Source: YuanAuto

Total deliveries surpassed 94,000 units, setting a new quarterly record;

Gross margin hit an all-time high of 15.6%;

Automotive gross margin achieved seven consecutive quarters of growth at 10.5%...

The market eagerly anticipated Xpeng Motors' first-quarter 2025 financial report. After all, in January this year, Xpeng topped the monthly sales chart of new energy vehicle (NEV) startups for the first time in nearly three years and maintained its lead in February. Cumulative sales from January to March were also the highest among NEV startups.

However, one notable drawback was that Xpeng Motors had yet to achieve profitability.

The financial report revealed that Xpeng Motors incurred a net loss of 660 million yuan during the reporting period, marking a significant reduction year-over-year and quarter-over-quarter, compared to 1.37 billion yuan in Q1 2024 and 1.33 billion yuan in Q4 2024. Despite a slight decrease in total revenue and revenue per vehicle quarter-over-quarter, Xpeng managed to substantially reduce its losses due to cost reduction and efficiency enhancement efforts, as well as its collaboration with Volkswagen.

Similar to Q4 2024, Xpeng Motors' services and other revenues exceeded 1.4 billion yuan, which included technological R&D services in collaboration with Volkswagen, boasting a gross margin exceeding 66%. Profits from Volkswagen have the potential to become a stable source of income for Xpeng for the foreseeable future.

During the earnings call on the evening of May 21, although Zhang Xiaofeng, Vice President of Xpeng Motors, disclosed that vehicles developed in collaboration with Volkswagen had entered the final stage of development and were expected to hit the market in early 2026, YuanAuto understands that the collaboration and related revenues will not end there.

"The collaboration between Xpeng and Volkswagen will continue beyond the mass production of the models. After mass production in 2026, revenues from the Volkswagen collaboration will be tied to sales of the jointly developed models. Volkswagen and Xpeng are confident in the product capabilities of the two models based on the G9 platform and the EEA developed by both parties," Xpeng Motors informed YuanAuto on May 22.

01

Volkswagen Becomes Xpeng's "Long-term Revenue Stream"

At the Shanghai Auto Show in April this year, a Volkswagen SUV concept car named ID.EVO stole the show. It garnered attention not only for its golden Volkswagen logo but also because it was the prototype of a model developed in collaboration with Xpeng.

"We're going all in to pack it with tech," said Stefan Mecha, CEO of Volkswagen Passenger Cars China. To ensure that the mass-produced version of the ID.EVO can keep pace with the Chinese market in terms of technology, Volkswagen has set aside its century-old automaker stance and sought guidance from Xpeng to the fullest extent possible in areas such as electronic and electrical architecture, smart cockpits, and assisted driving functions.

It is understood that both the Volkswagen ID.EVO and its mass-produced version are based on the Xpeng G9 platform, aiming to create a model that combines the strengths of both Volkswagen and Xpeng. In essence, the new car will inherit Volkswagen's driving characteristics while addressing its shortcomings in electrification and intelligence.

Some may worry that after Xpeng helps Volkswagen catch up, it will be the first to be impacted by the new models, especially the Xpeng G9. On this issue, Xpeng has already prepared a response.

First, as mentioned above, in the collaboration agreement between Xpeng and Volkswagen, both parties have agreed that after the launch of the jointly developed models, Volkswagen will still need to pay Xpeng based on actual sales.

Second, after the Xpeng G9 was refreshed in March this year, its price range shifted from 2.639 million to 3.599 million yuan for the 2024 models to 2.488 million to 2.788 million yuan. Based on YuanAuto's speculation based on Volkswagen's product matrix pricing in China and the positioning of the ID.EVO, there will be a clear separation in pricing between the two cars.

Meanwhile, according to He Xiaopeng, founder, chairman, and CEO of Xpeng Motors, who revealed during the earnings call on the evening of May 21, the Xpeng G9 may launch a super electric model with a fuel tank by the end of this year. This will further distinguish the Xpeng G9 from the pure electric ID.EVO and its mass-produced version.

"It's a lucrative move for new energy vehicle startups to collaborate with these multinational automakers. Xpeng is one example, and NIO is another," an industry insider familiar with automaker technological R&D service-related revenues told YuanAuto on May 23. In addition to providing technological R&D services, supplying components is also a possibility. "NIO achieved profitability in the fourth quarter of last year, and technology licensing was crucial. They expect this revenue to exceed 5% of their total revenue in 2025."

02

Profitability: Betting on the Allure of the New P7

Volkswagen, serving as a "long-term revenue stream," is a significant boost for Xpeng's goal of achieving profitability in the fourth quarter of this year. However, the key to achieving this goal lies in Xpeng's ability to reclaim its prowess in selling the 300,000-yuan-level P7 as a best-seller.

Starting from the fourth quarter of 2024, the two affordable models, the Xpeng MONA M03 and the Xpeng P7+, became the sales drivers of the brand, leading to a decline in Xpeng Motors' revenue per vehicle. The financial report showed that Xpeng's revenue per vehicle was 152,900 yuan in the first quarter of this year, down from 160,300 yuan in the fourth quarter of 2024.

This has raised concerns in the market that Xpeng is losing its ability to sell more expensive cars. During the earnings call on the evening of May 21, an analyst asked Xpeng executives how they planned to sell the G7 and P7, which are positioned significantly higher than the MONA M03 and P7+, in the second half of the year.

According to He Xiaopeng, the Xpeng G7 is a model in the 250,000-yuan range, while the all-new P7 is in the 300,000-yuan range.

In fact, this is not the first time Xpeng has sold a 300,000-yuan-level P7, and it was even Xpeng's first best-seller. Looking back at the launch of the Xpeng P7 in 2020, this pure electric sedan with a price range of 2.299 million to 3.499 million yuan initially had a lukewarm market performance due to the impact of the pandemic. However, after environmental factors improved, monthly sales began to grow rapidly.

In 2021, the Xpeng P7 was the sales champion in its segment for multiple months, with a total of 60,569 units delivered throughout the year, outperforming all other Chinese NEV startups in the market. At the same time, data showed that a significant proportion of Xpeng P7 sales included the XPILOT 3.0 assisted driving software, meaning that the final price of these models exceeded 300,000 yuan.

A brand with distinctive intelligent and youthful labels, coupled with a highly perceptible smart cockpit and assisted driving experience, was the formula that made the 300,000-yuan-level Xpeng P7 a best-seller back then.

Focusing on the current Xpeng, the smart cockpit and assisted driving are still its advantages. During the earnings call, He Xiaopeng even boasted that Xpeng's assisted driving will have a disruptive advantage over competitors in the second half of the year. Building on this foundation, He Xiaopeng is also betting on the allure of the new models.

"The all-new Xpeng P7 may be the project with the most emotional investment in our history. Our Chinese and foreign design teams have used extraordinary imagination and original fashion aesthetic design language to break the monotonous and similar design thinking and lead new trends," said He Xiaopeng when announcing the all-new generation of P7 on May 15.

Whether consumers will deem the "allure" of the all-new Xpeng P7 worth 300,000 yuan will determine whether Xpeng can achieve its goal of profitability in the fourth quarter.

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