Q1 2025 Xpeng Inc Earnings Call

Yahoo

22-05-2025

Alex Xie; Head of Investor Relations & Capital Markets; Xpeng Inc
Xiaopeng He; Chairman of the Board, Chief Executive Officer, Co-Founder, Executive Director; Xpeng Inc
James Wu; Vice President-Finance; Xpeng Inc
Brian Gu; Vice President of Corporate Finance and VW Projects; Xpeng Inc
Charles Zhang; Vice President of Finance and Accounting; Xpeng Inc
Tim Hsiao; Analyst; Morgan Stanley
Ming Hsun Lee; Analyst; Bank of America
Ping Le Wu; Analyst; Citic Securities
Bin Wang; Analyst; Deutsche Bank
Johnson Wan; Analyst; Jefferies
Lou Jia; Analyst; BOCI
Nick Lai; Analyst; JPMorgan
Operator
Hello, ladies and gentlemen. Thank you for standing by for the first-quarter 2025 earnings conference call for XPeng Inc. (Operator instructions) Today's conference call is being recorded.I will now turn the call over to your host, Mr. Alex Xie, Head of Investor Relations and Capital Markets of the company. Please go ahead, Alex.
Alex Xie
Thank you. Hello, everyone, and welcome to XPeng's first-quarter 2025 earnings conference call. Our financial and operating results were issued by Newswire Services earlier today and available online. You can also view the earnings press release by visiting the IR section of our website at ir.xpeng.com.Participants on today's call from our management will include a Co-Founder, Chairman and CEO, Mr. He Xiaopeng; Vice Chairman and President, Dr. Brian Gu; Vice President of Corporate Finance and VW Projects, Mr. Charles Zhang; Vice President of Finance and Accounting, Mr. James Wu; and myself.Management will begin with prepared remarks, and the call will conclude with a Q&A session. A webcast replay of this conference call will be available on our website IR. Before we continue, please note that today's discussion will contain forward-looking statements made under the safe harbor provisions of the US Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties.As such, the company's results may be materially different from views expressed today. Further information regarding these and other risks and uncertainties is included in the relevant public filings of the company as filed with the US Securities and Exchange Commission. The company does not assume any obligation to update any forward-looking statements except as required under applicable law.Please also note that XPeng's earnings press release and this conference call will include the disclosure of unaudited GAAP financial measures as well as unaudited non-GAAP financial measures. XPeng's earnings press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited GAAP measures.I will now turn the call over to our Co-Founder, Chairman and CEO, Mr. He Xiaopeng. Go ahead.
Xiaopeng He
(interpreted) Hello, everyone. The first quarter of 2025 marked a promising start for XPeng as the company successfully navigated the traditional off-season in the automotive market. Our Q1 deliveries totaled 94,008 units, marking a 331% year-over-year increase and establishing a new historical record for quarterly deliveries. We secured the top position itself among emerging EV brands domestically and internationally.During this quarter, our vehicle gross margin has improved for seven consecutive quarters, propelling the company's overall gross margin to a record high of 15.6% in Q1 2025, with net loss narrowing significantly compared to the previous quarter. Free cash flow exceeded RMB3 billion in Q1.(interpreted) Many are curious about our impressive performance in Q1. I believe it stems from XPeng's systemic enhancement across our abilities in organization, product development, marketing, technology and operations, along with a consistent commitment to AI-driven tech innovation and steady and long-term sustainable growth. The MONA M03 introduced eight months ago has surpassed 100,000 deliveries, securing its place as the best-selling A-class pure electric sedan.The P7+ achieved its 50,000 unit production, just five months after its launch, and the 2025 G6 and G9 models delivered over 7,500 units in total in their April debut. Our monthly deliveries have exceeded 30,000 units for six consecutive months.