After Xpeng’s CEO warned of an industry “bloodbath” caused by a brutal price war, the Chinese automaker is ready to do whatever it takes to take its models off the stage on the European battlefield.
The automaker launched operations in Germany last week and is part of a growing wave of Chinese brands expected to account for a quarter of EV sales in Europe this year.
But it’s the lease war, not the price war, that may propel the fledgling Volkswagen-backed automaker into the hearts and minds of brand-loyal German drivers.
Rental wars
“It’s not so much that the customer will buy the car,” said Xpeng Germany managing director Markus Schrick. Luck.
Instead, a growing number of drivers are choosing to lease their electric vehicles, in part due to concerns that rapid technological advances in electric vehicles will cause their vehicles to fall behind industry standards.
“With the rapid development of electric mobility, with the emergence of new technologies quite quickly. customers generally want to lease rather than own vehicles.”
Shpeng
Leasing could be a way to win over EV skeptics who have found it harder than expected to give up internal combustion engines.
While leasing is already very popular among non-electric vehicles, it is poised for explosive growth in the EV market due to the factors Schrick mentions.
Schrick says the company offers competitive lease rates on its vehicles, with starting prices for full ownership starting at €49,000 ($53,000) for the standard P7 range.
A competitive lease offering is a good thing for the automaker: Schrick says four out of every five cars rolling out of Xpeng’s warehouse are sold under lease agreements.
Compared, data analyzed by McKinsey & Co. It was found that 35% of new cars were rented in Germany.
While Xpeng is a more expensive entry point than fellow Chinese disruptor BYD, it has also been vocal about pricing as companies like Tesla and Volkswagen engage in a long-running price war.
“This year marks the beginning of intense competition that could end in a bloodbath,” Speng wrote to employees in February, CNBC reported, citing an internal letter shared with employees.
As with price wars, Schrick says Xpeng is prepared to follow its competitors’ lead and lower rental rates if another price war ensues.
“We won’t say, ‘If rents go down 20%, no, we won’t participate.’ Of course, we will find a solution because we need and want to sell cars,” he said.
After launching in 2020, the Chinese automaker has begun increasing deliveries this year by almost tripling them between the last quarter of 2022 and the same period of 2023.
The automaker is already present in the Nordic countries and the Netherlands.
Sworn Enemies
It will be interesting to see how Xpeng’s strategy plays out in Germany, given its close ties to the country’s leading automaker Volkswagen.
In December, Volkswagen bought a 4.99% stake in Xpeng for $700 million, with plans to create two SUVs by 2026.
That could leave rivals wondering where this close partnership ends—indeed, whether Xpeng and Volkswagen can work out a divide-and-conquer strategy.
Xpeng’s Schrick says the relationship between the Chinese automaker and Volkswagen is ending for now.
However, Schrick said he is “not opposed” to new strategic agreements with the German automaker in the future.
“A progressive smart technology developer like Xpeng, together with a traditional and high-tech company like Volkswagen, can only be a good partnership.”
Schrick also believes the deal gives the company a boost in the uphill battle Chinese brands face for brand recognition and consumer trust as they become accustomed to household names such as co-owner Volkswagen.
“If Volkswagen invests in something, that’s a good sign for most German consumers,” says Schrick.
“If Volkswagen invests 700 million euros in another car manufacturer, they will carry out a very deep and in-depth analysis. And this decision was not easy.
“They looked at the market carefully and chose Xpeng.”