Volkswagen-backed Xpeng braced for lease conflict to win over EV-skeptics

After Xpeng’s CEO warned of an business “bloodbath” sparked by a vicious value conflict, the Chinese language carmaker is ready to do every little thing it might to get its fashions off the lot within the European battleground. 

The carmaker launched in Germany final week, and is a part of a rising wave of Chinese language manufacturers which might be anticipated to account for 1 / 4 of EV gross sales in Europe this yr. 

But it surely’s a lease conflict, somewhat than a value conflict, that might get the Volkswagen-backed fledgling carmaker into the hearts and minds of brand-loyal German drivers.

Lease wars

“It’s not so much that the customer will buy the car,” Xpeng’s managing director for Germany, Markus Schrick, informed Fortune.

As a substitute, a rising variety of drivers are opting to lease their electrical automobiles, partly out of worry that fast technological developments within the EV area will trigger their vehicles to fall behind the business customary. 

“With the rapid development of electric mobility, with new technology coming in quite quickly. customers tend to not want to own the vehicles but leased vehicles.”


Leasing could also be a option to win over EV-skeptics, who’ve proved more durable than anticipated to show away from inner combustion engines.

Whereas leasing already has strong traction amongst non-EVs, it’s poised to blow up within the EV market as a result of elements Schrick mentions.

Schrick says the corporate is providing aggressive lease charges on its vehicles, the place beginning costs for outright possession start at €49,000 ($53,000) for its P7 customary vary.

A aggressive lease providing is an efficient factor for the carmaker, with Schrick saying 4 out of each 5 vehicles rolling off Xpeng’s lot are offered by means of lease agreements.

By comparability, data analyzed by McKinsey & Co. discovered 35% of latest vehicles had been leased in Germany.

Whereas coming in at a costlier entry level than fellow Chinese language disruptor BYD, Xpeng has additionally been vocal about pricing, as firms like Tesla and Volkswagen get right into a prolonged value conflict.

“This year marks the beginning of a fierce competition that may end in a ‘bloodbath’,” Xpeng wrote to workers in February, CNBC reported citing an inner letter shared with workers.   

Like with the worth wars, Schrick says Xpeng is ready to comply with its opponents in reducing lease charges if a recent value conflict ensues.

“We won’t say: ‘If the lease rates go down 20%, no, we don’t participate.’ Of course, we will find a solution because we need and we want to sell cars,” he mentioned.

After launching in 2020, the Chinese language automaker has moved to ramp up deliveries this yr, virtually tripling them between the ultimate quarter of 2022 and the identical interval in 2023. 

The carmaker already has a presence within the Nordic international locations and the Netherlands.


It will likely be fascinating to see how Xpeng’s technique unfolds in Germany, given its shut ties with the nation’s premier carmaker Volkswagen.

Volkswagen bought up a 4.99% stake in Xpeng for $700 million in December, with plans for the pair to create two SUVs by 2026.

That may increase eyebrows from opponents about the place that shut partnership ends—certainly, whether or not Xpeng and Volkswagen may strategize to divide and conquer.

Xpeng’s Schrick says that for now, the connection between the Chinese language carmaker and Volkswagen stops there.

Nonetheless, Schrick mentioned he “wouldn’t mind” extra strategic agreements with the German carmaking large going ahead. 

“Such a progressive smart technology developer like Xpeng, together with such a traditional and high-tech company like Volkswagen, it can only be a good partnership.”

Schrick additionally thinks the deal has given the corporate a leg up within the arduous battle confronted by Chinese language manufacturers for brand recognition and consumer trust, having grown used to family names like their part-owner Volkswagen.

“If Volkswagen invests in something, for most German consumers, that’s a good sign,” Schrick says.  

“If Volkswagen invests €700 million into one other automotive producer, they’ll have achieved a really deep and profound evaluation. And that call was not made straightforward. 

“They have looked at the market intensively, and they chose Xpeng.”

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