Chinese electric vehicle company Xpeng Motors (NYSE: XPEV) has received permission to roll out its self-driving technology in Beijing. The move comes at a time when the industry is grappling with massive losses and some companies reconsider their investments in the sector.
Notably, Xpeng Motors has already rolled out its self-driving tech in Shenzhen, Guangzhou, and Shanghai.
According to CNBC’s translation of the Chinese-language release, Xpeng has permission to roll out the self-driving to “ring-road” and “main high-speed roads.” It is not yet clear whether Xpeng can roll out the service to all the roads in Beijing.
Notably, while Xpeng Motors has disappointed markets with its car deliveries and its car deliveries were below 10,000 in all the months this year, it has been making strides in self-driving tech and is the only Chinese automaker to offer self-driving technology that’s similar to Tesla.
Tesla incidentally does not have permission to offer its full self-driving (FSD) in Chinese cities. Notably, in 2021, China banned Tesla cars from some government compounds over “spying concerns” as the cars come fitted with cameras to assist with self-driving.
While Musk denied that Tesla cars could be used for spying, it did not cut ice with China. He even started a new data center in China to store all data collected in the country locally.
Musk recently visited China after previously admitting to “constraints” on its ability to expand operations in the country.
Xpeng Motors Set to Roll Out Self-Driving in Beijing
Xpeng Motors stock soared in Hong Kong trading today after reports of it getting permission to roll out self-driving in Beijing came out.
We’re once again leading the industry by being the first to introduce ADAS for urban driving in Beijing.
— XPENG (@XPengMotors) June 15, 2023
While it’s a move forward for the company, there are a few aspects to consider. According to a report from Automotive News, investors have poured a whopping $160 billion towards self-driving companies over the last dozen years.
Cruise, which is backed by General Motors, lost $500 million in Q2 2022 and $900 million in the first half of 2022. Its accumulated losses surpassed $5 billion last year while the daily losses averaged around $5 million.
However, so far none of the companies has been able to come up with fully autonomous Level 4 cars.
Some of the companies have also been reconsidering their investments towards self-driving and in October last year, Ford wrote off its entire investment in autonomous driving startup Argo AI – which eventually wound up its operations.
• Apple delays Project Titan (not feasible)
• Ford/VW shut down Argo AI
• Audi to shut down Artemis AV
• VW delays Trinity EV project (software)
• Toyota delays bZ4x to ’25
• GM delays EV ramp to ’24 (battery supply)
Tesla’s EV “competition” is in disarray $TSLA
— Dillon Loomis (@DillonLoomis22) December 7, 2022
The company also announced that it would not focus on L4 autonomous systems. Ford’s CEO Jim Farley said that while companies have spent a cumulative $100 billion towards level 4 autonomous vehicles, no company has been able to define a profitable business model.
Ford Gave Up on L4 Autonomous Driving
Ford’s CFO John Lawler said that the company believes that it does not need to create fully autonomous technology on its own.
One way forward for automotive companies would be to opt for partnerships in the self-driving space. Notably, Tesla has partnered with Ford and General Motors to share 12,000 of its Superchargers.
The Tesla CEO is also open to willing its self-driving tech with other automakers. Notably, the penetration of L4 autonomous cars is expected to rise to 1% in 2026 and further to 5% by 2030.
That said, L4 fully-autonomous cars still remain a work in progress and even Tesla’s FSD is still quite far off from being fully autonomous.
The FSD has always been controversial – including its very name which US regulators find misleading.
The US National Highway Traffic Safety Administration is also separately investigating Tesla Autopilot after multiple crashes involving the software. The California Department of Motor Vehicle also accused the Elon Musk-run company of using deceptive practices to market the FSD.
This year, Dawn Project released a 30-second commercial calling out Tesla for what it said was “deceptive marketing.”
Xpeng Motors is Grappling with Massive Losses
Coming back to Xpeng Motors, while the company expects its monthly deliveries to average 15,000 in the third quarter and 20,000 in the fourth quarter, like fellow EV startups it is also battling with perennial losses and cash burn.
The company’s gross margins plummeted to a mere 1.7% in the first quarter of 2023 – down sharply from the 12.2% in the corresponding quarter last year.
Its net losses also swelled to around $327 million on $571.6 million in revenues.
The company does not provide separate results for its autonomous driving segment. Tesla however increased the FSD price by 50% to $15,000 last year and Musk believes that the price would eventually rise to $100,000.
Cathie Wood, who believes that Tesla stock would rise to $2,000 by 2026 and bought more Tesla shares last month is also bullish on the company’s self-driving business.
As for Xpeng Motors, markets would wait for it to meet the delivery forecasts as it has disappointed markets with the delivery as well as financial performance for over two quarters.
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