Source | Bohu Finance (bohuFN)

As the competition in the new-energy vehicle market intensifies in 2025, XPeng Motors follows NIO and Leaping Auto in setting the ambitious goal of "achieving profitability in Q4".

Recently, XPeng Motors' (hereinafter referred to as "XPeng") first-quarter report for 2025 further solidifies this confidence. According to the financial report, XPeng's revenue surged 141.5% year-on-year to RMB 15.81 billion in the first quarter of this year, with the gross profit margin climbing to 15.6%, and net losses narrowing significantly by 51.5% year-on-year to RMB 660 million, marking the lowest quarterly loss in the past five quarters.

Behind these impressive figures lies the "hit effect" of the MONA M03 selling 15,000 units per month, the global breakthrough of delivering 1,600 units of the X9 in Europe in its first month, and the tangible manifestation of the "comprehensive improvement in systematic capabilities" highlighted by XPeng Chairman He Xiaopeng.

However, despite gradually shaking off its early high-loss growth model, XPeng still faces the unresolved challenge of premiumization and continues to invest heavily in technology. To secure this profitability breakthrough, XPeng cannot solely rely on "cost-effectiveness"; it must also seize the opportunity to deploy more "new tricks".

01 "Cost-effectiveness" Saved XPeng

After narrowly escaping disaster, both NIO and XPeng have vocalized their goal of "achieving profitability this year," indicating that the new-energy vehicle market has reached a critical juncture.

In addition to NIO and Leaping Auto, brokers estimate that Xiaomi is also expected to achieve quarterly profitability in Q4, while Zeekr, which is still struggling to turn a profit, has already been "recalled" by Geely. The capital market has little patience for continuous "blood transfusions," and "profitability" has become a military order for new players; if they cannot "generate blood," they will be eliminated.

For XPeng, the cost of "surviving" required humility. At the end of 2023, XPeng was still grappling with the ramp-up of G6 production capacity, amid rumors of supply chain corruption and sales of the high-end model G9 falling short of expectations, causing XPeng to briefly enter the "ICU" (intensive care unit).

To address this, XPeng invited Wang Fengying, the former president of Great Wall Motors, to implement a series of "iron-fisted reforms," leading to the reshaping of the supply chain and changes in distribution channels.

In the second half of 2024, the MONA M03, positioned as a "pure electric sports sedan designed specifically for young people," was launched. With this new car, the outside world finally witnessed XPeng's actions of "self-reform".

Firstly, it broke XPeng's previous positioning of "neither high nor low" and focused on "cost-effectiveness." Since its inception, XPeng has always adhered to the "technological route," and its intelligent driving capabilities are evident to all.

However, XPeng's technological prowess has never translated into strong brand premium power. Consumers showed little interest in XPeng's high-end products, and its mid-to-low-end products also lacked price competitiveness compared to models at the same price point, leading to a gradual decline in XPeng's sales.

But after XPeng reshaped its supply chain, its vehicle costs were effectively controlled. The starting price of the MONA M03 is as low as RMB 119,800, making it highly competitive among models of the same level. Cumulative deliveries have exceeded 100,000 units in the eight months since its launch.

Secondly, XPeng further clarified intelligentization as its core selling point and, based on ultimate cost-effectiveness, took the lead in raising the banner of "intelligent driving equality," opening up new market segments through "intelligent driving dimensionality reduction".

Thanks to XPeng's long-accumulated "technological image," coupled with the MONA M03 and P7+ that prioritize "intelligent driving equality," consumers have a deeper understanding of XPeng's intelligent driving capabilities, and XPeng has successfully ingrained "cost-effectiveness" further into its brand DNA.

Since then, XPeng's sales have seen a complete turnaround. In 2024, XPeng delivered 190,000 vehicles, a year-on-year increase of 34.2%, showing an increasing trend. In January of this year, XPeng topped the new-energy vehicle monthly sales chart again after two years and seven months, with total deliveries in the first quarter reaching 94,008 units, a year-on-year increase of 330.8%.

