Xpeng to license EV tech to more foreign automakers beyond Volkswagen

• Xpeng plans to expand its technology offerings beyond Volkswagen to more overseas customers.
• Xpeng's revenue from services and other businesses nearly doubled in the second quarter.

Xpeng (NYSE: XPEV) plans to offer technology solutions to foreign automakers beyond Volkswagen as it seeks new revenue streams, with some potential partners already expressing interest.

Reuters reported the plans on Thursday, citing 2 people familiar with the matter. Xpeng has contacted some potential partners that have expressed interest in its technology, 1 of the people said.

Xpeng plans to offer its electrical and electronic architecture, smart cockpit systems, Turing AI chips and advanced driver-assistance software, according to the report. Potential customers also include foreign software developers and automotive suppliers.

The sources did not identify the potential partners. The report did not disclose whether any new agreements had been signed or provide commercial terms.

Another person said Xpeng also plans to expand its technology licensing and customization business to cover robotaxis, humanoid robots and other physical AI applications, including the operational deployment of Xpeng's robotaxis.

Xpeng established a strategic commercialization team about 6 months ago to explore new technology partnerships and other business opportunities, building on its experience with Volkswagen, Reuters said.

The push could increase the contribution of high-margin services to Xpeng's business. Technology offerings are becoming an important source of revenue growth as vehicle margins face pressure and the company continues to invest in AI research and development.

Xpeng's earnings report released on August 24 showed that revenue from services and other businesses rose 93.9% year-on-year to 2.7 billion yuan ($400 million) in the second quarter. The segment's gross margin climbed to 75.1% from 53.6% a year earlier.

By comparison, vehicle sales revenue grew just 1.0% over the same period, while vehicle margin narrowed to 12.1% from 14.3% a year earlier. The company still posted a net loss of 1.34 billion yuan.

Xpeng's management said on its earnings call in August that growth in services was driven mainly by technology research and development services under the Volkswagen partnership, as well as higher revenue from components and accessories sales.

Xpeng's strategic partnership with Volkswagen began in July 2023, when the German automaker announced an investment of about $700 million for a roughly 4.99% stake in Xpeng. The alliance covers electric vehicle platforms, software and electrical and electronic architecture.

Xpeng chairman and CEO He Xiaopeng said in an internal letter in February that Volkswagen would become the first commercial customer for VLA 2.0.

The first jointly developed model, the ID. UNYX 08, went on sale in China in April, featuring Xpeng's Turing AI chips and second-generation Vision-Language-Action (VLA 2.0) driver-assistance system.

As Xpeng expands into physical AI, its technology licensing and customization services could extend beyond automotive applications. Mr. He said on the August earnings call that humanoid robots could eventually generate significantly higher margins than the vehicle business.