Chinese electric car unicorn Xpeng Motors has raised $400 million and brought consumer electronics giant Xiaomi Corp on board as a strategic investor to give it the edge as it develops intelligent hardware for its vehicles.
The new round of Series C funding was announced on Wednesday morning. Xpeng’s relationship with Xiaomi is significant.
“We are a strong believer that smart mobility and autonomous driving are going to transform our daily lives, and we share the same vision with Xiaomi that technology innovation is the key driver in reshaping our future transportation,” said He Xiaopeng, chairman and chief executive of Xpeng, in a statement.
Although the company has not disclosed the other investors in the round, China’s rival to Tesla has now raised $1.7 billion in six funding rounds including this one according to Crunchbase. It closed its $587 million Series B+ round in August last year co-led by Primavera Capital Group and Morningside Venture Capital.
While its electric vehicle (EV) rivals target the higher end of the market, Xpeng is unashamedly focused on the middle market. The company’s flagship sports utility vehicle G3 sells for only Rmb155,800 ($23,180), making it one of the more affordable electric cars available in China.
The ME7 model from rival Enovate, for example, currently retails for around $59,600.
In an interview with FinanceAsia in April, He said: “We target China’s middle market because we believe mid-market customers will be able to generate meaningful data for us to improve our products and enhance customer experience.”
By this, he means younger buyers around 25 to 35 years old who are engaged with and curious about technology. Indeed, He himself has always appeared more interested in the technology side of the business.
This should not really come as a surprise. Before Xpeng, He founded UCWeb, the country’s largest mobile browser – later sold to Alibaba – and is well-known for referring to Xpeng as a technology company rather than a car manufacturer.
This focus on technology is confirmed by Xiaomi Corporation chief executive Lei Jun. The two companies, Lei said, have been collaborating to develop technologies connecting smart phones and smart cars.
“We believe that this strategic investment will further deepen our partnership with Xpeng in advancing innovation for intelligent hardware and the Internet of Things,” he added.
INDUSTRY ROAD BLOCKS
But the industry as a whole has been suffering and Beijing’s gradual removal of subsidies on EVs this year, has been a blow.
In a note in April, ratings agency Fitch said that this was “unlikely to disrupt fast volume growth” adding that “we expect demand in the world's largest EV market to be supported by increasingly attractive product offerings, as well as wider commercial use of passenger EVs”.
Even though Fitch also warned that manufacturers would require deep pockets as they would have to subsidise customers for the time being to mitigate the subsidy cuts, the market is yet to recover and the short-term outlook for the sector remains tough.
He himself has euphemistically called the year “eventful” citing economic headwinds, uncertainties in the global markets and government policy changes.
To put this into perspective, earlier this week, the China Association of Automobile Manufacturers said that the sales of electric, hybrid and fuel cell cars had fallen by more than 45% in October, and the most recent financial figures from industry leaders BYD Auto and NIO were underwhelming.
All bad news, but there is a glimmer of hope for Xpeng. As well as its latest equity raising, the company also said that it had secured several billions of RMB-denominated unsecured credit lines from Chinese and international banks including China Merchants Bank, China CITIC Bank and HSBC.
Much like its technology, Xpeng might just be ahead of the curve.
