Among the recognized three major players in the Chinese electric vehicle new brand arena, besides Li Auto, which currently maintains strong profitability, good financial condition, and outstanding market performance, both NIO and Xpeng are facing similar challenges. That is, their market performance has yet to break through, and they have been unable to rapidly increase sales, resulting in long-term substantial losses.

And they have all coincidentally turned to the strategy of “downsizing attacks,” by launching sub-brands to boost sales.

The sub-brand

Among them, NIO’s sub-brand is “ONVO,” positioned in the 200,000 to 300,000 RMB range. Xpeng, on the other hand, is more aggressive, promoting its new sub-brand that will enter the 100,000 to 150,000 RMB level of the automotive market by integrating Didi Global Inc.’s car-making technology. Given the collaboration with Didi and this price range, one can’t help but wonder, what is Xpeng up to? Are they preparing to compete in the ride-hailing market against GAC AION, BAIC, and BYD? Today, let’s discuss Xpeng’s strategy and its intended goals, and what effects it may have.

MONA

Let’s first take a look at the basic information of Xpeng’s new sub-brand. Xpeng’s sub-brand, currently codenamed “MONA,” is positioned in the price range of 100,000 to 150,000 RMB, aiming to create AI-driven cars targeted at young people. The first model is expected to be launched in the third quarter of this year. Leveraging Didi’s car-making technology base and Xpeng’s self-developed assisted driving and intelligent cockpit technology, the vehicles will be manufactured in Xpeng’s factory. MONA will also adopt an independent brand identity and establish new sales channels.

The first model of MONA

Currently, spy photos of the first model of MONA have been exposed. The new car is positioned as a compact pure electric sedan, adopting the popular minimalist design language. The most prominent feature of the front end is the T-shaped LED headlights, exuding a strong sense of technology. The overall design features a three-box body shape with a floating roof and hidden door handles. According to official teaser images, the C-pillar adopts a segmented visual design. As for the taillights, they seem to echo the styling of the headlights.

In addition, it can be observed that there is no provision for millimeter-wave radar in the front end, and the camera window at the top of the windshield is relatively wide. From this, it can be roughly inferred that MONA will focus on using vision-based L2-level driver assistance systems to reduce hardware costs.

In terms of interior design, MONA showcases its unique charm as an intelligent mobility product. The cabin adopts the mainstream T-shaped design, paired with a three-spoke multifunction steering wheel and a large central control screen. Currently, information regarding the powertrain remains undisclosed. In terms of the chassis, it will utilize a front MacPherson and rear torsion beam structure. It is reported that the expected price of this new car will be around 150,000 RMB.

Why did Xpeng create an independent low-end sub-brand?

Price

From the currently available public information, MONA’s positioning actually overlaps with the entry-level price range of Xpeng’s current models, the P5 and G3. If MONA enters the market at this price point, it will create internal competition. Therefore, there is some reason to believe that in the future, the P5 and G3 models may face discontinuation, allowing the Xpeng brand to focus on the mid-to-high-end market above 200,000 RMB, making way for the sub-brand MONA. So, why does Xpeng want to create an independent sub-brand?

Firstly, Xpeng currently has a very urgent need to boost sales. According to data, Xpeng sold 141,601 vehicles in 2023, falling short not only of the targeted 376,000 units but also behind NIO’s 160,000 units and Leapmotor’s 144,000 units. Therefore, rapidly increasing sales to reduce manufacturing costs is currently Xpeng’s most important challenge.

More importantly, Xpeng is a brand focused on intelligence, and the continuous improvement of AI-supported smart driving and intelligent cockpit features relies on a significant amount of vehicle data feedback for iteration. This helps spread out research and development costs, improve feature experiences, and enhance software monetization capabilities. Therefore, ramping up production volume is crucial for Xpeng in multiple ways.

Currently, Xpeng’s product lineup has been largely established in the 200,000 to 300,000 RMB price range, with models like the P7i sedan and the G6/G9 SUV serving as sales leaders. In such a scenario, reducing prices or introducing cheaper models would indeed be the best choice. However, directly lowering prices might potentially damage Xpeng’s existing brand image. Therefore, introducing an independent sub-brand to differentiate it from the parent brand is a good choice to maintain Xpeng’s consumer-oriented DNA.

Appearance

Additionally, according to some internal sources, the MONA project actually originated from a previously abandoned car-making project at Didi. The complete vehicle technology from this project has been sold to Xpeng, which originally came from Didi’s team. This budget-friendly model might not align with Xpeng’s existing design style, hence establishing it as an independent sub-brand ensures both consistency in the family’s characteristics and reduces the cost of modification and adaptation.

Is Xpeng suitable to create an independent sub-brand?

However, in our view, turning MONA into a sub-brand directly may not necessarily be a good approach.

Firstly, Xpeng’s label of intelligence alone cannot fully support the premium brand image it desires. The current market performance of all Xpeng models is a good illustration of this. The early emphasis on advanced intelligent driving with the P5 model did not manage to elevate its brand image or achieve a breakthrough in sales.

On the contrary, with the continuous iteration of intelligent technology, costs will inevitably decrease. From this perspective, the parent brand of Xpeng may even evolve towards affordability. Introducing a sub-brand could result in self-cannibalization between the two brands in the price range below 200,000 RMB. Moreover, establishing a new independent brand will incur significant channel construction costs and additional investments in the initial stage.

More importantly, in the price range of 100,000 to 200,000 RMB, traditional domestic automakers like BYD and Geely already have a significant lead in product lines and market share. Without a competitive advantage beyond intelligent driving, MONA may struggle to survive amidst fierce competition.

In summary, Xpeng’s introduction of MONA has its rationale, but it also carries certain risks.