(interpreted) I'm most excited by the fact that our growth potential is just starting to emerge, where spearheading integrated innovations powered by AI in various fields, including AI assisted driving, smart cabins, Turing chips, embodied intelligent robots and enterprise productivity tools. In Q2, we achieved significant progress in several areas, reinforcing our conviction that XPeng's comprehensive transformation toward AI has begun to achieve initial success across the full technology stack.Some of our key AI capabilities are poised to create generational leadership within the industry in 2026. I'm confident that through the extensive application of our physical world foundation model and turing chips and vehicles, the global deployment of AI-powered vehicles and related policies along with the innovative advancement of humanoid robots XPeng will lead three growth curves and attain sustainable long-term high growth.(interpreted) XPeng has actively embraced a strategy of the monetizing technology aimed at reducing various to advanced technology through innovative R&D and crafting products that resonate with users. These efforts makes premium technology accessible to all.On May 28, we will launch the MONA M03 Max. The full performance position will debut during AI assisted driving in the RMB150,000 price sector for the first time. This innovation enables tech-savvy young consumers to experience top-tier intelligent features once exclusive to luxury vehicles without compromise, ensuring safe and smooth AI assisted driving.This launch represents a pivotal moment for AI democratization, we deem the automotive sector, shaking up the current landscape where smart urban driving and highway driving is limited to high-end models at premium price points and showcasing Chinese automakers groundbreaking innovations in physical world AI.(interpreted) In June, the G7 will make its debut to the public, and I'm confident that it will stand out as a highly competitive new product in the RMB 250,000 class SUV market. In Q3, we'll launch the new generation P7, a luxury sports coupe in the 300,000 R&D segment. In Q4, our Kunpeng super electric models will gradually begin mass production, realizing the one vehicle dual energy options approach. The Kunpeng Series aims to expand our reach to a wider consumer base, both domestically and internationally, unlocking substantial sales growth potential.(interpreted) XPeng's global expansion represents our second growth curve. We anticipate that our overseas business will experience rapid growth over the next three years, becoming a significant contributor to our sales and profit increase. In Q1 2025, overseas deliveries sorted by more than 31,700 year-over-year, solidifying our status as China's leading exporter of mid- to high-end new energy vehicles. During Q1, we opened over 40 new stores abroad, entering key markets such as the UK and Europe and Indonesia in Southeast Asia. As a global technology company, we strive to enhance localized R&D, manufacturing and services globally, establishing a unique mid- to high-end brands rooted in technological innovation.(interpreted)Let me now give you an update on XPeng's AI development. 2025 signifies the launch of XPeng's full-scale implementation of the physical world foundation model in AI-powered vehicles, further extending our generational advantage. We have developed the most comprehensive and sophisticated full stack in-house R&D system with the highest potential in the industry, which includes the Hawkeye Pure Vision ADAS solution, self-developed high-performance Turing chips, ultra large-scale cloud-based foundation model, fully localized VI models, vehicle EEA architecture and physical simulation systems.This strengthens our strategy for advanced autonomous driving, establishing formidable competitive barriers. Moving forward, we'll expedite R&D efforts from L2+ assisted driving to L3 and L4 autonomous driving technologies, widening our generational lead.(interpreted) Experience is the pioneer in China's automotive sector for implementing urban smart driving without depending on LIDAR. Our Hawkeye Pure Vision ADAS solution, although difficult to develop, greatly enhances the upper limit of safety and user experience. We improved the capacity parameters and inference frequency of our visual perception models, significantly reducing end-to-end latency for quicker and safer assisted driving.Our enhanced 360-degree environmental perception performs exceptionally well in intricate urban environment, including turns, u-turns and under adverse weather conditions, such as rain, snow or fog, enhancing both safety and driving experience. Furthermore, XPeng Hawkeye Pure Vision ADAS solution is ideally position for the global rollout of high-end autonomous driving and the shift from AI cars to advanced intelligent robots.