 million, which was crucial for the nascent Xpeng Motors. Lei Jun's trust and example attracted other investors, including Alibaba, IDG Capital, and Morningside Ventures, as well as individuals like Yao Jinbo and Zhang Tao.

(Image source: Xiniu Data)

After overcoming a difficult start-up phase, Xpeng Motors gradually gained momentum. When Xiaomi went public in 2018, He Xiaopeng invested $100 million in support of Lei Jun.

In He Xiaopeng's tweet, he mentioned that this was Lei Jun's third visit to Xpeng's Guangzhou headquarters. As the head of Xiaomi Group, Lei Jun is known as a workaholic, yet he managed to find time in his busy schedule to visit Xpeng. This reflects not only their close relationship but also Lei Jun's eagerness to learn.

2

When Will Xpeng's Sales Take Off?

As a representative of new-energy vehicle startups, Xpeng Motors may be considered the 'weaker' player among NIO, XPeng, and Li Auto in terms of market value and sales. In 2023, Xpeng sold 141,601 vehicles, while Li Auto sold 376,030 and NIO sold 160,038. Li Auto, as the first among these new-energy vehicle startups to achieve profitability, has significantly surpassed Xpeng in market value, likely putting considerable pressure on Xpeng.

The latest half-year report shows that Xpeng's sales in the first half of 2024 fell short of expectations. In the first six months, Xpeng sold 8,250, 4,545, 9,026, 9,393, 10,146, and 10,668 vehicles, respectively, for a cumulative sales volume of 52,028 vehicles, a year-on-year increase of 25.6%. Over the same period, Li Auto sold 188,981 vehicles, and NIO sold 87,426 vehicles. In terms of sales volume, Xpeng lags significantly behind both Li Auto and NIO. From a growth perspective, Xpeng's 25.6% increase also falls short of NIO's 60.2% and Li Auto's 35.8%.

From the latest weekly sales data from August 12 to 18, Xpeng sold only 2,300 vehicles, surpassed by Xiaomi Motors with 2,600 vehicles. Looking back at the 'Innocent Childhood Friends' slogan now adds an intriguing dimension.

To boost sales, Xpeng has undertaken significant reforms. For example, a new round of organizational restructuring was initiated at the beginning of the year, involving departments such as marketing, human resources, product planning, and intelligent data. Even senior management positions underwent changes. Xiaopeng's co-founders, Xia Heng and He Tao, were reported to have stepped down from core management roles, transitioning to 'Lifetime Honorary' positions. Xpeng officially stated that Xia Heng and He Tao would continue to support the company's development in their new roles.

In the interim report, He Xiaopeng expressed optimism about future sales, believing that with the launch of MONA M03, Xpeng has entered a robust product cycle and a period of rapid development. From now until the end of 2026, Xpeng plans to launch multiple competitive new products and models. AI technology and category innovation are favorable for Xpeng, and with significant cost reductions from technological advancements, its robust marketing system will gradually gain traction in both domestic and international markets, leading to a substantial increase in sales.

In fact, Xpeng performed impressively in the first half of this year. Financial reports show that Xpeng's revenue reached 14.66 billion yuan, a year-on-year increase of 61.2%. Its net profit attributable to shareholders was -2.65 billion yuan, compared to -5.14 billion yuan in the same period last year, representing a 48.41% year-on-year increase. Notably, Xpeng's gross profit margin improved significantly, reaching 13.5% during the reporting period, up from -1.4% in the same period last year. In particular, the second quarter of this year saw a record-high gross profit margin of 14%. The net profit margin also decreased from -56.53% in the same period last year to -18.09%, and has shown a continuous improvement trend over the past five reporting periods. While Li Auto and NIO have yet to release their interim reports, Xpeng, as the first new-energy vehicle startup to disclose its interim report, deserves recognition for its performance, even though it has not yet turned a profit. Xpeng is steadily moving towards profitability, with a significant reduction in the loss per vehicle sold on average.

3

Which 'Xiao' in 'Wei-Xiao-Li'?

The business world is like a battlefield. Previously, He Xiaopeng was close to Li Xiang and Li Bin. However, after Li Auto surpassed 10 billion yuan in profits in 2023, the relationship between He Xiaopeng, Li Xiang, and Li Bin may have subtly changed. For instance, when Li Auto insisted on publishing weekly sales rankings, He Xiaopeng supported Li Bin.

According to an Interface News report on July 31, at the Xpeng Motors AI Autonomous Driving Technology Launch Event on July 30, He Xiaopeng stated, 'Venture capital firms in the US are investing heavily in large models, chips, and other areas, striving to improve end-to-end autonomous driving technology and outperform human drivers. However, upon returning to China, I found people arguing online and focusing on 'weekly sales rankings.' What are our tech companies doing?' He Xiaopeng's remarks came after Ma Lin, NIO's Assistant Vice President of Brand and Communication, explicitly stated on social media that they would 'reject the weekly sales rankings published by Li Auto.'

At the event, He Xiaopeng did not publicly name Li Auto, which was the only company publishing weekly sales rankings at the time. In July 2023, Huang Honglin, General Manager of Xpeng Product Marketing, shared two ranking charts on WeChat Moments with the caption, 'Please focus on official information; roadside news is unreliable,' accompanied by images of Li Auto's weekly rankings.

As both Xpeng and Li Auto are new-energy vehicle manufacturers, they inevitably compete directly or indirectly. Balancing business and personal relationships is challenging. The current situation is even more delicate, as Xiaomi has also become a new-energy vehicle manufacturer, encouraged by He Xiaopeng.

Public data shows that Xiaomi SU7 has sold over 10,000 units for two consecutive months. According to The Paper's report, Xiaomi sold 7,058 vehicles in April, 8,630 in May, 14,296 in June, and 13,120 in July. Over the same period, Xpeng sold 9,393 vehicles in April, 10,146 in May, 10,668 in June, and 11,145 in July. In the past four months, Xiaomi SU7's cumulative sales reached 43,104 units, surpassing Xpeng's 41,452 units.

The price range of the Xpeng P7 is from 193,900 yuan to 274,900 yuan, while the Xiaomi SU7 ranges from 215,900 yuan to 299,900 yuan, with overlapping price points. With Xiaomi's rise, the identity of the 'Xiao' in 'Li-Wei-Xiao' leaves much to the imagination of the market.

Looking back at Xiaomi, although it currently loses approximately 60,000 yuan per vehicle sold, car manufacturing has brought significant traffic to the company, directly driving the growth of its other businesses. In the first half of 2024, Xiaomi's revenue reached 164.4 billion yuan, a 29.62% increase from the same period last year. Prior to this, Xiaomi had experienced seven consecutive quarters of negative revenue growth, with a year-on-year increase of -11.63% in the same period last year. However, as Xiaomi preheat prepares for its car launch, its revenue has shown a continuous upward trend, with growth rates of -7.60%, -3.24%, 26.95%, and 29.62% over the past four quarters. In 2024, Xiaomi's revenue growth has been close to 30%.

As Xiaomi SU7 orders continue to increase, Xiaomi's delivery volume has also shown a notable improvement. While this may impact the survival space of new-energy vehicle startups to some extent, it is fair to say that Xiaomi Motors, NIO, Li Auto, and Xpeng are all outstanding enterprises in China's new-energy vehicle industry. It is sincerely hoped that these automakers can work closely together to shine on the global stage, becoming a beacon of Chinese innovation.