Xpeng unveils affordable EV line to capture larger market share in China

Chinese electric vehicle (EV) manufacturer Xpeng has made a bold move into the mainstream automotive market with the launch of its budget sub-brand MONA. On Tuesday, the company announced pricing for its first MONA model, the M03 electric hatchback coupe, starting at an attractive 119,800 yuan (USD 16,813), positioning it squarely in one of China's most competitive and fastest-growing market segments.

The introduction of the MONA M03 marks Xpeng's strategic push into the 100,000-150,000 yuan (USD 14,035- USD 21,052) price range, a crucial segment that accounts for approximately one-third of total car sales in China. This move is seen as a significant step for Xpeng, as it aims to broaden its customer base and challenge both domestic and international rivals in the world's largest automotive market.

Xpeng is offering two versions of the MONA M03. The entry-level model, priced from 119,800 yuan (USD 16,813), comes without advanced autonomous driving features. For consumers seeking cutting-edge technology, the M03 Max variant, starting at 155,800 yuan (USD 21,866), incorporates Tesla-like autonomous driving capabilities. Notably, both versions undercut the price of Xpeng's previously most affordable offering, the P5 sedan, which starts at around 157,900 yuan (USD 22,000).

During a launch event in Beijing, which coincided with Xpeng's 10th-anniversary celebrations, company co-founder and CEO He Xiaopeng highlighted the M03 Max as "the only car with advanced autonomous driving at less than 200,000 yuan (USD 28,068)." He announced that deliveries of the M03 Max are scheduled to commence in early 2025, setting the stage for an intensified competition in the affordable smart EV segment.

The MONA brand is the result of Xpeng's acquisition of the electric vehicle development unit from Didi Global, a Chinese ride-hailing giant that has recently scaled back its EV ambitions due to fierce market competition. Through MONA, Xpeng aims to achieve greater economies of scale, potentially paving the way to profitability. The company has set an ambitious target of selling at least 100,000 MONA vehicles annually.

Xpeng's financial outlook has shown signs of improvement in recent months. The company reported a 20% increase in EV sales during the first seven months of the year compared to the same period last year. Additionally, Xpeng has bolstered its revenue streams by providing technology services to automotive giant Volkswagen, contributing to an enhanced gross profit margin.

The launch of MONA aligns with similar strategies employed by Xpeng's domestic competitors. NIO, another prominent Chinese EV manufacturer, introduced its own lower-priced brand, Onvo, in April. The Onvo L60, set to hit the market in September, is positioned to compete directly with Tesla's popular Model Y in China.

In a notable departure from some of their previous models, both the MONA and Onvo EVs have opted not to include lidar sensors in their advanced autonomous driving systems. This approach mirrors Tesla's camera-only Full-Self Driving technology, allowing for significant cost reductions in hardware. While lidar sensor prices have decreased substantially over the past two years, thanks to increased production by Chinese manufacturers like Hesai Technology, they still represent a considerable expense in vehicle production.

Interestingly, Xpeng had previously been at the forefront of lidar integration in mass-produced vehicles. In 2021, the company launched the P5, touted as the world's first mass-produced car with optional lidar sensors. However, in a strategic shift last September, Xpeng removed the lidar option from the P5 to reduce its starting price to 157,900 yuan (USD 22,000), aiming to appeal to more price-conscious consumers. Currently, Xpeng vehicles equipped with lidar sensors are available from 224,900 yuan (USD 31,450).