(interpreted) In my view, the crown of physical world AI lies in chips, models, data and infrastructure with chips as a dual. XPeng has been committed to in-house chip development since 2021. In 2024, our self-developed chips succeeded in its first tape-out.The Turing chip delivers 3 times to 7 times the effective compute power of mainstream automotive chips through full sec in-house development and closed-loop integration of hardware, software, compilers and model architecture. We maximize synergy between chips and AI models. Our dedication to chip R&D will not only deliver industry-leading in-vehicle computing power and models, but also elevate the efficiency and overall experience of XPeng's AI models.(interpreted) In the ecosystem of the physical world AI model, the benefits of the scale in law are becoming clear. XPeng is working on larger-scale cloud-based foundation models and edge fi models. Our physical well foundation model is the cloud that in the cloud has achieved 72 billion parameters to facilitate its training. We established the first 10,000 GPU-AI computing cluster in the Chinese automotive industry, maintaining an operational efficiency of over 90% throughout the year.By the end of the year, our high-quality training data will expand to 200 million via that depicts various driving scenarios across the country. Powered by large computing resources and extensive data, our foundation model can understand the real world and execute complex reasoning similar to human capabilities.It will evolve through reinforcement learning to outperform seasoned human drivers, laying the groundwork for L3, L4 autonomy and autonomous driving and eventually acting as a universal model for all expanse physical AI terminals. We create edge models via knowledge distillation and pruning to align with in-vehicle computing power, leveraging the foundation models capabilities as much as possible to enable industry-leading inference on devices.(interpreted) To truly outperform traditional vehicles, AI power cars must possess true intelligence, integrated three core capabilities of the brain, cerebrum and the spinal cord. For XPeng's smart we are currently developing a multi-model large model that entirely functions locally on Turing chips. This advancement facilitates smarter voice interactions and a more personalized user experience and ensures smooth operation even in office conditions, significantly enhancing safety and global scalability. This will be China's first large model capable of fully localized multilingual interaction and VRA features in a cockpit, paving the way for rapid improvement in the vehicles intelligence.(interpreted) Our investments in AI vehicles also provide distinct advantages in humanoid robot R&D in China's robotics industry. The -- our fourth-generation robot, celebrated at the Shanghai Auto Show will soon be followed by a fifth generation model powered by Turing chips significantly enhancing on-device computing capabilities.XPeng's robot models will surpass traditional industry approaches such as small reinforcement learning models and from systems utilizing the BLA architecture of our physical foundation model and taking advantage of our existing cloud AI infrastructure to improve robotic intelligence as a type of embodied intelligence, humanoid robots will represent XPeng's third growth curve. We aim to launch industry-leading humanoid robots for industrial and commercial applications in 2026 and evolve rapidly through data from mass production scenarios.(interpreted) I'm optimistic that the robust growth momentum will carry on in 2025. In the second quarter, we'll finalize annual upgrades or consideration improvements for five models with second major models set to begin deliveries in the third quarter. For the second quarter, we estimate total vehicle deliveries to range from 102,000 to 108,000 units, reflecting a year-over-year increase of 237.7% to 257.5%.Revenue is expected to be between RMB17.5 billion to RMB18.7 billion, representing a year-over-year growth of 115.7% to 130.5%. I believe will not only meet our goal of more than doubling sales growth this year, but we'll also achieve profitability in Q4 and generate substantial free cash flow for the entire year.With enhanced self-sustaining capabilities will drive ongoing breakthroughs in AI technology and product development.(interpreted)Thank you, everyone. With that, I will now turn the call over to our VP of Finance, Mr. James, who will discuss our financial performance for the first quarter of 2025.
