Brian Gu, President and Vice Chairman of Xpeng, was the most recent guest of Reuters’ Podcast “The Exchange”. In this podcast, Katrina Hamlin, has conversations with some of the most influential movers and shakers in business and markets hosted by Rob Cox, global editor of Breakingviews, the commentary publication of Thomson Reuters.
During the interview, Xpeng President, spoke about the reduction of the Chinese Subsidies allowing the cut on final price to the consumers; the RoboTaxis and the Autonomous Driving developments.
Subsidies Reduction in China
“Subsidies on the retail side has been one of the main instruments that government has been using over the years but that’s not what generated the momentum. (Chinese) Government shifted its gears from subsidy policy to the Infrastructure and Support focused on the EV Industry. What we saw during the last year was a gradual decreases of the subsidies on the EV sales in China. And it has been an annual pattern already, this year the decline was expected. The second thing is that the amount of subsidy is much smaller compared to the final price of the vehicle – now is less than 10%.”
“What I think it’s actually driving the significant sales last year and during the last months which problably everyone saw the very strong growth of momentum of EV penetrations is not because of the subsidy levels, it’s actually because of the deveopment overall of the EV Sector, having the right products, attractive features, infrastructures for charging and aditional pollicies to support the driving of those EVs on the road. Collectively, I think they are making EVs much stronger to customers. So I think the subsidy become a much smaller part of the equation for people’s purchase decisions and more important, they will be focus on the product itself: the quality, the performance, the smart technology capabilities and, obviously, the design and the look of the product. The consumer will focus on the product so the subsidies will be less than an issue.”
“We see the subsidy reduction as part of the overall cost of doing business. So wether that is something that we pass through to the customers or that’s something that …. it’s an individual company’s decision policies. A number of companies have announced that they’re gonna increase the price to respond to subsidy reductions. We were actually one the those companies, due to the strenght of our product in the consumer market. And there are others that take advantage of this reduction to promote aditional marketing programms so its an effectively promotion on your product if you’re protecting your price.”
Q.: Obviously there’s lot about the cost on your plate, you are extremely commited to R&D, you make sure that you invest a substantial amount in that year-on-year. So, I’m sure a lot people will be very interested in hearing what you think for the year ahead in terms of capital raisings to cover these costs.
“Well, I won’t be commenting our own company given the nature of this conversation but I’ll say a few points. For EVs, and also Smart EVs (that includes smart cockpits, autonomous driving and other smart capabilities) that investment is a long-term commitment, because you need a consistent long-term investment for developing your technology. At some time, you have to build the infrastructure for the factorys, the charging network, product offering, models,… so there’s a signifcant amount of investment. I would expect the level of the investment in EV continuing to be very strong and access for capital is also very important. The top players, who has their strong market position and access to capital, have advantage compared to the smaller/ weaker players who probably will struggle to get the capital to invest on their business adn R&D. That’ll become one of the core differences between winners and losers.”
Investors have been really exciting about the EV theme in the last couple of years. You mentioned Autonomous Driving theme as well, do you think it’s gonna become an investment theme in the year ahead?
I think the Autonomous Driving is a very big topic, obviously there’s different types of Autonomous Driving research going on. Robotaxi and the Level 4 of Autonomous Driving is where people have been putting a lot of dollars into and mostly driven by software companies who are trying to come up with software solutions. We think it is a bit far out in terms of comercialitazion.”