XPeng (Minutes): Committed to making the New P7 one of the top three pure electric vehicles in the 200,000 to 300,000 RMB range.

The following are the Minutes of the XPeng FY25 Q2 earnings call organized by Dolphin Research. For an interpretation of the financial report, please refer to "XPeng: Record High Gross Margin, Can It Soar Like a "Great Peng"?"

I. Review of Core Financial Information

Capital Expenditure: R&D expenses reached RMB 2.21 billion in the second quarter of 2025, a year-on-year increase of 50.4% and a quarter-on-quarter increase of 11.4%. The growth was mainly due to the company's expansion of its product portfolio to support future growth, with increased expenses related to new model and technology development.

Cash Flow: Free cash flow exceeded RMB 2 billion in the second quarter. As of June 30, 2025, the company's cash and cash equivalents, restricted cash, short-term investments, and time deposits totaled RMB 47.57 billion.

Personnel Adjustment Plan: The company aims to build organizational strength by attracting and retaining top talent, adopting world-class management practices, and utilizing automation tools. It will leverage AI to optimize management, R&D, and collaboration to maximize organizational synergy.

Guidance:

- Deliveries in the third quarter of 2025 are expected to reach 113,000 to 118,000 units, a year-on-year increase of 142.8% to 153.6%.

- Revenue in the third quarter of 2025 is expected to reach RMB 19.6 billion to RMB 21 billion, a year-on-year increase of 94% to 107.9%.

- In the fourth quarter of 2025, a strong product cycle featuring "dual capabilities" (pure electric + extended range) will be launched, complemented by Turing AI-driven intelligent driving solutions.

- In 2026, plans are in place to achieve mass production of L4 autonomous vehicles and launch pilot Robotaxi services in selected regions.

- In the second half of 2026, plans to launch humanoid robots with initial L4 capabilities for commercial/industrial use.

- In the second half of 2026, the goal is to fully launch the complete Kunpeng super electric product line in international markets.

- Over the next three years, the company will focus on expanding domestic and international market share, maintaining steady growth, and leveraging disruptive AI innovations to enhance global user value. The company is confident in maintaining leadership in mass markets while improving operational efficiency and moving towards sustainable profitability.

II. Detailed Content of the Earnings Call

2.1 Executive Statements of Core Information

1. Operational Milestones:

1) Delivery Breakthrough: Deliveries in the second quarter of 2025 reached 103,181 units, a year-on-year increase of 242%.

2. Performance of Popular Models:

- Mona M03 MAX became a bestseller upon launch, accounting for over 80% of Mona M03's total sales.

- The G7 SUV, launched in July, is the first model equipped with the self-developed Turing AI SOC, becoming a bestseller in its category over the past four weeks, with the Ultra version accounting for over 50% of sales.

- The new generation P7 luxury coupe (priced around RMB 300,000) has pre-sale orders surpassing all previous models' data in the same period, expected to rank in the top three in the sub-RMB 300,000 pure electric sedan segment.

2. Technology and Product Planning:

1. AI Technology Layout:

- The company's core hardware and software technologies have been independently developed over ten years. All Ultra versions of models will be equipped with three self-developed Turing AI SOCs, providing a total of 2250 TOPS of computing power, more than three times that of the latest flagship competitors.

- The onboard VLA+VLM models are driven by Turing AI SOC, with model scale increasing by an order of magnitude to tens of billions of parameters, and the VLA model's frame rate is twice that of competitors.

- The company is leading in L3 computing capabilities and plans to mass-produce L4 autonomous vehicles in 2026, while launching pilot Robotaxi services in selected regions.

- Launched the industry's first AI chip dedicated to intelligent cockpit foundational models, with effective computing power more than 12 times that of leading cockpit processors.

2. New Product Release Plan:

- The G7 SUV was released in July.

- The new generation P7 luxury coupe is planned to be officially launched in the third quarter.

- The "Kunpeng" series ("dual capabilities": pure electric + extended range) will begin mass production in the fourth quarter, with the X9 Peng super electric version being the first model, offering over 450 km of pure electric range and over 1500 km of combined range.

3. Globalization Strategy:

- Overseas Deliveries: Overseas business continued strong growth in the first half of 2025, with overseas deliveries exceeding 18,000 units, a year-on-year increase of over 200%.

- Channel Construction/Market Expansion: Currently ranked as the top-selling Chinese electric vehicle startup brand in 10 markets, including Norway, France, Singapore, and Israel, and leading in European mid-to-high-end Chinese BEV sales.

- Delivered the first locally produced XPENG X9 in Indonesia in July, marking a key milestone in global localized production.

4. AI and Robotics Vision:

- The company's latest humanoid robot has made significant progress, with plans for mass production of the version with initial L4 capabilities in the second half of 2026.

