On May 20, reports emerged that China's new energy powerhouse, XPeng, will offer its autonomous driving and electric vehicle (EV) technology to other car manufacturers. XPeng Motors Vice Chairman and President Brian Gu recently stated in an interview that XPeng will provide its autonomous driving and EV technology to other automakers, creating new revenue streams, fostering R&D, and maintaining its technological edge.

"We believe that more cooperation is a long-term trend because it's unimaginable for traditional car companies to rapidly develop intelligent driving technology on their own," Gu said. He emphasized that the future of electric vehicles lies in intelligent driving technology. "In my view, if you have leading technology, there are many ways to monetize it."

The sale of XPeng's core technology may be driven by cash flow challenges. As of December 31, 2023, XPeng Motors' total revenue reached 30.68 billion RMB, up 14.2% year-on-year; vehicle sales revenue was 28.01 billion RMB, up 12.8% year-on-year; gross profit margin was 1.5%; and net loss was 10.38 billion RMB, with cash flow at 45.7 billion RMB. Although total revenue appears respectable, XPeng's profitability is low, with sales costs as high as 30.23 billion RMB and a gross profit margin of only 1.5%.

Moreover, amidst the price war, many automakers in China are facing pressure, with significantly extended payment cycles to suppliers. Reports indicate that in 2021, XPeng fulfilled its obligations to suppliers and related parties in just 197 days, now extended to 221 days. This further illustrates the financial pressure car companies are under in China's increasingly competitive automotive market.

Facing cash flow difficulties, generating new revenue streams has become essential for XPeng. As early as last year, XPeng has been playing the role of a technology platform company, collaborating with Volkswagen. In April this year, XPeng and Volkswagen Group signed a strategic cooperation framework agreement on EEA electronic and electrical architecture technology, marking a new milestone in their strategic partnership.

XPeng indicated that the cooperation with Volkswagen involves "technical service fees" rather than "technology licensing fees," meaning XPeng is not simply transferring IP to Volkswagen. Both parties will contribute to joint R&D: XPeng will provide the intelligent platform and software, while Volkswagen will handle the vehicle body, model design, and interior/exterior development. XPeng will be responsible for the underlying autonomous driving technology, with software delivered via OTA. Analysts suggest that XPeng's provision of technical services represents a high-margin business model.

Currently, XPeng has officially scheduled its AI Day event for May 20, where upgrades in intelligent driving, parking, and voice assistant are anticipated. He Xiaopeng teased some of the content for May 20, stating, "This is the first time an end-to-end large model will be implemented in China via OTA. This OTA will transform Xiao P into a large model, marking the beginning of significant changes. On 520 AI Day, we will unveil XPeng's new OTA."