The price cut that Tesla pushed through in China four months ago created a big stir. Its mass-market Model 3 saw a 17% markdown, while the rest of its line-up was sold for $12,000-$18,000 less than previously. That was fine for new buyers but for those who had just purchased a Tesla car, “feeling cheated” was pretty much the common outcry. In response to accusations that it had violated consumer rights, Tesla made a concession by offering a 50% discount on its autopilot or autonomous driving options to its earlier buyers.
Notwithstanding this furore, the California-based company remains for many of its electric vehicle (EV) start-up peers in China something of a role model. One of them is XPENG Motors, which like Tesla also distributes its cars through direct-to-customer sales channels. More surprising is that far from learning from Tesla’s mistake, XPENG has been embroiled in a remarkably similar public relations debacle.
It all began with the marketing of a new variant of its flagship SUV (sport utility vehicle), the G3. The 2020 version, launched on July 10, came with a driving range of either 401km or 520km and was sold for respectively Rmb143,800 or Rmb196,800 ($28,263). Its predecessor, released only in December, had a shorter driving range of 365km and the most basic version was priced at Rmb155,800 (factoring in the removal of purchase subsidies). Worse, customers who bought the older version complained they did not take delivery until April.
Adding to the fury of those customers who bought at launch was XPENG’s decision to keep quiet about the forthcoming G3’s range enhancements and better price.
“It’s still a while away from when we can actually deliver the longer-range model. Regarding its launch date and price, please pay attention to XPENG Motor’s official release,” a customer service officer had explained on July 5, five days before the 2020 model went on sale.
Within days of the new G3’s unveiling on July 10, several weiquan (or “consumer rights’ defence”) movements sprouted across the country, protesting against the move. At XPENG’s headquarters in Guangzhou, disgruntled customers held up white placards that read “fleecing car owners” and demanded their money be returned. They were not appeased when XPENG’s boss He Xiaopeng made a public apology and offered compensation – including up to 60% rebates on the price of new cars traded in for used ones.
Compared to the life cycle of a typical gasoline car, XPENG’s current pace of product upgrade is unusual. But some analysts believe it is going to be the norm for the EV era. “Technological upgrades tend to be in rapid succession and the slightest delay will make you a laggard in the race, thanks to over-the-air (OTA) technology,” noted Sohu.com. “Similar to smartphones, the smart car will also see more frequent and faster upgrades.” In the case of XPENG, its operating system has already been through four upgrades via OTA technology since its launch seven months ago.
Remedying this PR misstep could set XPENG back an estimated Rmb1 billion, according to 36Kr, a news portal. However, it’s unlikely to create the sort of legal issues that might derail its plan to go public in the US. Backed by Alibaba and Foxconn, the five year-old start-up has so far raised Rmb14 billion and is looking to boost its coffers to Rmb30 billion by the end of this year. It was valued at close to $4 billion in its most recent financing – just prior to the rollout of its 10,000th electric vehicle in mid-June, Bloomberg reports.
Meanwhile, its close competitor WM Motor announced that 8,536 units of its EX5 model were sold in the first six months, taking the total of customer deliveries to 12,386 units since launch last September. The Shanghai-based company claimed in a press release that the EX5 commands 20% of the Class-A pure-electric SUV category across 13 cities; and said that its in-cabin AI voice assistant Xiaowei had been activated 3.56 million times in the first half of 2019.
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