Chinese EV start-up Xpeng to build factory in Wuhan less than a year after putting first plant to work, as EV demand soars

Daniel Ren
·3-min read

Chinese electric vehicle (EV) start-up Xpeng Motors, which counts Alibaba Group Holding and Xiaomi among its backers, is building a factory less than a year after its first assembly facility went online.

The New York Stock Exchange-listed carmaker will build a 7.89 million sq ft factory in Wuhan, it said on Thursday. The facility will have the capacity to assemble 100,000 EVs a year, Xpeng said.

“We have a long-term strategic road map to embrace the (EV) sector’s transformation,” said He Xiaopeng, the company’s co-founder and chief executive. “Expanding our capacity in key hubs like Wuhan plays a critical role.”

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The carmaker – along with NIO and Li Auto – is viewed as one of three Chinese EV companies that could potentially rival US carmaker Tesla. The smart features their cars offer, such as advanced driver-assist systems and sophisticated digital technologies for in-car entertainment, could potentially let them compete with Tesla’s Model 3 and Model Y, which have been a runaway success in China, the world’s largest automotive as well as EV market.

“Planning ahead to add production capacity is not wrong for China’s leading smart EV companies, because a sales jump is expected,” said Ivan Li, an asset manager at Shanghai-based Loyal Wealth Management. “EV start-ups will need to expand their capacity in line with market demand to avoid any unnecessary waste of investment.”

Swiss bank UBS predicted last month that China’s new-energy vehicle sales would hit 6.6 million units in 2025, rising nearly six-fold from the 1.17 million vehicles delivered last year.

Xpeng said on Thursday that it had signed an agreement with Wuhan’s city government, but did not reveal the size of its investment in the plant, nor did say when construction work would start. The facility will house manufacturing and power train plants, as well as research and development facilities.

The new factory follows in the footsteps of Xpeng’s first assembly line, in Zhaoqing in China’s southern Guangdong province. The Zhaoqing production line, which has a capacity of 150,000 units, started manufacturing the carmaker’s P7 mid-size smart EV just in May last year. Established in 2014 in Guangzhou, the capital of Guangdong, Xpeng began producing its G3 sport-utility vehicles in 2018 with a contract manufacturer in central China, before opening its Zhaoqing factory.

Wuhan, where the Covid-19 pandemic originated in December 2019, is one of mainland China’s six major passenger vehicle manufacturing centres, where Renault and Peugeot-Citroen, France’s two largest carmakers, assemble cars with their Chinese partner, Dongfeng Motor Group.

Tesla, the biggest EV player in China, sells more cars in a single month than most of its domestic challengers are managing in a quarter. In February, it delivered 18,318 Shanghai-made vehicles, 470 per cent higher than the same month in 2020. Shanghai-based Nio delivered 20,060 vehicles from January to March, a leap of 423 per cent year on year. Xpeng, meanwhile, sold 13,340 units in the same period, up 487 per cent.

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