He Xiaopeng’s muse for creating one of modern China’s most consequential – and successful, he hopes – technology products was an unlikely source: the line of American toys rooted in Japanese anime culture that first became popular while he was growing up in the early 1980s in central China’s Hubei province.
Hasbro’s Transformers, based on the storyline about sentient, living autonomous robots, made such an impression that He dreamt of creating products to meld technology with mobility. It was a dream that took him through a degree in computer science, followed by an early stab at entrepreneurship as co-founder of the Java-based internet browser UCWeb, culminating in today’s trading debut of his eponymous electric car brand Xpeng in Hong Kong.
“The future of mobility is vehicles integrated with robotic science” and artificial intelligence, He said in an interview with South China Morning Post via a video link from Guangzhou, where Xpeng is based. “The number of hours that people spend in the vehicle will only increase, just as they currently spend four to five hours every day on their smartphones. The implications of such [usage] scenarios are tremendous, encompassing transport, technology and finance.”
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There is probably no better place on Earth for He to realise his dream than China, which surpassed the United States in 2009 as the world’s largest market for vehicles powered by internal combustion engines (ICEs). More recently, Chinese car owners have begun to embrace electric cars, a growth that may see three of every five new cars on the nation’s roads being powered by electricity by 2030, according to UBS’ forecast.
To finance his dream, He needed a lot of capital. With private equity funding from such backers as Xiaomi’s founder Lei Jun, Primavera Capital and his former employer Alibaba Group Holding, He raised HK$14 billion (US$1.8 billion) in a second primary listing in Hong Kong, less than 12 months after a US$1.72 billion initial public offering and a US$2.48 billion top-up sale in New York.
Xpeng’s shares, offered at HK$165 each in Hong Kong, began trading at HK$168, giving their debut a first-day premium of 1.8 per cent, giving the company between US$37 billion and US$40 billion in market value.
Founded in 2015, Xpeng has released three production models since its first G3 all-electric crossover rolled off a contract manufacturer’s plant in December 2018 in the Henan provincial capital of Zhengzhou.
The carmaker followed with a P7 sports sedan in last July before its New York listing. The G3 is Xpeng’s entry model, priced at 149,800 yuan (US$23,170) while the P7 starts from 229, 900 yuan , both after an 18,000 yuan government subsidy.
Next on the release calendar in the fourth quarter is the P5 sedan, a groundbreaking model that would be the first mass-produced electric car to be equipped with Lidar technology, a set of laser rangefinders used in guiding autonomous driving that Tesla’s chief executive Elon Musk famously dismissed as a “fool’s errand” that was too expensive to put into production.
Upping the ante with Tesla, the clear market leader in China’s booming electric car market, is more than bragging rights for Xpeng. The carmaker invests heavily in its own research and development, down to writing its own codes for voice commands that replace manual functions, a valet parking feature that remembers and executes automatic parking, and Level 3 autonomous driving, defined as driving with human presence, but with minimum interference.
In March, a fleet of Xpeng P7 mid-sized cars completed the mainland’s longest autonomous driving test in an eight-day journey from Guangzhou to Beijing, the busiest and most complex highways along China’s eastern coastal corridor. The cars, guided by its Navigation Guided Pilot (NGP) function, a new autonomous assistance feature, achieved a frequency of 0.71 times human intervention per 100 kilometres (62 miles).
Underneath the range of features is He’s belief that modern, smart vehicles are driven by software, in much the same way that the smartphone is the device for millions of applications – constantly launched or upgraded – that manifest the powers of the internet-connected digital age.
Software for powering different applications on the G3 and the P7, from on-board entertainment to climate control and navigation, is sent over the air, has been updated 23 times with 128 new features added as of May, the carmaker said.
“When I first met [He] I was struck by his entrepreneurial passion; he remained passionate about his mission, except he has gained even more credibility and stature over time,” said Primavera’s founder Fred Hu, whose private equity firm owned 2.7 per cent of Xpeng’s American depositary receipts (ADRs) as of March 31. “He has worked so hard to make Xpeng a dream come true [that] he is now one of the rarefied individuals [to be] called a successful serial entrepreneur.”
He, who turns 44 in November, was born in Huangshi, a city of 2.7 million residents according to the latest population census.
The industrial city is about an hour’s drive to the provincial capital of Wuhan, where Xpeng is building its second assembly, designed to churn out 100,000 electric cars a year. This factory, a nod to He’s upbringing and a gesture to give Wuhan’s economy the leg up after the 2019 coronavirus pandemic, would give Xpeng an annual capacity of up to a quarter of a million vehicles, not counting its contract manufacturer in Zhengzhou.
