[Xpeng Q&A] Equipping the new sedan with LIDAR, how will Xpeng play the second half?

This article is a script from the Q&A session of Xpeng's earnings call on March 8. In order to facilitate reading, we have made appropriate cuts. If you want to know more details, you can click the link provided below to re-watch the earnings call.

Q: Could you elaborate more about the underlying factors of 5% sequential pricing erosion in Q1, especially I think some of XPILOT 3.0 revenue would be recognized in Q1. So isn't that ASP-accretive? Why are we still expecting ASP to be down quarter-over-quarter here?
A: I think in quarter four, we delivered close to 13,000 units. In the first quarter because of the seasonality issue the February -- which was very slow typically the lowest month in the year. So our guideline for the moment is 12,500 units. So you can see that 500 units are like volume and mix impact. We have included the XPILOT 3.0 for those vehicles those customers who have activated the functionality. We have included that in our first quarter mainly in the January and part in February. But due to the volume and mix impact we are foreseeing that will have some minor impact on the overall revenue compared with quarter four last year.

Q: What kind of challenge and bottleneck do you see for your international expansion especially the smart cabin and autonomic driving are your strength?
A: Our strategy on overseas expansion is in general will be very similar to our domestic market ones. Basically, we'll focus on our product portfolio and our operation and organization. After XPILOT 2.5, we'll be able to synchronize the launching of future XPILOT versions both in the domestic market and in the overseas market as well. Now, in terms of our smart cockpit, we are doing everything in-house and we already dedicated a large team of R&D people in – last year in this regard. Usually, it will take maybe a longer time such as 12 months to build a good solid technological foundation that allow us to really apply it in all of our products and allow us to have a good foundation to expand overseas. But once the foundation is built, we believe that in the future development is going to be very impressive in terms of the speed of expansion, the reduction of costs, and also the core technology, and high quality – the technological foundation and the quality of our smart cockpit product.

Q: Does XPILOT 3.5 already achieve the 90-degree turning in the vehicle, but also actually recognize the traffic lights? If you do need to speed up your R&D, do we have a big jump in R&D expense for the upcoming two or three years?
A: I believe that in the future LIDAR technology, millimeter wave technology, and cameras will be part of the standard configuration of the hardware architecture that supports a safer driving experience for future autonomous driving technology in general. We are going to significantly increase our R&D spending this year and for upcoming years as well. Mainly we'll be focusing on all of the areas surrounding autonomous driving including the software upgrade, the data, and computing, and also the internationalization of autonomous driving and also an exploration into the level four autonomous driving strategy and also to the hardware upgrade in relation to supporting the software upgrade.