After the significant increase in sales, XPeng has finally reached a profitability inflection point. According to the financial report, XPeng's gross profit margin in the first quarter of this year was 15.6%, an increase of 2.7 percentage points year-on-year and 1.2 percentage points quarter-on-quarter, hitting a record high; the automotive gross profit margin was 10.5%, an increase of 5 percentage points year-on-year, improving for seven consecutive quarters.

Regarding the substantial improvement in profitability, officials attributed it primarily to the continuous reduction in vehicle costs and economies of scale driven by sales growth.

In the past year, He Xiaopeng has mentioned multiple times achieving "technology cost reduction" through full-stack independent research and development and vertical integration. In addition to cost reduction across the entire supply chain, design, research and development, and manufacturing processes, research and development costs were also included in the bill of materials (BOM) for cost reduction, with an expected cost reduction of 25% last year.

AI cost reduction is also highly anticipated. He Xiaopeng said, "AI not only improves efficiency but also gives us more time to focus on innovation." Earlier this year, XPeng also issued an internal letter stating that AI has improved human efficiency and decision-making efficiency.

Furthermore, the cost reduction effect brought about by economies of scale is significant. In the first quarter of this year, XPeng's cost per vehicle was RMB 137,000, continuing to decline by RMB 6,000 quarter-on-quarter. Driven by economies of scale, the amortized cost per vehicle is also declining.

He Xiaopeng noted that XPeng is beginning to move towards a positive cycle of "increasing revenue and profit," mainly due to the company's comprehensive improvement in systematic capabilities in products, marketing, technology, and operations. For example, XPeng's technical service cooperation with Volkswagen directly reflects the revenue generated by technological advancement, contributing RMB 1.44 billion in revenue alone.

The capital market also recognizes XPeng's "best financial report in history." After the financial report was released, XPeng's U.S. stock price surged 13% to close at USD 22.25, and its market capitalization soared overnight.

02 Two Sides of the "Turnaround Battle"

However, even the best coin has two sides. Although XPeng's sales have surged since last year, they have primarily been contributed by the two best-selling models, the MONA M03 and P7+.

Among them, the sales share of the MONA M03 reached 50%, and the P7+ accounted for about 25%. The low prices of these two models have lowered XPeng's overall profitability. Under the general direction of the cost-effectiveness route, XPeng's average vehicle price fell from over RMB 200,000 for the entire year of 2024 to around RMB 150,000 in the first quarter of this year.

While "cost-effectiveness" saved XPeng, it also trapped it in the business of "hard-earned money," and XPeng is not the only automaker willing to earn hard-earned money.

In the fourth quarter of last year, Leaping Auto announced the achievement of quarterly profitability. In terms of sales performance, Leaping Auto's momentum is also strong. In the cumulative sales from January to April of this year, the gap between it and XPeng is only a few thousand vehicles, making it the second place on the new-energy vehicle sales chart.

Therefore, "cost-effectiveness" is both XPeng's way out of the dilemma and another hidden concern for XPeng.

Firstly, after focusing on volume models, XPeng's brand premium power is being weakened. Currently, XPeng's higher-priced models, such as the G9, X9, and P7, sold less than 5,000 units in the first quarter, making it difficult to support XPeng's "face" in premiumization.

It is easy for a brand to "descend dimensionally," but once it sinks, the difficulty of "upward breakthrough" will increase. XPeng must also keep an eye on the time window to minimize the impact of low-priced models on the brand.

Secondly, the moat of "intelligent driving equality" is not solid. Since this year, BYD, Geely, and Leaping Auto have all intensified their efforts in "intelligent driving popularization." BYD's entire lineup comes standard with the "Tian Shen Zhi Yan" (Divine Eye), with prices even dipping below RMB 100,000. When technological advantages are rapidly diluted by competitors, XPeng's "dimensionality reduction strike" will inevitably evolve into "close combat".

However, after more than half a year of hot sales, the sales of the MONA M03 have begun to decline from their peak. Its sales in January to April were 15,225, 15,312, 16,593, and 14,210 units, respectively. Additionally, the backlog of orders for the MONA M03 and P7+ is also accelerating to zero, with the current delivery cycle being only 1-2 weeks.

Under the impact of peers successively launching more low-priced new models, it remains questionable whether these two XPeng hits can continue to maintain a high monthly sales trend.

