Xpeng Inc. is looking for a manufacturing site in Europe, making it the latest Chinese electric vehicle maker to seek to mitigate the impact of import tariffs by building its vehicles in the region.
Volkswagen AG’s Chinese partner is in the early stages of selecting a site in the European Union as part of its future plan to localize production, Chief Executive Officer He Xiaopeng said in an interview with Bloomberg at its headquarters in Guangzhou, China, on Thursday.
He said the company expects to build capabilities in regions with “relatively low business risks,” adding that Xpeng also plans to set up a large-scale data center in Europe where efficient software collection has become critical for smart driving features in cars.
He stressed that Xpeng’s overall plan to expand globally will not be affected by the higher tariffs, although he noted that “some profits from European countries will decline after the tariff increase.”
Establishing a manufacturing footprint in Europe would see Xpeng join a growing ranks of Chinese electric vehicle makers, including BYD Co., Chery Automobile Co. and Zhejiang Geely Holding Group Co.’s Zekr, that are looking to build production in the region to lessen the impact of the EU’s decision. He increases Tariffs on China-made electric cars hit 36.3%. Xpeng is set to face an additional 21.3% tariff.
The added European tariffs are just one aspect of a broader global trade dispute. The United States has imposed tariffs on Chinese electric car imports that could exceed 100%, as the world’s two largest economies spar over an industry that has grown rapidly thanks in part to Beijing’s subsidies.
The trade actions have only added to the challenges facing the 10-year-old company in recent years. Xpeng has also suffered from weak domestic sales, product planning disputes and a protracted price war in the Chinese market. Its stock price has more than halved since January.
The automaker delivered about 50,000 vehicles in the first half, accounting for only about a fifth of BYD Co.’s monthly sales. While its current-quarter delivery forecast beat analysts’ estimates, its projected revenue fell. short well From expectations, according to its latest quarterly report.
One bright spot for Xpeng is its partnership with Volkswagen, which began a year ago. Hundreds of the German automaker’s employees now work at its Guangzhou headquarters. Vice-president-level managers from both sides meet at least once a week, He said, noting that the company is “doing its best to ensure the success of the partnership.”
One example of how the Chinese company is benefiting from this collaboration is managing complex supply chains. With Volkswagen’s help, Xpeng’s gross profit margin in the second quarter rose to 14% from minus 3.9% a year earlier.
AI feature
Xpeng also sees its expertise in AI and advanced assisted driving features helping it make inroads into Europe, which is one reason it needs to build a large-scale data center there before it can offer those features in the region, He said.
He said U.S.-listed Xpeng has also invested heavily in AI-related R&D, including its own chips, noting that semiconductors will play a more important role in “smart” vehicles than battery cells.
“Selling a million AI cars a year will be a prerequisite for companies to finally emerge as winners in the next decade, when a human driver may touch the steering wheel less than once a day on average during their daily commute,” he said. “We will see companies launching such products starting in 2025, and Xpeng will be among them.”
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