James Wu
Thank you Xiaopeng, Now let me provide a brief overview of our financial results for the first quarter of 2025. I'll reference RMB only in my discussion today, unless otherwise stated. Our total revenues were RMB15.81 billion for the first quarter of 2025, an increase of 141.5% year-over-year and a decrease of 1.8% quarter-over-quarter.Revenues from vehicle sales were RMB14.37 billion for the first quarter of 2025, an increase of 159.2% year-over-year and a decrease of 2.1% quarter-over-quarter. The year-over-year increase was mainly attributable to higher deliveries.Revenues from services and others were RMB1.44 billion for the first quarter of 2025, representing an increase of 43.6% year-over-year and an increase of 0.5% quarter-over-quarter. The year-over-year increase was mainly attributable to the increased revenues from technical R&D services related to the Volkswagen Group, repair and maintenance services and auto financing services.Gross margin was 15.6% for the first quarter of 2025 compared with 12.9% for the same period of 2024 and 14.4% for the fourth quarter of 2024. Vehicle margin was 10.5% for the first quarter of 2025 compared with 5.5% for the same period of 2024 and 10% for the first quarter of 2024. The year-over-year and quarter-over-quarter increases were primarily attributable to the ongoing cost reduction and economies of scale driven by the increase in sales volume, partially offset by the inventory provision and losses on purchase commitment related to the upgrade of certain vehicle models.R&D expenses were RMB1.98 billion for the first quarter of 2025, representing an increase of 46.7% year-over-year and a decrease of 1.3% quarter-over-quarter. The year-over-year increase was mainly due to higher expenses related to the development of new vehicle models and technologies as the company expanded its product portfolio to support future growth.SG&A expenses were RMB1.95 billion for the first quarter of 2025, representing an increase of 40.2% year-over-year and a decrease of 14.5% quarter-over-quarter. The year-over-year increase was primarily attributable to the higher commissions paid to the franchise stores, driven by higher sales volume. The quarter-over-quarter decrease was mainly due to lower marketing and advertising expenses.As a result of the foregoing, loss from operations was RMB1.04 billion for the first quarter of 2025 compared with RMB1.65 billion year-over-year and RMB1.56 billion quarter-over-quarter. Net loss was RMB0.66 billion for the first quarter of 2025 compared with RMB1.37 billion year-over-year and RMB1.33 billion quarter-over-quarter.As of March 31, 2025, our company had cash and cash equivalents, restricted cash, short-term investments and time deposits in total of RMB45.28 billion. To be mindful of the length of our earnings call, I would encourage listeners to refer to our earnings press release for more details on our first quarter 2025 financial results.This concludes our prepared remarks. We'll now open the call to questions. Operator, please go ahead.
Operator
(Operator instructions)Tim Hsiao, Morgan Stanley.
Tim Hsiao
(interpreted) So my first question is about the volume sales because expense has successfully kept monthly run rate about 30,000 units for six months in a row, outperforming EV startup here during the low season. Given the strong model pipeline that the CEO just mentioned, should we expect more significant sales jump in the following quarters? So just wanted to get more clarity on the upside? That's my first question. Thank you.
Xiaopeng He
(interpreted) Thank you so much for your question. First of all, I think it is -- -- our performance in the past quarter definitely aligns with our overall strategy of long-term and steady development. And we are doing everything we can to make nations very comprehensively for our future long-term development.For Q2, we expect to actually have five upgraded versions or improvement face look versions, which may cause some changes in the market in the midterm or short term, but it will be very beneficial for the long-term development of the country -- but for the company. But I would like to actually highlight three things.First of all, starting from Q3, you're going to see our momentum of launching your models even more aggressively going into 2026 and it's going to generate more deliveries. The second aspect is our AI capability and our R&D efforts being translated into AI performance on our cars and also our robots, which will allow us to maintain a leader in the industry and really widening our generational difference between ourselves and our competitors. The last aspect, something that I want everyone to pay attention to is our Kunpeng electric drive system, which also will go into -- is going to power our future lineup. Thank you.
Brian Gu
Yes, Tim, it's Brian. Let me just add to what mentioned. First of all, the steady performance we saw in the previous many months actually also reflects improved operation quality. For example, the first quarter usually are the low season for Chinese auto sales and we maintain still steady growth. And also the second quarter, despite many transitions we need to handle for our refreshments of products, we still see a very stable and steady delivery numbers.So those actually, I would say, representative of the operation quality that we have. Looking forward, we actually have very strong confidence that with now the many new launches, for example, the MONA Max by the end of this month.And also the next couple of months with G6 -- G7 and P7 launches, all of them, we think, will be catalysts for further growth. So we believe that in the third quarter, we'll see continued growth in our delivery numbers and hitting historical highs again.And another thing I think I want to also highlight is that also, you can look at the new models that we're introducing, those will represent products in higher-priced categories as well as with better profit -- gross profit margins. So this also introduced a very, I would say, favorable mix towards our overall product mix.And I'll have James comment on the.
Operator
Ming Lee, Bank of America.
