Chinese electric vehicle stocks rose on Monday as XPeng (XPEV) announced a new production process that it says will lower costs.
The updated Smart Electric Platform Architecture, known as SEPA 2.0, will optimize research and development cycles by 20 percent, according to the company.
“It will make rapid advancements in technology available for our customers as standard, with faster software upgrades, stunning cost savings and elevated product experience,” He Xiaopeng, Chairman and CEO of XPeng said in a press release on Sunday.
XPeng shares rose more than 11 percent in early trading Monday with other China EV automakers, Nio (NIO) and Li Auto (LI) also moving higher on the news.
SEPA 2.0 will cut powertrain systems costs, including batteries, by a minimum of 25 percent, Xpeng president Brian Gu, told reporters in Shanghai on Sunday, according to Reuters. The upgrade will cover a wide breadth of models from smaller sedans to hatchbacks and pickup trucks, helping XPeng reduce costs across its lineup.
The SEPA 2.0, announcement comes as XPeng’s deliveries have dropped for four straight quarters. As other Chinese EV companies have seen deliveries rise amid an ongoing price war, XPeng deliveries sank 46.8% in the most recent quarter compared to the same period in the prior year. Xpeng is set to debut its first model built with SEPA 2.0, the G6 Ultra Smart Coupe SUV, at Auto Shanghai 2023 on Tuesday.
“We envision that this evolutionary intelligent architecture will lead smart EV technology development for the next three years,” Xiaopeng said in the press release.
Xpeng is still lagging market leaders Tesla (TSLA) and BYD (BYDDF) in the Chinese EV market. BYD led new energy vehicle sales in March with a 35.5% market share, while Tesla represented 14%.
Tesla has teased a next-generation model of its own that would also further cut costs. This comes as the automaker has hacked prices five times since January.
Wall Street analysts believe the price cuts have reinvigorated demand, with Tesla delivering a record 422,875 vehicles globally in the first quarter.
But with Tesla’s quarterly earnings report expected on Wednesday, the price cuts impact on margins will be a focus for investors.
“When you really look at how they can lower costs, it’s really a great way for them to gain market share,” RBC Capital Markets lead equity analyst for global autos recently told Yahoo Finance Live. “And there will be some near-term pressure on profitability, no doubt, but I think the market really understands this.”
Source: China EV stocks rally after XPeng unveils ‘stunning’ cost savings, new production process
