Chinese electric vehicle maker Xpeng considers factory in Europe to be in ‘low occupational risk’ areas

Volkswagen AG’s Chinese partner is in the initial stages of selecting a site in the European Union as part of its future plan to locate production, Chief Executive He Xiaopeng said in an interview with Bloomberg at its Guangzhou headquarters on Thursday. , China.

The company expects to build capacity in areas with “relatively low labor risks,” he said, adding that Xpeng also plans to set up a large-scale data center in Europe as efficient software collection becomes paramount for intelligent car driving functions.

Xpeng’s broad globalization plan will not be affected by higher taxes, he argued, although he noted that some “profits in European countries will be reduced after the tariff increase.”

Establishing a manufacturing footprint in Europe would see Xpeng join the growing ranks of Chinese electric vehicle makers, including BYD Co., Chery Automobile Co. and Zhejiang Geely Holding Group Co.’s Zeekr, which is looking to expand production in the region to minimize the impact. from the European Union’s decision to raise taxes on electric vehicles made in China to 36.3%. Xpeng is set to face an additional 21.3% tariff.

The added European tariffs are just one aspect of a wider global trade dispute. The US has imposed tariffs on electric vehicle imports from China that can exceed 100 percent as the world’s two largest economies spar with an industry that has grown rapidly thanks in part to Beijing’s subsidies.

The trading actions have only added to the challenges the 10-year-old company has faced in recent years. Xpeng has also struggled with tepid domestic sales, product planning disputes and a protracted price war in the Chinese market. Its share price has more than halved since January.

The automaker delivered about 50,000 vehicles in the first half of the year, just about a fifth of BYD Co’s monthly sales. Although its delivery outlook for the current quarter beat analysts’ estimates, revenue estimates fell well short of expectations, according to its latest quarterly report.

A bright spot for Xpeng is its year-old partnership with VW. Hundreds of employees of the German automaker now work at its headquarters in Guangzhou. Vice president-level managers from both sides meet at least once a week, he said, noting that the company is “making every effort to make sure the partnership works well.”

An example of how collaboration benefits the Chinese company is in managing complex supply chains. With Volkswagen’s help, Xpeng’s second-quarter gross margin climbed to 14 percent from negative 3.9 percent a year ago.

AI advantage

Xpeng also sees its expertise in artificial intelligence and advanced driver assistance features as helping it make inroads in Europe. That’s one reason it will need to set up a large-scale data center there before it can bring those features to the region, he said.

US-listed Xpeng has also invested heavily in AI-related research and development, including in its own chips, he said, noting that semiconductors will play a more critical role in “smart” vehicles than battery cells.

“Selling one million AI-powered cars will be a prerequisite for companies to finally become profitable in the next 10 years, when the human driver will touch the wheel less than once a day, on average, every day . the shuttle,” he said. “We will see companies launching such products from 2025, and Xpeng will be among them.”

Recommended newsletter: High-level information for high-powered executives. Subscribe to the CEO Daily newsletter for free today. Subscribe now.