5. Profitability Goals:

- Vehicle gross margin reached 14.3% in the second quarter of 2025, a quarter-on-quarter increase of 3.8 percentage points, improving for the eighth consecutive quarter.

- Overall gross margin reached 17.3%, with net loss further narrowing. The company is committed to improving operational efficiency and moving towards sustainable profitability.

2.2 Q&A Session

Q: Regarding brand positioning and product pricing, how will XPeng reverse the trend of declining average selling price (ASP) due to product mix over the past two years and effectively enhance brand positioning and the sales proportion of high-end models?

A:XPeng is enhancing product premium from four directions: firstly, optimizing product layout, with New P7 (RMB 300,000 level) and X9 (RMB 400,000 level) as the main sales models, and multiple new cars above RMB 300,000 will be launched in 2026-2027. Secondly, leveraging technological advantages to increase investment in Ultra Trim versions and Robotaxi. Thirdly, through aesthetic design, creating more visually appealing cars. Lastly, accelerating global brand building, expected to speed up in 2026-2027.

Q: When can we see a significant ASP increase, and how will this accelerate XPeng's profit improvement?

A:With multiple new models above RMB 300,000 launching in 2026-2027, and continued investment in technology, aesthetics, and brand, XPeng's average selling price (ASP) is expected to increase significantly. The increase in ASP will directly drive the growth of the company's gross profit and net profit, thereby accelerating overall profit improvement.

Q: In the context of increasing competition in end-to-end intelligent driving solutions and new chip applications, where does XPeng's technological advantage in intelligent driving lie?

A:XPeng's core advantage in intelligent driving lies in its strong computing power, model scale, and data accumulation. The company's total computing power has reached 2250 TOPS, far exceeding peers (100-700 TOPS). Additionally, XPeng's frame rate running speed is twice that of competitors, reflecting the company's smarter brain and better control over movement.

Q: When will the XPeng Ultra version equipped with Turing chips achieve significant differentiation from competitors through superior software experience?

A:The Ultra version will gradually elevate from the initial VLA release to the same level as the MAX version. By the end of this year, XPeng's intelligent driving software experience is expected to significantly differentiate from peers. Next year, with the trial operation of Robotaxi, the Ultra version equipped with Turing AI SOC will achieve a 10-fold or more leading advantage with models homologous to L4.

Q: Regarding the expansion of cooperation with Volkswagen's EE architecture to internal combustion (IC) and plug-in hybrid (PHEV) vehicles, can you provide detailed information and guidance on future cooperation revenue?

A:XPeng's fourth cooperation with Volkswagen extends the authorization of electrical and electronic architecture to Volkswagen's internal combustion (IC) and plug-in hybrid (PHEV) vehicles in China.Previously, IP licensing revenue based on platforms like G9 has been recognized since the first quarter of 2024 and remains relatively stable. In the second half of the year, revenue from the first two cooperations is expected to grow. The newly signed EE architecture cooperation revenue will be the third recurring revenue stream upon SOP of Volkswagen's IC and PHEV vehicles.

Q: Will XPeng launch 2B version vehicles that are distinct from consumer-facing products in the future?

A:In the future, there will be two types of L4 autonomous vehicles: L4 driven by humans and L4 without human driving. XPeng is committed to achieving model homogeneity between future products and Robotaxi, but functional differences remain, such as Robotaxi's ability to recognize and stop for passengers waving on the street, which consumer vehicles will not. The company will advance such 2B business through reinforcement learning and attempt in different pilot regions in 2026.

Q: Can XPeng's existing vehicles provide L4 autonomous driving functionality through OTA services next year?

A:XPeng's mass-produced vehicles are pioneers in achieving intelligent driving without high-precision maps and LiDAR scanning of entire cities. Although committed to model homogeneity between consumer vehicles and Robotaxi, L4 functionality requires policy and regulatory permission and approval, and achieving fully driverless L4 will take several years. The full provision of L4 in the future, especially OTA support for existing vehicles, requires company trials and communication with partners.

Q: What is the reason for the strong pre-sale performance of the new P7, and how does the company predict its sales?

A:The new P7's pre-sale orders far exceeded expectations, even surpassing historical sales data of other model series.This is mainly due to its original design being well-received by customers, as well as the vehicle's aesthetics and durability. Users and media have given positive feedback on the chassis co-developed with Volkswagen. Pre-sale data shows a high proportion of male buyers, with the age group being the youngest for XPeng to date.

Q: Will the new P7 become a high-sales model like the first-generation P7 or P7 Plus?

A:XPeng is committed to making the new P7 rank in the top three in the RMB 200,000 to 300,000 pure electric vehicle segment. Given its strong pre-sale performance, design favored by consumers, and excellent durability, the company is confident in its sales. Although specific data cannot be disclosed, current market feedback and targets indicate it is likely to become a high-sales model.