Ming Hsun Lee
(interpreted)So for your export business, could you give us the latest guidance for your growth in 2025? And among all the different regions, which area do you see a higher growth? And for the EU zone because they increased the tariff for the EV made in China since last year. So right now, what is your current strategy in this market? Thank you.
Brian Gu
Hey, Ming, it's Brian. Let me address your question. Yes, indeed, we have seen a very strong international growth and also contribution to our results, both on the top line as well as on the bottom line. It is actually an area we actually are increasing our efforts with investments as well as our team focuses. I would say that this year, our continued focus will be on the European, Middle East and Southeast Asia, those three core regions. And also some of the regions we also have launched recently, for example, the UK, Indonesia as well as, I think, continued growth we are seeing across a number of the markets that we entered later last year.So I would say these actually are showing pretty balanced overall growth, all reaching triple-digit growth, I would say, in the last quarter year-over-year. Going forward, I think we are continue going to expand to additional markets.We're looking at also some of the other regions that we currently doesn't have a focus yet, for example, Latin America as well as some other countries in the Asian region. The the issue on the tariff, I think, is something that we are very, very focused on. Clearly, it's having an impact on the profitability of our business, for example, in Europe.However, I think we are committed to build for the longer term. We are also looking at ways to reduce the impact of these tariffs through more collaboration with our partners, a change in product mix on the ground as well as potentially local investments that give us ability to navigate some of these tariff hits. So these are things that we are focusing at the moment. And I think if there's any further progress, we'll be definitely sharing with you as well as the community.
Ming Hsun Lee
(interpreted) So my second question is related to your Turing chip. So is well (inaudible) be the first model to use the Turing ship in your product portfolio. And then going forward, will all of your XPeng's branded EV models use Turing chips? And by using these chips, I believe you can reduce your cost, will you share the cost reduction benefit with your customers? Yes. So that's my question. Thank you.
Xiaopeng He
(interpreted) Thank you. This is Xiaopeng. Thank you for the question. Now when it comes to our Turing chip, the development of it has been going really, really well. Not only when it comes to the application of our cars, but also in upgrading our autonomous driving capability, in our cockpit and across a lot of our models. Currently, everything is going really well.We have already -- we have already begun our production in second quarter this year, and we expect to must produce some more models supported or with the Turing chip in the third quarter of the year. Now when it comes to the mass production in a wider scale, we believe that it's going to happen very, very soon because with the development of our chip, we not only will be able to have a stronger and more competitive autonomous driving capability, but also stronger capabilities to support our other products.When it comes to the Turing chip itself, AI computing power right now, the effect of computing power is we are leading the industry because it's about 3 times to 7 times the chip computing power in mainstream edge AI chips, which is very, very competitive, and it's a huge step-up of the game. So when it comes to the Turing chip and how it helps us to go into the next level or next stage of the AI world, especially the physical AI world, we are going to leverage our physical world foundation model also our ex AI or in-vehicle AI model, which will be very, very capable and powerful to allow us to go into higher level or more advanced level of autonomous driving.We believe that in a very, very near future, we will be able to really showcase our generational lead in this regard. By that time, we're not going to talking about the human interference within the current, how many miles we're going to enter the next stage of autonomous driving. And that's when I believe we can really generate benefits and optimize our user experience for our consumers because by that time, we not only will launch our new models with higher and advanced autonomous driving capability, but also leveraging our smart cockpits and also localize our VLA capability, XPeng cars will definitely bring to you a completely new experience because our target of the company has always been democratizing high-end technology, we will bring benefits to all of the people and hope that everyone can get access to this fancy technology one day and as soon as possible and we believe that this new Turing chip can help us to do that. Thank you.
Ming Hsun Lee
Thank you. That's all my question.
Operator
Ping Le Wu, Citic Securities.
Ping Le Wu
(interpreted) Thank you for taking my question. And my first question is about MONA. MONA, I'm looking forward to the release of MONA next? And what is the rule of the MONA Series AI strategy? And what percentage share of MONA next is our target? Thank you.
