Product matrices and technology platforms have accumulated and developed, and the organizational management structure is seeking change. Xiaopeng Motors owns the Mona, P, G and X series, covering all major model markets in the 0.1-0.4 million yuan price range. In terms of financial performance, in the first half of 2024, the company achieved record highs in revenue and gross margin of 14.66 billion/ 13.5% respectively, and losses narrowed significantly to -2.65 billion yuan. By setting up five virtual committees and multiple product matrices, the company achieved efficient cross-departmental collaboration and a closed loop of product development. Subsequently, Wang Fengying and other executives joined Xiaopeng Motor, merged the direct management and distribution systems, optimized the channel structure, proposed the “Jupiter Plan”, and further innovated the company's management structure. Since then, a series of technical reserves such as the Fuyao Platform and X-EEA have been built.

A new round of product cycles has set sail, and a strong upward trend in new products can be expected. 2024: Launched in August 2024, the MONA M03, as Xiaopeng's first compact sedan, quickly became the focus of the market with its high level of intelligence and performance that surpassed competitors in terms of practicality, battery life, and cockpit experience, and showed the potential to be a hit model at the beginning of its launch. Meanwhile, the Xiaopeng P7+ is scheduled to be launched in the fourth quarter of 2024. By reducing technology costs by 25%, it is expected to bring a strong competitive advantage in smart driving and space.

2025-2026: Xiaopeng's new product cycle is expected to continue. It is expected that more than four new models will be launched in 2025 to further expand the product matrix.

Autonomous driving solutions are being developed over a long period of time, and the accumulation is expected to grow. Xiaopeng Motor continues to upgrade its autonomous driving solutions through self-research on full-stack technology, and ranks among the leading domestic intelligent driving companies. Recently, Xiaopeng released the AI Hawkeye Vision Solution and plans to use L2 hardware to implement L3 functions. The pure vision end-to-end solution can be expected to be fully implemented. At the same time, the self-developed Turing chip was successfully streamed, providing a strong computing power guarantee for advanced intelligent driving. The cost of smart hardware may be significantly reduced in the future, and is expected to drop to 0.008/0.007 million yuan in 2025/2026. 1024 Xiaopeng Technology Day may showcase the company's advanced autonomous driving solutions. The pure vision+ end-to-end solution is expected to enter a leading position in China and achieve technological parity, reducing the price of models equipped to less than 0.2 million yuan.

Sales are expected to double, and the downward trend in costs is clear. At the sales level, during the period 2020-2023, Xiaopeng will maintain the pace of launching a new model every year. It is expected to accumulate thin sales in 2024-2026 and accelerate. Sales are expected to reach 0.182, 0.309, and 0.529 million vehicles in 2024-2026. At the cost level, driven by both technological cost reduction and commercial cost reduction, cooperative procurement with the public and continuous optimization of autonomous driving, car body, electronic and electrical structures are expected to continue to reduce costs. Furthermore, the scale effect is expected to bring about significant improvements in depreciation and expenses, compounding Volkswagen's cooperative revenue in pure electric platforms, electronic and electrical architectures, and joint procurement, driving the company's profit inflection point to an accelerated pace.

Investment advice: We expect the company to achieve revenue of 501.39/ 73.506/121.651 billion yuan in 2024-2026, net profit to mother of -86.37/ -16.91/2.361 billion yuan, and EPS of -4.55/ -0.89/ 1.24 yuan respectively, giving it a “Highly Recommended” rating.

Risk warning: Sales of smart driving models fall short of expectations; the penetration rate of new energy vehicles falls short of expectations; new car launch points are delayed; new product launches fall short of expectations; intense competition in public opinion and price wars; risks such as falling short of expectations in the construction of delivery and pick-up channels; increased competition in the automotive industry, etc.