He Xiaopeng
Qilai Shen/BloombergHe Xiaopeng, the billionaire cofounder of Chinese electric vehicle maker Xpeng, is making progress in his year-long effort to revive flagging sales at the Guangzhou-based upstart – and he has won a vote of confidence from one of the world’s largest automakers amid a nascent turnaround.
Shares of the dual-listed company jumped more than 30% in morning trading in Hong Kong on Thursday after surging as much as 40% in New York overnight. The big jump follows an announcement by Volkswagen on Wednesday that it will acquire a 4.99% stake in Xpeng via a $700 million capital increase, and gain an observer seat on the Chinese EV maker’s board.
Xpeng’s stock rally has boosted the wealth of the once-struggling He to $3.4 billion – an amount that more than doubled from what he had just two months ago.
Investors are reassessing the company’s outlook as the VW investment is considered a validation of its technological prowess. The carmakers will work together to develop two VW branded EVs that will be launched in the world’s biggest auto market in 2026, with Xpeng expected by analysts to supply software related to autonomous driving and smart cockpit. This will help it generate sales from licensing the technologies to VW, which has recently been struggling to get its own Cariad software division on track.
In May, the German automaker overhauled top management at the struggling unit again, hoping to correct problems such as budget misses and repeated delays. VW, in the meantime, reported second-quarter earnings that missed expectations, partly due to intensifying competition in China, one of its most important markets.
“This is definitely a win-win cooperation,” says Yale Zhang, a Shanghai-based managing director at consultancy Automotive Foresight. “Xpeng needs money for research and development while VW lacks an intelligent EV platform.”
The Xpeng cofounder, who serves as the company’s chairman, struck an optimistic tone. The 45-year-old He posted on his verified Weibo account a photo taken with Ralf Brandstätter, VW’s board member for China, and wrote that he looks forward to bringing the best technology, products and brand to the world.
The billionaire’s renewed ambition – which may also see him resume global expansion this year — comes just as Xpeng is seeing signs of a rebound in the second half. Pummeled by a brutal price war initiated by Tesla, He decided to sacrifice margins and sell the company’s latest G6 electric SUV at a starting price of $29,000 – which is cheaper than Tesla’s best-selling Model Y SUV in China but comes with equally competitive self-driving technologies. With deliveries just starting in mid-July, the company is expected to deliver up to 7,000 G6s in September and 9,000 in October, according to a note from Blue Lotus Research Institute that was published via the Smartkarma platform.
“As a new model typically needs more than 3 months to ramp up production and supply chain capacity in the industry, we reiterate that G6 will still be in the process of capacity ramp up in Q3,” Blue Lotus wrote.
Still, that would be a meaningful boost, especially as Xpeng saw total deliveries drop another 18% to 18,320 units in the first quarter even after China lifted most of its Covid-related restrictions. The competitive pricing, coupled with advanced technologies, has the potential to make G6 a hit product in the second half, says Automotive Foresight’s Zhang.
“The notable improvement in G6’s self-driving level may make it a top-selling model,” he says. “The whole industry has seen this, and VW has seen this. This may also be why VW decided to invest in the company.”