Finally, "cost-effectiveness" cannot support the long-term "money-burning" of the AI ecosystem. Last year, XPeng announced the "transition from software-defined cars to AI-defined cars," clearly positioning itself as an AI-focused automaker, which means that XPeng still needs continuous investment in intelligence.

In the first quarter of this year, XPeng's research and development expenses reached RMB 1.98 billion, an increase of 40.2% year-on-year. Although XPeng's research and development expenses have always been controlled at the mid-to-low level among new-energy vehicle companies, to make long-term investments in the AI era, XPeng needs more "savings." Relying solely on the profitability of volume models can barely keep it afloat.

03 XPeng Doesn't Want to Keep "Inwardly Scrolling"

XPeng is also very aware that the "winning move" to the finish line of the new-energy vehicle competition is not just a price war but also an ecosystem war.

Last year, He Xiaopeng shared XPeng's "three growth curves" on the earnings call: AI + cars, the global market, embodied humanoid robots, and deeper integration with the automotive industry. Additionally, during the first-quarter earnings call, He Xiaopeng also shared numerous innovative achievements in intelligence.

The Turing chip, which successfully taped out last year, has begun to be installed in cars and is expected to be installed in a larger number of cars in the third quarter of this year. Furthermore, XPeng's humanoid robot will enter mass production for some scenarios in 2026 and be capable of rapid OTA iterations.

In addition, in terms of globalization, XPeng's overseas sales in the first quarter of this year achieved a year-on-year growth of over 370% and added over 40 overseas stores. He Xiaopeng announced that in the next three years, XPeng's overseas business will continue to expand rapidly.

In the first quarter of this year, XPeng's layout of "All in AI" achieved significant results. However, it should be noted that there is still a lot of uncertainty in the current commercialization paths of these innovative areas, and the cycle for technology implementation is relatively long. Therefore, in the short term, XPeng's only truly "viable" player is still its automotive business.

Currently, XPeng's new car planning is also starting to keep up with the "new rhythm." He Xiaopeng revealed in the earnings call that three new products will be launched in the future, including a new all-electric SUV model G7 with a higher positioning; a new generation of P7 at the RMB 300,000 level; and an extended-range SUV codenamed G01.

At the end of last year, XPeng released its new extended-range technology, the "Kunpeng Super Electric System." XPeng's new extended-range SUV is expected to become a "profit bomb" that rivals Li Auto.

Moreover, the heavily revamped new generation of P7 carries the important mission of helping XPeng return to the RMB 300,000-level pure electric sedan market. He Xiaopeng further stated that the new XPeng P7 "may be the project we have emotionally invested in the most."

Compared to the previous generation of P7, the new generation adds the label of "beauty" in addition to intelligence and youthfulness. With all buffs stacked, whether consumers are willing to pay for it is another test for XPeng's sprint towards premiumization.

Of course, XPeng has not forgotten its fierce rival Xiaomi. Although Xiaomi's YU7 has not yet announced its price, according to multiple media reports, its pricing may be around RMB 259,900. If true, XPeng's G7 and Xiaomi's YU7 are likely to face off head-on in the second half of the year, which will also be an important opportunity for XPeng to reclaim market share lost to Xiaomi's automotive business.

It can be seen that after nearly a year of "cost-effectiveness battles," XPeng no longer wants to "inwardly scroll." However, it is still unknown whether XPeng's series of high-end new products can successfully break through. But with enough cards in its hand, XPeng's confidence is naturally stronger.

In the second quarter of this year alone, XPeng has annual facelifts for five models, including the global flagship MPV model, the 2025 XPeng X9. Although this may have a certain impact on the sales of some models in the short term, it will be beneficial in the long run.

Regarding this, He Xiaopeng is very optimistic. He believes that XPeng's growth potential is just beginning to be unleashed and stated that XPeng's total sales in 2025 will more than double those of 2024, challenging a sales target of 350,000 units.

Indeed, XPeng has emerged from the "deep water zone," but to cross the "profitability threshold," in addition to sprinting towards sales, it also needs to further consolidate its moat in this cycle, from technology to brand, from products to ecosystems. Every hurdle requires real effort, and XPeng still has a new round of tough battles to fight.

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