After Xpeng’s CEO warned of a “bloodbath” in the industry sparked by a fierce price war, the Chinese automaker is ready to do everything it can to get its models off the European battlefield.
The automaker launched in Germany last week and is part of a growing wave of Chinese brands expected to account for a quarter of electric vehicle sales in Europe this year.
But it’s a leasing war, rather than a price war, that could bring the fledgling Volkswagen-backed automaker into the hearts and minds of German motorists loyal to the brand.
Rental wars
“It’s not so much that the customer will buy the car,” said Xpeng’s managing director for Germany, Markus Schrick Fortune.
Instead, a growing number of drivers are choosing to lease their electric vehicles, partly out of fear that rapid technological advances in the electric vehicle industry will cause their cars to fall behind industry standards.
“With the rapid development of electric mobility, with the arrival of new technologies quite quickly. customers tend not to want to own the vehicles but to rent them.”
Xpeng
Leasing could be a way to win over electric vehicle skeptics, who have proven harder than expected to abandon internal combustion engines.
While leasing already has solid popularity among non-EVs, it is poised to explode in the EV market due to the factors Schrick mentioned.
Schrick says the company offers competitive leasing rates on its cars, where starting prices for outright ownership start at €49,000 ($53,000) for its standard P7 range.
A competitive leasing offering is a good thing for the automaker, with Schrick saying that four out of five cars coming off the Xpeng lot are sold through leasing deals.
By comparison, data analyzed by McKinsey & Co. found that 35% of new cars were leased in Germany.
While coming in at a more expensive entry point than Chinese peer BYD, Xpeng has also been outspoken about pricing, as companies like Tesla and Volkswagen enter a long-running price war.
“This year marks the beginning of a fierce competition that could end in a ‘bloodbath,’” Xpeng wrote to staff in February, CNBC reported, citing an internal letter shared with staff.
As with the price war, Schrick says Xpeng is prepared to follow its competitors in cutting rental rates if a new price war erupts.
“We’re not going to say, ‘If rents go down 20%, no, we’re not going to participate.’ Of course we will find a solution because we need and want to sell cars,” she said.
After the launch in 2020, the Chinese automaker decided to increase deliveries this year, almost tripling them between the last quarter of 2022 and the same period in 2023.
The car manufacturer is already present in the Nordic countries and the Netherlands.
Enemies
It will be interesting to see how Xpeng’s strategy plays out in Germany, given its close ties to the country’s main automaker, Volkswagen.
Volkswagen bought a 4.99% stake in Xpeng for $700 million in December, with plans to create two SUVs by 2026.
That could raise competitors’ eyebrows about where that close partnership will end up — indeed, whether Xpeng and Volkswagen can strategize to divide and conquer.
Xpeng’s Schrick says the relationship between the Chinese automaker and Volkswagen stops here for now.
However, Schrick said he “wouldn’t mind” future more strategic deals with the German auto giant.
“Such a progressive smart technology developer like Xpeng, together with such a traditional, high-tech company like Volkswagen, can only be a good partnership.”
Schrick also believes the deal has given the company an advantage in the uphill battle faced by Chinese brands for brand recognition and consumer trust, having become accustomed to household names such as their co-owner Volkswagen.
“If Volkswagen invests in something, for most German consumers, that’s a good sign,” says Schrick.
“If Volkswagen invested 700 million euros in another car manufacturer, they would have done a very thorough analysis. And that decision wasn’t easy.
“They looked at the market carefully and chose Xpeng.”