His first attempt at entrepreneurship was UCWeb, which he co-founded in 2004. A decade later, UCWeb would serve more than 500 million worldwide users in 11 languages, with the largest market share in India.
Alibaba, which owns this newspaper, bought UCWeb in 2014 for US$4.3 billion. He then worked for the e-commerce giant in its mobile business division for three years before setting forth on his own to fulfil his dream in mobility. He invested his windfall from the UCWeb sale in a start-up founded by two former executives from Toyota Motor’s Chinese partner GAC Group, Henry Xia Heng and He Tao. The trio decided to name their cars Xpeng, after the roc, the mythical bird of prey.
Before striking out on his own, He sought advice from Alibaba’s then chairman Jack Ma and chief operating officer Daniel Zhang, who asked the young entrepreneur to speak to Alibaba’s vice-chairman Joe Tsai, who oversees the conglomerate’s strategic investments. Over two hours in Hong Kong, He presented a vision that convinced Tsai that the EV start-up was worth Alibaba’s investment. Alibaba owned 1.04 per cent of Xpeng’s ADRs as of March 31.
Xpeng delivered 27,041 vehicles last year, about a fifth of the Model 3s sold by Tesla from its US$2 billion Gigafactory in Shanghai. Sales picked up in 2021, with first-half deliveries topping 30,738, more than what Xpeng sold last year.
The strong sales are helped by China’s government, which has offered a slew of subsidies, cheap financing and preferential policies – including lower-than-market interest rates for Tesla – to prod and push carmakers to embrace electrification, and for consumers to ditch their petrol guzzlers for EVs. The government wants to claim the technological vantage point in EVs, one of 10 priorities under the Made in China 2025 industrial master plan, and a crucial step in the nation’s journey towards carbon neutrality by 2060.
China’s new-energy vehicle sales are likely to hit 6.6 million units in 2025, a six-fold jump from last year’s 1.17 million, according to UBS.
To be sure, Xpeng is competing in a crowded market where 500 EV makers are clamouring to offer what is usually the biggest non-property, big ticket purchase for most households. They run the entire gamut of modern China’s industry, from the internet search engine Baidu, to century-old makers of petrol-powered cars such as Ford. Even Xiaomi, one of the earliest investors in Xpeng, announced a multibillion dollar plan over the next decade in March to enter the fray, starting with a US$1.5 billion investment.
“The key risk for Xpeng is increasing competition in the price range of between 200,000 yuan and 300,000 yuan, which impose [financial] pressure on its strategy” to go upscale, said Jefferies’ analyst Alexious Lee, who expects the company’s ADRs to decline to US$39.70 with his “hold” recommendation.
For now, the fiercest competition is between Tesla and the trio of New York-listed EV makers: Xpeng, NIO and Li Auto.
When Tesla slashed the price of its Shanghai-built Model Ys on New Year’s Day by 30 per cent from its pre-launch price, He hit back on social media, noting that Xpeng’s smart features would give it the edge against competitors.
“We are confident of the unique smart features of our products,” he wrote on social media at the time.
Tesla reached an out-of-court settlement with an ex-employee who had gone to work briefly for Xpeng, ending a two-year suit that alleged that the former engineer had stolen the US carmaker’s Autopilot system. Xpeng, which was never made a party to Tesla’s suit, said it writes its own codes, and designed its own P7 model from the ground up.
“If EVs were to become the dominant technology of the future, we aim to be one of those companies among the group” over the next decade, He said, declining to provide specific projections and market share.
The carmaker began to export its electric cars, starting with the first 100 units of the G3 to Norway last December. That was followed in quick order by NIO, which also began to ship its ES8 sports-utility vehicle to Scandinavia in May.
Now with ample cash from the dual-listing in Hong Kong, He is moving forward making Xpeng’s international foray.
He’s personal wealth is estimated at US$7.6 billion, according to Bloomberg, making him the 25th richest man in the EV industry and the 71st wealthiest in China. With his fortune, He is able to indulge at least part of his dream to meld robotics with technology and transform the future of transport. His wholly owned Xpeng Heitech, unveiled a load-carrying drone, dubbed the Kiwigogo flying car, at the Auto China 2020 exhibition in Beijing last September.
The machine, capable of carrying two passengers to a height of between 5 and 25 metres, is described as an effort to sharpen research into mobility, electrification and digitalisation.
“A lot of people have doubts about a go-global strategy because it would be very challenging and would incur a big cost [in resources],” said the billionaire. “But should we give up just because it is difficult? I do not see it this way, and I think going global is something that Xpeng has to do.”
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