What Xpeng has learned from 'big brother' Tesla's mistakes

China’s Xpeng, at first glance, looks to be copying Tesla’s business model as it expands beyond EV-friendly Norway to additional European markets starting this year with the Netherlands, Sweden and Denmark. But there are crucial differences, some made in response to Tesla’s mistakes.

“Tesla is a good example to use, a big brother to look up to to learn from the advantages and the disadvantages,” Isaac Yeo, managing director of Xpeng in the Netherlands, told Automotive News Europe.

First, here are the similarities with Tesla.

• The P5 electric midsize sedan that Xpeng will launch as part of its expansion in Europe is a direct rival to the Tesla Model 3.
• The P7 large sedan is a rival to the Tesla Model S, with a dash of Tesla’s Model X SUV in the form of the top-spec P7 Wing model sporting scissor doors.
• Initially, Xpeng launched in Norway in 2020 with the G3 compact SUV, but the new thrust is more upmarket -- in line with Tesla.

Xpeng, formed in 2014, has borrowed from Tesla’s business model in other ways:

• All sales are direct to consumers.
• The selling point of the cars is their high-tech digital intelligence.
• Xpeng runs its own operating system for the infotainment with no room for Apple CarPlay or Android Auto.

Charging-friendly markets

One key difference is that Xpeng decided not to install its own network of chargers in Europe, despite operating 954 stations in China, including 774 superchargers.

“We thought about setting up superchargers, but it wasn’t really cost-effective. We would rather spend more on products,” Yeo said.

Xpeng’s decision also runs counter to Chinese rival Nio, which has pledged to build a network of battery-swap stations, starting in Norway.

Xpeng instead has chosen to launch in European countries with good fast-charging networks, such as the Netherlands, which is also the company’s European base.

“It’s a charging paradise here,” Piotr Chmielewski, Xpeng’s regional head of charging, said.

Xpeng’s current lineup isn’t that competitive in terms of charging speed, but the new G9 large SUV due in the third quarter this year in China and coming later to Europe will “charge faster than anything in the market,” Xpeng claims, partly because of its 800-volt electrical system.

Separate sales philosophy

Xpeng also won’t handle all aspects of sales and service itself, a big change from Tesla’s vertically integrated model.

While the sales are direct from Xpeng, the company has engaged dealer group Emil Frey in the Netherlands, Motor Gruppen in Norway and Bilia in Sweden to act as its agents.

Xpeng is having to find the right balance between keeping control of servicing through its relationship with Emil Frey and offering leasing via the big finance players that often dictate where customer can go for service.

Seeking ‘service accountability’

Servicing was one area that Tesla got badly wrong in the Netherlands, Yeo said.

“Tesla did huge volume in 2019 but that dropped massively in 2020 because people couldn’t get their car serviced,” he said. “We need to build our reputation on service accountability.”

Like Tesla, Xpeng has kept the model lineup simple. The P5 has a sole variant with just three color options. The model is fully loaded, including the Xpilot 2.5 suite of advanced driver assistance systems that are only available on the Tesla Model 3 via an over-the-air update that starts at 3,800 euros.

Xpeng had a change of heart on charging customers to activate its ADAS package this year when it decided to bundle Xpilot as part of the purchase price with the aim of getting the technology better known among customers.

Higher-spec versions of the P5 in China, meanwhile, will come with lidar to enable more accurate auto-navigation. Tesla CEO Elon Musk has said his cars can operate the brand’s so-called “Full Self Driving” suite without adding lidar.

Ultimately, many of Xpeng’s decisions have been made not just because of Tesla’s stumbles. They are made to keep down costs, which is key for a young brand burning through cash in search of its first profit.

Said Yeo: “Trying to do everything by yourself is not cost-effective.”