Xiaopeng He
(interpreted) Thank you for the question. Now this is definitely a question that we're going to explore. We are also curious about that as well because when you look at the current market, when it comes to the market segment of RMB150,000, there no real implementation of end-to-end large models or the computing power of 500 tops and above. So these available cars are not the so-called full performance models. So we are very excited about MONA, and we are very curious about its penetration rate in the market.I definitely have very high for it because of our capability. And when you look at the -- look across the industry, even for cars between 150,000 to 200,000 currently, there's very, very rare so-called full performance version available in the market.So what is the penetration rate going to be, 50%, 70%, we don't know. And -- but we are curious, and we'll try our best to achieve the maximum amount. Thank you.(interpreted) And also regarding the part of your question that is about our M03 and the MONA series, obviously, M03 was our first model of the whole MONA series. And in 2026, we can expect to see more models from this series.And MONA as a series, it really caters for young people's taste, it looks cool and beautiful, provide this emotional value and connection with younger consumers. So we definitely can cater to that. We believe that after next year, you will be able to see full potential of this series, and it's going to be very impactful across the industry. Thank you.
Ping Le Wu
(interpreted) And my second question is about the research and development investment. And for 2025, to what percent to the of the R&D expense will be allocated to AI-related areas? Or to what or how much to the increase of the R&D expense will be allocated to AI-related areas? Thank you.
James Wu
Thank you. This is James. So I'll answer your question regarding the overall R&D expenses for this year. So if you look at our total R&D expenses in 2024, it's around RMB6.5 billion. In 2025, we have guided around RMB8.5 billion of full year R&D expense, and this remains unchanged. I would say the increased R&D expenses will -- a good amount of that will be spent on AI-related activities, and that would primarily help us to improve our computational capability on a cloud basis, that will both as Xiaopeng mentioned earlier, be applied on the AI vehicle, autonomous driving training as well as humanoid robot line as well.Obviously, there are other areas that we will continue to invest include smart cockpit equipped with local VLA features that will allow us to increase our capability on multi-language voice command, interaction function as well. And we should be able to also personalize our customer experience with more enhanced capability.Other than AI, obviously, we will continue to invest on a vehicle basis. As you know, we will have additional vehicle models that we launched this year and into 2026 as well to enhance our product portfolio, and that will help us to complete our portfolio in the long term.
Operator
Bin Wang, Deutsche Bank.
Bin Wang
(interpreted)
James Wu
Bin, this is James. So let me clarify it. So in the first quarter, we did receive some level of, let's say, regulatory subsidies as well as tax rebates, tax handling fees, refunds, things like that. The recognition of those revenues is based on the actual receipt of the cash proceeds, which occurred in the first quarter.Now this is -- in the nature of, I would say, cash collections into the next couple of quarters, I'm not sure we'll continue to be benefited from this type of revenue recognitions. So that is on the other income side. You also asked a question about the FX movement in the first quarter.This is primarily driven by our business in Europe. We have a pretty sizable I would say, deliveries, we actually delivered more than 10,000 units in Europe over the course of last year. And we are exposed to euro from a revenue perspective.The strength in euro in the first quarter resulted in a portion of FX gain in the first quarter. But we've seen that to circle back a little bit in the recent months in April and May, but we'll continue to monitor that exposure and be able to control our exposure to euro and not to ensure that FX impact through our exposure is not a surprise going forward. Thank you.
Bin Wang
(interpreted) The second question is about the second quarter margin guidance. I seem that you have better product mix in the second quarter because it happened smaller proportion MONA (inaudible) can you provide guidance for the second quarter ASP and gross margin? Thank you.
James Wu
Sure. This is James again. From a gross margin perspective -- so first of all, I think we've observed we have achieved a seven consecutive months vehicle margin improvement. This is primarily due to our cost reduction efforts as well as achievement of certain levels of economies of scale. And then looking into Q2 and beyond, what I would say is there are still several areas we see that can help us further improve our vehicle margin.The first is continue the product mix, as you mentioned, as we introduce new models, even with the model year changes on G6 and G9, we've seen healthier margin compared to the old models. And this in line will also help us to further higher our average sales price. What I would say is the ASP you've seen in first quarter is probably the lowest throughout the year.We will continue to sell better product mix to help us increase average sales price in the following quarters into 2025. The other thing that we continue to see is the mature cost reduction through our supply chain optimization.And then lastly, based on the volume projection and higher volume potentials in the third and fourth quarter, we should be able to achieve higher scale, which will help us to lower allocations and improved vehicle margins as well.So with all of that, we are pretty confident at this point that going into second half and into Q4, we believe that our total company gross margin should be able to get close to the high teens level to support us eventually achieve profitability in Q4 as we communicated earlier. Thank you.
