(Bloomberg) -- Chinese automaker Xpeng Inc. is looking at several options in Europe that may help it to localize production and sidestep tariffs the bloc is levying on electric vehicles made in Asia’s biggest economy.
“We’re looking at multiple options, ranging from contract manufacturing to working with existing plants, or even thinking about [new] plants,” Vice Chairman and Co-President Brian Gu said in a Bloomberg TV interview from Berlin on Wednesday. “But those are still very preliminary.”
European Union member states are preparing to vote on Friday on imposing definitive tariffs as high as 45% on imported EVs made in China. It would take a qualified majority — 15 member states representing 65% of the bloc’s population — to block the tariffs.
German automakers — including Volkswagen AG, Xpeng’s European partner — have broadly rejected the tariffs, which they say could threaten sales in their biggest car market if China retaliates with counter-measures. Mercedes-Benz Group AG CEO Ola Kallenius has led calls for open markets in the past months, while VW CEO Oliver Blume has repeatedly voiced concerns over a potential trade spat.
VW and Xpeng agreed to deepen cooperation in July, with the two pledging to develop a new electrical and electronic solution for all battery-powered cars made in China under the VW brand. In July 2023, VW said it would make a $700 million investment in Xpeng in return for a 4.99% stake.
Gu stressed the significance of Europe to Xpeng, and the need to become more local in that regard. Chinese consumers, for example, place more importance on multimedia features in the smart cockpits of today’s cars, whereas for European buyers, navigation tools are seen as more desirable.
“Being more local is not only because of the tariffs,” he said. “As a company, [we have] to aspire to be a leader in a market like Europe. We have to think about becoming more local. We have to have a more local team to build a more local brand, and also have more local presence.”
Xpeng is launching sales this year in close to 40 countries, including many in Europe but also the Middle East and in Southeast Asia, such as Thailand, Malaysia and Singapore. “I’ll be in Dubai for our United Arab Emirates launch later this month,” Gu said.
The company posted record monthly sales of about 21,350 vehicles in September, lifting third quarter deliveries to around 46,500, exceeding the high end of guidance it gave in August of 41,000 to 45,000 cars.
The boost came from Xpeng’s newly launched mass-market Mona brand. More than 10,000 M03 sedans, which start from 119,800 yuan ($17,1000), were delivered last month.
However the price war in China continues to hit the earnings of EV makers, including Xpeng. The automaker’s forecast for third quarter revenue of up to 9.8 billion yuan was well below the 10.6 billion yuan that analysts had projected.
Xpeng, which hasn’t made money since it was founded in 2014, is turning to its partnership with VW to offset some of those losses. Earnings from the technological collaboration it has with the German automaker helped Xpeng to narrow losses in second quarter by more than half from a year ago.
Gu also said Xpeng is looking closely at the US, which for now remains largely off limits for Chinese carmakers due to punitive tariffs.
“The US market is a very important market, and also a market that’s ripe for technology innovation,” he said. “But right now, the policy is evolving and also making it challenging for Chinese companies to enter.”
©2024 Bloomberg L.P.