Shares of Chinese electric vehicle producer Xpeng (9868.HK) climbed over 10% on Wednesday, propelled by increased revenue from research and development services to Volkswagen and positive statements regarding its self-driving technology prospects.
After deepening its partnership with VW in April to collaborate on EV architecture, Xpeng reported that these R&D services largely accounted for its service revenue nearly doubling to 1 billion yuan ($138 million) in the first quarter from the previous year. This surge in revenue helped lift Xpeng’s gross margin to 12.9%, a significant rise from 1.7% a year earlier and 6.2% in the last quarter.
“The company has established a new business model for selling intelligent technology that boosts profitability,” said analysts from Huatai Securities in a report.
As a leader among Chinese automakers in smart EV technology, Xpeng also revealed its aim to achieve “level four” autonomous driving capabilities by next year. However, they noted the development of necessary hardware and regulatory adjustments would require more time. Level four autonomy enables a vehicle to operate without a human driver within specific areas. Currently, such advanced technology has been limited mostly to robotaxi experiments in confined areas.
Meanwhile, existing driver-assistance systems in China are categorized as “level two,” which mandate that drivers remain prepared to intervene. Similarly, Tesla’s “Full-Self Driving” and its less advanced Autopilot feature fall under level-two systems, requiring driver vigilance.
