'Out of intensive care,' Xpeng's stunning recovery is a lesson in executive adaptability

Xpeng Motors accelerated to the top of the electric-car sales chart in China this new year, selling 11,100 vehicles between January 20 and February 2.

The unexpected turnaround for the Guangzhou-based electric-car maker nosed out second-place Li Auto by 100 units.

Just a year earlier, Xpeng was struggling. In February 2024, sales dropped by almost a quarter from the previous year to 4,545 vehicles.

Monthly sales hovered around 10,000 units until August, while rival electric auto manufacturers Nio and Li Auto consistently sold over 20,000 and 40,000 vehicles, respectively.

But signs of recovery for Xpeng began in earnest last September, with monthly deliveries reaching a peak of 36,695 in December, an 82 percent increase year-on-year.

Industry analysts often cite 300,000 annual sales as the threshold for scale. Xpeng's fourth-quarter deliveries alone registered a record 91,507.

Amid missteps that led to slumping sales and rumors that Xpeng, once the king of electric-car sales, might be headed for bankruptcy, the company's stunning comeback has reasserted its position in the highly competitive market.

How did the turnaround happen and what can other carmakers learn from it?

Any lesson is relevant in a market where thinner margins have left only a few players in the black.

Based on a recent interview with Xpeng founder and chief executive He Xiaopeng for LatePost, an online business publication, I believe he made five key moves to get the beleaguered carmaker back on track.

From tech-driven to user-centric

The phrase "user-centric" should have been second nature to He.

Before founding Xpeng, he helped create UC Browser, a mobile app excelling at building products around user needs.

Yet, as a tech-driven engineer, he believed innovation alone would ensure success – until the failed launch of the G9 proved otherwise.

Unveiled in September 2022, the G9 was a mid-size sport utility vehicle meant to break into the premium 300,000-400,000 yuan (US$41,284-$55,045) segment.

Instead, it flopped due to a confusing product lineup, key features locked behind costly add-ons and an overestimation of consumer readiness for high-tech innovations like an 800-voltage fast-charging system, zoned voice controls and dual-chamber air suspension.

Despite an initial 22,000 pre-orders, interest fizzled quickly. Xpeng's stock plunged 11.5 percent the next day, wiping out over HK$12 billion (US$1.54 billion) of market value. G9 monthly sales remained below 1,000 units for seven straight months.

Though Xpeng scrambled to adjust pricing and configurations, the damage was done.

The G9 debacle tarnished the brand's reputation, casting doubt over Xpeng's other models and denting overall sales. One misstep, it turned out, had triggered a systemic crisis.

Xpeng learned the hard way that if consumers don't immediately grasp your product's value, no amount of flashy tech will win them back.

This led the carmaker to overhaul its approach with later models, simplifying pricing and making key features standard. He now prioritizes practical, user-friendly design over pure technological innovation.

Take Xpeng's redesign of the rear cabin space, for example. The company made changes to the trunk and second-row seat integration.

This is highly practical for users, though not particularly groundbreaking from a tech perspective.

When asked if he's still "a tech guy," He said, "I used to be, but now I need to understand users and business better."

This shift reflects a crucial lesson: true product-market fit comes from turning technology into clear, tangible value for consumers.

Expanding access to smart tech

Xpeng's revival began with the revamped G9 in September 2023, correcting past product and pricing mistakes.

But its true resurgence came with affordable models like the P7+ and Mona M03, designed to bring advanced electric technology to a wider audience.

The Mona M03, launched in August 2024, became an instant hit. Sales surpassed 10,000 units in the first month and exceeded 60,000 by January 2025, making it Xpeng's new sales darling.

Priced around 120,000 yuan, it balances practicality, smart features and affordability. With a streamlined design for efficiency, intelligent parking assistance and an optional 620-kilometer long-range version, the M03 even outsold BYD's best-selling Qin Plus in December 2024.

The success of the M03 resonates with budget-conscious consumers increasingly drawn to purchases that give them a bang for their buck.

Success in the mass market isn't just about price and features; it's about hitting the right price point while delivering a compelling package that exceeds expectations.

To achieve this, Xpeng tackled a long-standing issue – high procurement costs.

Bringing in expertise

The auto industry, like many others, thrives on economies of scale. Only by ramping up production can manufacturers drive down costs and boost profitability.