Bin Wang
Thank you very much.
Operator
Johnson Wan, Jefferies.
Johnson Wan
(interpreted) My question is regarding the humanoid robot. We noticed that iron has received a lot of attention at the Shanghai Auto Show. How are we going to leverage our existing know-how from autonomous driving to robotics? What are the advantages of our products? And also, do we have a specific goal for the mass production of humanoid robot products? Thank you.
Xiaopeng He
(interpreted) Thank you. So basically, robots or robotics -- robots development, they are operating as an independent center within the company, but it leverages our overall in-house full stack R&D capability. For example, the EEA of our robots are being developed by the EEA team of autonomous driving of our car department.And also the joints within the humanoid robot are being developed by our powertrain team, XPeng Motors and also the other parts, for example, the spinal cord of humanoid robot, the cerebellum, which is the larger brain of the humanoid robot, I mean everything combined is being developed by both the robotic team but -- and also our autonomous driving intelligent driving team.So I would say, well, in addition to that, also our chips, we leveraged the Turing chip capability when it comes to developing our iron or humanoid robot. So I would say 70% of the development among our humanoid robots are coming from the same source as autonomous driving, our cars.Now obviously, overall, these are two different products. They have different metrics. And so they do have different differences when it comes to their capabilities and features and form factors. So there are differences.(interpreted) I think XPeng is very different from other humanoid robots or robotics company. First of all, we are data-driven. We redefine how we should build a humanoid robot. Also, we have chips that we're developing in-house, the operating system, we can develop in-house, and we also have full stack development capability of our hardware and software. From that point of view, we are really guided by a super strong coupling capability to do things, especially when it comes to developing new products such as humanoid robot.So we expect to actually, by 2026, going into certain percentage of mass production capacity and can quickly going into -- can quickly enter a stage of OTA iteration. We also expect to actually bring -- reinforce some very surprising and brand new innovative products to the market, which will look very different from what we can see right now available in the market. Thank you.
Johnson Wan
Thank you. That's very helpful.
Operator
Lou Jia, BOCI.
Lou Jia
(interpreted) My first question is regarding the vehicle margin in Q1. As we see that vehicle margin is negatively impacted by some inventory provision and loss on purchase commitments related to some old models. Wondering if excluding this with our core vehicle margin campaign in future, if this impact will persist. (spoken in foreign language).
Brian Gu
So we will answer your first question first. Thank you.
James Wu
This is James. So yes, we do recognize some level of purchase commitments as we change some of our models. One of the things you probably have seen from the media is that we have reviewed the very next generation of P7, which the outlook design has received very well feedback from the market. So that's part of the recognition that we have done in the first quarter around the current generation of P7. We also have recently launched changes for G6 and G9.These have been included in the purchase commitments as well. Overall, I would say the impact of these in the scheme of things is relatively small. It doesn't change the overall trend of our margin improvement for the past seven consecutive months. What I would say is looking into the next couple of quarters in 2025, I wouldn't expect the purchase commitments related to our model changes is going to be significant. So you can take that as in your consideration.What I would focus is, as I mentioned earlier, our vehicle margin, given our continued cost reduction, continued climbing of higher economy of scale as well as the product mix improvement, we forecast vehicle margin to steady growth in the following quarters in 2025. Thank you.
Lou Jia
(interpreted) So my second question is that looking forward into second half of the year, we will go upscale again by launching more high-priced models, how management get prepared for our primarization? Thank you.
