Alibaba-Backed Electric Startup Joins Ride-Hailing Industry In China

Xpeng Motors
XPeng's electric vehicle (EV) P7 is unveiled during the media day for Shanghai auto show (Photo: Reuters)

Electric vehicle startup company Xpeng Motors is now preparing to enter the relatively volatile ride-hailing industry with the approval of its license to operate. The Chinese firm, which is being backed by firms such as Alibaba and Xiaomi founder Lei Jun, is now set to intensify competition in the industry that has yet to produce a profitable company.

Industry veterans such as Uber and Didi Chuxing have yet to produce any money from their businesses and it remains to be seen if this would also be the case for Xpeng Motors.

The Alibaba-backed firm received its license to operate from Guangzhou regulators earlier in the week, which means that it should be able to launch its pilot service within the month.

According to reports that cited employees working for the company, the firm's move to the ride-hailing industry will apparently be a jumping off point for its other products and services.

The firm apparently plans to use its ride-hailing service to promote its own products to a large customer base, significantly larger than the scope it could reach through traditional marketing.

Xpeng Motors recently posted a number of a job opening on its website, which included positions for fleet managers, business development specialists, and operation specialists. The company has so far not specified how large of a fleet it plans to launch or its particular timetable for the new business. However, the firm did announce that its goal will be to provide a smart and mobile ecosystem using its intelligent products, seemingly hinting at the adoption of advanced technologies such as autonomous driving and fully-electric powertrains.  

Xpeng Motors was originally established in 2014 and has since introduced two fully electric models, namely its G3 Electric sports utility vehicle (SUV) and it's P7 electric four-door coupe. The company has so far delivered more than 2,000 G3 SUVs to buyers, with plans to deliver 4,000 more by the end of the year.

The ride-hailing business has so far been very unprofitable for the companies that have chosen to engage in it. China's Didi Chuxing recently revealed that it was losing quite a lot of money in its operations, pocketing 19 percent on each fare while spending 21 percent in operations.

The difference is shouldered by the company using the money it had raised from its various funding rounds. The story is also the same with its peers such as Lyft, which recently reported a quarterly loss of $1.14 billion. Uber, which recently went public in the United States, reported a first-quarter loss of around $1 billion. Both Lyft and Uber have had their valuations significantly cut down following very poor public performance after their respective IPOs. 

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