Before 2023, Xpeng struggled with high procurement costs, raising concerns among analysts about its mid-scale, high-cost model.

Recognizing the need for change, He brought in auto veteran Wang Fengying, former general manager of Great Wall Motors, as Xpeng's president in early 2023 to fix these deep-rooted issues.

Widely recognized as an "iron lady," Wang swiftly identified inefficiencies, including overpriced steel procurement.

He responded with a major supply chain overhaul. As an outsider, he learned the ropes himself, initiating a crackdown on internal corruption.

Corruption is endemic in the auto sector, where procurement managers often manipulate pricing without detection. He's crackdown led to the removal of about 10 senior executives.

The impact was immediate – procurement costs dropped and margins increased. Strategic partnerships, like its collaboration with Volkswagen, allowed Xpeng to access a cheaper supply network and further optimize costs.

But the most crucial cost reductions came from in-house innovations. Integrating the electric car powertrain with the chassis improved safety, reduced maintenance complexity and cut costs.

The benefits were clear in the P7 sedan's evolution. While the original P7 cost over 2 billion yuan to develop, its successor, the P7+, was built at a fraction of that.

Now, cost discipline remains a core priority. He personally presides over monthly cost-reduction meetings to ensure that Xpeng stays on track in China's cutthroat auto market.

Leadership transformation

Running an automaker isn't just about understanding technology; it's about communications, especially when team morale is low.

Once reluctant to initiate conversations, He changed course during Xpeng's darkest period. From February to May 2024, he had over 30 meals with more than 600 employees, turning the dining table into a war room to rebuild morale and restore confidence.

Beyond motivation, He recognized the need for systematic management reforms, particularly in breaking down silos between departments.

Previously focused on vertical integration, he shifted to fostering horizontal, cross-functional collaboration, aligning operations, personnel and finance for greater efficiency.

"The bigger the company, the more we need horizontal management," He explained. "Only the CEO can break down these barriers, right from the front lines."

According to him, most manufacturers today continue to rely on talent and simple processes rather than structured systems.

But as Xpeng scales up, structured management has become a necessity. He expects the firm to complete its transformation into a globally competitive technology company by 2027, with a fully integrated management framework.

Embracing the end-to-end game

Xpeng has long been a leader in China's autonomous driving space. It was the first company to launch a "navigate on autopilot" system as early as October 2022.

But by early 2023, the rise of large artificial intelligence models shifted the industry away from reliance on high-definition maps toward end-to-end AI-driven approaches.

The changing landscape leveled the playing field, eroding Xpeng's early advantage.

To stay ahead, Xpeng pivoted to large-model-based autonomy, initially trying to run these models directly on its vehicles.

However, hardware constraints, especially a shortage of Nvidia's Orin-X chips, made real-time, in-vehicle data processing impractical.

Xpeng solved this through a hybrid architecture that offloads complex computations to the cloud while keeping essential functions onboard. This combined approach mirrors Tesla and other industry leaders.

Despite his public spats with Tesla boss Elon Musk, He shares a similar vision of pushing beyond cars into humanoid robots and auto-grade AI chips.

But Xpeng's vision stretches even further, venturing into modular flying cars and proprietary operating systems.

These moonshot projects often meet internal resistance, but this Hubei Province native remains steadfast.

"I had to forcefully push these projects through. No one supported me," he admitted in the LatePost interview. "But I believe they hold immense strategic value for any intelligent car company, though they demand long-term investment and substantial funding."

The L3 transition

He is still a tech geek at heart, driven to create cool, cutting-edge innovations that can be accessible to everyday consumers.

With China entering the era of L3 autonomous driving in 2025 – where cars will be able to steer, brake and accelerate entirely on their own under specific conditions – the competition is intensifying.

BYD's recent rollout of its "God's Eye" self-driving software system signals that the race is on.

Xpeng's deep technical foothold could give it a competitive edge as L3 autonomy takes shape.

Yet, He remains cautious at the helm, dismissing talk that Xpeng is in celebration mode.

"Right now, we're just starting to walk out of the intensive care unit," he remarked, hinting at the fragile state of Xpeng's recovery.

As the battle for intelligent driving heats up, is this tech visionary ready for the survival-of-the-fittest showdown ahead?

(The author, a former Shanghai Daily opinion writer, now works as a business analyst and communication strategist. He has no conflict of interests to declare.)