XPeng Inc. (XPEV)

XPeng is a car company based in China that makes electric vehicles. The company was founded in 2014 and has become one of China’s top car makers. Here is what the company actually does: it designs electric cars, builds them in factories, and sells them to customers in China. The cars are not ordinary—they have powerful computers inside that let them drive themselves partway on highways, understand voice commands, and connect to the internet like a smartphone.

What XPeng cars are and who buys them

XPeng makes cars for people who care about technology and want an electric car instead of a gas engine. The main customers are middle-class professionals in big Chinese cities who buy new cars fairly often and are willing to pay more for cars that are newer and fancier. The cars cost more than basic cars but less than luxury brands like BMW or Mercedes. The company sells sedans (the P7 model is popular) and larger SUVs (the G7 and X9 models). Every car is made in a factory and comes with a touchscreen inside, software that gets updated over the internet, and the ability to drive itself on highways to some extent.

China is the right place to make this kind of car. Chinese customers adopted electric cars faster than Americans or Europeans did. The charging network is robust. And there is fierce competition among Chinese car makers, which has kept XPeng sharp and focused on technology.

How the driving software actually works

XPeng has built all of its self-driving software in-house. This is not something the company bought from someone else or copied. Engineers at XPeng wrote it from scratch. The system is called XPILOT and in 2026 the company rolled out a new version called VLA 2.0. This system uses cameras, radar, and machine learning to watch the road, understand what is around the car, and decide what to do.

What does it actually do? The car can steer itself on highways if the driver allows it. It can see traffic, stay in its lane, speed up or slow down, and make lane changes. It can also park itself if you ask it to. You still need a driver in the seat—the computer is not ready to drive completely alone yet. But it does reduce how much steering and attention the driver has to do.

The new version released in early 2026 works better than the old one. It understands more situations. It makes smarter decisions. And it gets better over time because XPeng collects data from every car on the road and uses that data to teach the software.

The computer chip inside the car

XPeng makes its own computer chip for the self-driving system. The chip is called Turing and it runs the driving software and learns from the data the car collects. Making your own chip is hard and expensive but it gives XPeng two big advantages: first, it can make the chip exactly how XPeng wants it, tuned to work perfectly with the software; second, it does not have to depend on another company to make the chip, which means fewer delays and more control over the supply.

The Turing chip is powerful. It has more computing power per watt of electricity than the chips that other car companies use. That matters because cars have limits on how much electricity and heat they can handle. More power in less space means better driving software and faster learning.

How XPeng makes money

The company makes money by selling cars. A customer buys a car and pays for it. XPeng keeps some of that money as profit and uses the rest to pay for parts, factories, shipping, and other costs. The profit margin on a single car is modest—many cars need to be sold to make real money—so XPeng has to sell a lot of them. The company also sells extra features that customers can add to their cars, such as better software or premium charging.

XPeng has also started to let other car makers use its driving software. A German car maker called Volkswagen has agreed to use XPeng’s system in some of their cars. This is a new source of money because XPeng can collect fees from Volkswagen and from other companies that might license the software in the future. It also proves that XPeng’s software is good enough that even big, traditional car makers think it is worth buying.

Why XPeng matters and what could go wrong

XPeng matters because it proves that a new car maker—not one of the old brands that have been around for a hundred years—can build a real car company in China. It also matters because its driving software is advancing quickly. The company’s CEO and founder has said that by 2030, cars might be able to drive fully by themselves on highways without needing a driver. That is a big claim, but XPeng’s progress suggests it is not absurd.

What could go wrong? Several things. First, other Chinese car makers are also building good electric cars with good software. The competition is intense and some competitors have more money or bigger factories. Second, the Chinese government could change its rules about electric cars or driving software, which would affect XPeng’s business. Third, if the economy in China slows down, fewer people will buy new cars, and XPeng’s sales could drop. Fourth, the self-driving software is getting better but it still makes mistakes. A serious accident caused by the software could hurt the company’s reputation.

There is also the fact that XPeng is based in China. Doing business there carries political risks. Trade tensions between China and other countries could affect XPeng’s ability to sell cars or get parts.

How to learn more about XPeng

The best place to start is XPeng’s annual report (SEC CIK 0001810997), which lists how many cars the company sold, how much money it made, what its costs are, and what the management thinks about the future. The quarterly earnings calls show what is happening right now—whether sales are growing, whether the company is losing money or making a profit, and what challenges the leadership team is worried about.

Pay attention to car sales numbers. This is the simplest measure of how well the company is doing. If sales are growing fast, the company is on an upward track. If sales are flat or falling, something is wrong. Also watch the gross profit margin—this is the money left over after paying for parts and building the car. A rising margin means the company is becoming more efficient; a falling margin could mean something is going wrong.

The driving software story is important too. Read about new features XPeng releases, listen to what the engineers say about where the technology is going, and watch how customers react. Good software keeps customers coming back and lets XPeng charge premium prices. Bad software or software that fails in real driving would be a disaster.