Q: Regarding XPeng's newly announced Robotaxi strategy, what are the current technological or regulatory opportunities?

A:As an OEM, XPeng has unique advantages in the Robotaxi strategy. Technological opportunities lie in solving the growth ceiling of L4 vehicles, enabling people to drive without relying on navigation ADAS systems and achieving unified OTA update sources. On the regulatory side, once L4 vehicles are licensed, their potential growth is enormous. Although global rollout faces challenges, the possibility of operating in specific regions is increasing.

Q: The vehicle gross margin in the second quarter increased by 3.8% quarter-on-quarter, far exceeding expectations. Can management break down the main drivers of this improvement?

A:The significant quarter-on-quarter improvement in vehicle gross margin in the second quarter was mainly due to product mix optimization, cost reduction, and scale effects. Product mix contributed the most: the proportion of Mona M3 deliveries decreased, while high-margin models like G6 and G9 increased, benefiting from technological improvements and optimized vehicle specifications. Additionally, engineering efforts to achieve higher levels of platform carbonization, increased sales in the second quarter bringing scale effects, and continued supply chain optimization further reduced material costs.

Q: Is the guidance target of RMB 8.5 billion in annual R&D expenses still maintained?

A:XPeng is continuously increasing R&D investment, especially in bringing AI capabilities from the digital world to the physical world. The company plans to launch the "dual capabilities" platform in the fourth quarter of this year. R&D investment also includes autonomous driving, robotics technology, and cloud computing capability enhancement to strengthen leadership in this field. Although the original text did not directly mention the specific target of RMB 8.5 billion, it emphasized the expansion of R&D investment.

Q: With the new model release plan, will sales and marketing expenses in the third and fourth quarters be comparable to the second quarter?

A:Sales and marketing expenses in the second quarter increased by approximately RMB 200 million quarter-on-quarter, partly due to commission expenses from increased delivery volume.Looking ahead to the second half of the year, the third quarter will see more significant product launches such as the new SUV G7 and new P7, with marketing and advertising expenses expected to be higher than in the second quarter. The fourth quarter will also see the launch of the super electric platform and X9, with the company continuing to invest sufficient resources to support new car releases.

Q: Does the significant improvement in aesthetic design of the new P7 indicate that XPeng's product strategy is shifting towards prioritizing design?

A:Yes, the overall answer is affirmative. XPeng's product strategy is significantly shifting towards prioritizing design. The company recognizes that while technology was an advantage, other aspects were lacking, and since early 2024, it has begun to focus more on product style and aesthetics. The new P7 is a reflection of this shift.

Q: Is this a core component of the company's long-term strategic transformation rather than a short-term adjustment?

A:This is not a short-term adjustment but a core component of the company's long-term strategic transformation.In the past, design was often the last consideration in product development, but now XPeng has elevated it to a priority, sometimes starting with design and aesthetics before deciding on engineering, cost, and positioning. The company has established design centers in Shanghai and Guangzhou and plans to expand globally to ensure products have no shortcomings and provide a better user experience.

Q: How is XPeng adjusting its business operations to respond to the anti-involution policy, which has become a key regulatory direction in the Chinese automotive industry?

A:XPeng believes the anti-involution policy is beneficial for enhancing the competitiveness of China's economy and the healthy development of the industry. The company will respond to this policy by providing the most innovative technology and products through relentless innovation and development. This aligns closely with the policy direction, aiming to offer products of the best quality, technology, and broad appeal.

Q: What specific impacts will this policy have on XPeng's operations and market positioning?

A:This policy will prompt XPeng to continue focusing on full-stack innovation, creating innovative and broadly appealing products while maintaining operational discipline and orderliness. For example, XPeng is one of the first OEMs to respond to the government's requirements for improving payment terms, ensuring partners and suppliers benefit. This helps build a healthier ecosystem and industry, ultimately gaining recognition from customers, partners, and regulatory bodies.

Q: Regarding the G7 model, what are the company's deployment plans for the infotainment system and AI models?

A:Regarding the G7 model, XPeng plans to deploy specific Turing SOC chips for its infotainment system in late October. Subsequently, the company will launch advanced AI features such as VOA and VOM models for G7 customers.

Q: Given the vehicle gross margin in the second quarter exceeded market expectations, does management expect the vehicle gross margin to reach high-teens in the third quarter?

A:Despite the significant improvement in vehicle gross margin in the second quarter, XPeng will continue to focus on the overall competitive landscape and scale expansion strategy. Regarding margin guidance, the company emphasizes that the goal remains to achieve profitability in the fourth quarter and reach high-teens overall profitability in the fourth quarter. These goals will collectively help the company achieve breakeven in the fourth quarter.

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