Xiaopeng He
(interpreted) Thank you for the question. This is Xiaopeng. When it comes to our targeted market segment, I would say our current line of basically feature around RMB100,000 to RMB 400,000 in which MONA is around RMB100,000 to RMB200,000. But basically, across RMB180,000 to RMB500,000 will all be our target market segment.So starting from Q3 going into 2026, you can expect to actually see a lot of our new product launch that actually have brand-new capabilities across not only the the design of the car, but also the smart cockpit, overall autonomous driving capability.And people will be surprised. And I think a lot of people are going to really love our new launches. And so for example, as you can see from our brand-new P7 and also going -- which will be launched in Q3, we are going to actually integrate new capabilities when it comes to the whole vehicle, the powertrain, the architecture, the smart cockpit and also the craftsmanship.I think all of these areas are something that we're going to focus on in the coming three years. and we believe such an improvement in overhaul of our capability being reflected in our lineup will showcase how great a company XPeng really is.Also, from our cash performance in recent months and quarters, you can also see that these improvements have been well accepted by the market. And we believe that no matter what price segments that we are targeting in, we are very confident of going into at least the top three, if not the top one, about selling models. In the future, we also are going to launch not only BEV models, but also electric or dual energy vehicles as well. So we're very confident going into our premium market segment. Thank you.
Operator
Nick Lai, JPMorgan.
Nick Lai
(interpreted) My first question is pretty simple. It is an too, we saw quite a few points in particular from Japan to launching what they call in China for China with localized supplier, local cost and a very competitive price. And we spoke Toyota, Honda in the past few days, and they indicate that in China in the next few years, they're going to launch a few more such products. So I'm curious to understand from XPeng's standpoint, how should we see the competition dynamic maybe from here?
Xiaopeng He
(interpreted) Thank you. Yes, we also observed the same trends from the market. I think competition are getting more and more aggressive from not only domestically, but also internationally as well. I think this is something that we will continue to see, and it's something that is destined to happen. But we're very firm on our position, which is technology company -- sorry, carmakers will need to have their technological capability in order to win in such a competition.And there will be more and more impact on the market when you have a more powerful technological element, whereas your manufacturing capability or capacity will matter less and less. And also another trend that I want to highlight here is that automakers are going to sort of convert from an integrated R&D format to a model of maybe a single direction full spec R&D of all resources to multi aspects fusion integrated R&D capability.And I think it will take time to happen. But we are pretty assured that it's going to take place. So ultimately, no matter how good your sales and marketing teams are doing, you need to be able to deliver the products that popular and that resonates with the customers and fulfill user demands. So we are very happy to see a lot of companies are changing their traditional way of doing things.We are learning from them. We believe that they are learning something from us as well. And I think during this process, we also are able to change ourselves into -- from the full stack R&D kind of way of doing research and development to a fusion integrated R&D ecosystem, entering a matrix of different R&D aspects. We believe that it will allow us become even stronger than logically. And by that time, integrated companies with only integrated R&D capability are going to struggle, especially in the mid- to long-term competition. Thank you.
Nick Lai
(interpreted) My second question is a really quick update on our partnership with BW. We sold major model on any very quick update on milestone that share can share with us. Thanks.
Charles Zhang
Hi, Nick, it's Charles. I think the collaboration with Volkswagen has progressed at a very fast speed. And so far, we meet every milestone, and we are currently probably less than one year to SOP of some of our products.And yes, as you rightly pointed out, I think that our partner, Volkswagen unveiled some of the models, for example, one model based on our G9 platform. And also there are multiple models that will be based on the architecture that we are jointly developing.So I think that all these models will start to come to market starting from early next year. So, so far, I think that -- I think the -- we are meeting all the milestones. And I think looking forward, I think that we continue, will work with our partner to jointly develop more products. And also we are also exploring potential new opportunities that can bring win-win value to our partnership.
Operator
Thank you. That does conclude our question and answer session. Now I'd like to turn over the call to the company for closing remarks.
Alex Xie
Thank you once again for joining us today. If you have further questions, please feel free to contact Xpeng investor relations through the contact information provided on our website or the (inaudible) and financial communications.
Operator
This concludes today's conference call. You may not disconnect your line. Thank you.
Portions of this transcript that are marked (interpreted) were spoken by an interpreter present on the live call. The interpreter was provided by the company sponsoring this event