China's Xpeng shifts tack from premium to mass-market – likely to the detriment of its equity partner Volkswagen
- Matthias Schmidt
- 3 hours ago
- 3 min read
With no premium Asian OEMs having ever penetrated more than 0.5% of the Western European new passenger car market, what makes XPENG think it can do any better? 🤷♂️
The answer is simple, it likely never will... in its current premium guise!
With just 21,000 units delivered across the region last year and on track to exceed just over 30,000 this year, in a market on track to exceed 12 million units, for the first time since pre-Covid 2019 (14.2mn), that would equate to 0.25% share.
However, phrase the question differently, and ask if XPENG can achieve more than 0.5% market share, the answer is likely yes.
Why?
Following in the footsteps of Tesla, which first had ambitions of challenging the likes of BMW Group and Mercedes-Benz AG, it then pivoted to becoming a volume brand offering the Model 3 and Model Y from closer to €30,000 than the heady heights of €60,000 for an equivalent German premium BEV.
In an often-overused phrase, the US company genuinely metamorphosed from a brand with premium ambitions to "democratising" the EV market, with the doors of the Model X stretching open to reveal the Model 3/Y below.
Launching the Xpeng L03 compact crossover in Munich today, with German prices dropping below €30K after subsidies for average-earning small family households, the Chinese company appears to have come to the realisation that the premium European market is too much of a hard nut to crack, like its US peer concluded, dropping both the Model X and Model S from its portfolio.
Crucially, in Norway, the L03 falls below the 300,000 NOK ceiling where 25% VAT is applied to BEVs.
The CEO, who shares the company's name, says they are in talks with various companies to expand production facilities across Europe, which indicates their ambitions for the model.
Magna would be limited to roughly 100K per year, depending on other contracts. The charismatic CEO, speaking English, said they are in talks with several OEMs regarding local production, which will become vital once the EU's IAA lands.
The FDI element now looks like enforcing JVs for greenfield investments with local OEMs and some form of intellectual transfer in an almost replica of the Chinese system that allowed Western brands to enter the world's largest car market decades ago.
However, with roughly 2.5 million units of overcapacity here. They can take their pick and avoid FDIs.
Last year, across W-Europe, the benchmark for the L03, the locally manufactured Tesla Model Y delivered 142K units, down from its 2023 peak of just under 250K units.
As for the L03 model, think of it as a fairly nondescript Polestar-Tesla lovechild, with less brand equity.
However, with those prices, the model could nonetheless hit Europe running as other Sino models have demonstrated.
Had it launched 24 months ago, when the toxic musk of Tesla's CEO was trailing behind each Tesla, the L03 would have struck a chord.
With the thick air having lifted for now, the XPeng may find it more difficult. But if the L03 is a success, it could end up contributing to being the straw that breaks its equity partner's back, on its home turf, potentially dragging Volkswagen brand's West European market share below 10%, for the first time since 2004, at precisely the moment that it desperately looks to steady the ship.
This includes extracts from one of our full studies which are available below. To discover more about out studies just contact us
Scope: Western Europe's 18 Markets: EU Member States prior to the 2004 enlargement, plus EFTA markets Norway, Switzerland, Iceland, plus UK – accounting for 90% of the enlarged European region.