16/04/2025 - Xpeng Inc.: Annual Report for Fiscal Year Ending December 31, 2024 (Form 20-F)

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

You should read the following discussion and analysis of the Group's financial condition and results of operations in conjunction with the Group's consolidated financial statements and the related notes included elsewhere in this annual report. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. The Group's actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under "Item 3. Key Information-D. Risk Factors" or in other parts of this annual report.

A. Operating Results

Overview

We are a leading Chinese Smart EV company that designs, develops, manufactures and markets Smart EVs that primarily appeal to the large and growing base of middle-class consumers in China. Since inception, we have taken an innovative technology path to our envisioned future of mobility. We intend to empower consumers with our differentiated Smart EVs that can offer disruptive mobility experiences. We believe this can be achieved by fast iteration of software and seamless integration with hardware, which enable us to lead the innovation of Smart EV technologies and provide differentiated Smart EV products to consumers.

Since our inception in 2015, we have become one of the leading Smart EV companies in China, with leading software and hardware technology at our core and bringing innovation in advanced driver assistance, smart connectivity and core vehicle systems. We develop full-stack advanced driver assistance systems, or ADAS, software in house and have deployed such software on mass-produced vehicles. We started to roll out our XNGP in March 2023 and have made XNGP available in cities without HD map coverage since November 2023. As a result, its geographical coverage has expanded swiftly in China.

Our Smart EVs appeal to the large growing base of middle-class consumers in China. We primarily target the mid-to high-endsegment in China's passenger vehicle market, with prices ranging from RMB120,000 to RMB420,000. Consumers choose our products primarily because of attractive design, industry-leading electrification and smart technologies, interactive smart mobility experience and long driving range.

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We are building a rapidly expanding, diversified portfolio of attractive Smart EV models to capture the growing demand for Smart EVs and appeal to the differentiated needs of a broad customer base.

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In December 2018, we started delivery of the G3, which is our first Smart EV and a compact SUV.

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In May 2020, we started delivery of the P7, which is our second Smart EV and a sports sedan.

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In March 2021, we started delivery of the P7 Wing, which is a limited edition designed to accentuate the sporty and dynamic styling of the sports sedan with scissor-style front doors that are traditionally only available in luxury sports vehicles.

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In March 2021, we introduced newer versions of the G3 and the P7 that are equipped with lithium iron phosphate battery to provide our customers with a wider variety of options.

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In April 2021, we unveiled the P5, which is our third Smart EV and a family sedan, and started delivery in September 2021.

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In July 2021, we introduced the G3i, which is the mid-cyclefacelift version of the G3, and started delivery in August 2021.

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In September 2022, we launched the G9, which is our fourth Smart EV and a mid-to large-sizedSUV, and started mass delivery in October 2022.

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In March 2023, we upgraded the P7 to P7i, and started delivery during the same month.

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In June 2023, we launched the G6, which is our fifth Smart EV, and started delivery to customers in July 2023.

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In January 2024, we launched the X9, which is our sixth Smart EV, and started delivery during the same month.

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In March 2024, we introduced a new version of P7i, being the first time we brought scissor-style front doors to two-wheel drive models, and started delivery during the same month.

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In August 2024, we launched the MONA M03, which is the first Smart EV of our MONA series and our seventh Smart EV, and started delivery of MONA M03 during the same month.

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In September 2024, we introduced a new version of the X9.

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In November 2024, we launched the P7+, which is the seventh Smart EV of our XPENG series and our eighth Smart EV, and started delivery during the same month.

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In March 2025, we upgraded the G6 and the G9 to their respective 2025 Edition and started delivery during the same month.

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In April 2025, we upgraded the X9 to its latest 2025 Edition.

We currently offer the following models:

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G9 (mid-to large-sizedSUV), with a wheelbase of 2,998 mm and CLTC range between 625 km and 725 km.

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P7i (sports sedan), with a wheelbase of 2,998 mm and CLTC range of 702 km.

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G6 (coupe SUV), with a wheelbase of 2,890 mm and CLTC range between 625 km and 725 km.

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X9 (seven-seater MPV), with a wheelbase of 3,160 mm and CLTC range between 650 km and 740 km.

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MONA M03 (sedan), with a wheelbase of 2,815 mm and CLTC range between 515 km and 620 km.

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P7+ (family sedan), with a wheelbase of 3,000 mm and an upgraded CLTC range between 615 km to 725 km enabled through OTA firmware updates.

Our ADAS and in-carintelligent operating system enable customers to enjoy a differentiated smart mobility experience, and our Smart EVs can be upgraded through OTA firmware updates to introduce enhancements and new functionalities. Continuous innovation in software is one of the key factors that differentiate our Smart EVs and has become a critical value proposition appealing to customers.

We seek to expand our customer reach by extending our online and physical sales and service network. We had a total of 690 stores, covering 226 cities in China as of December 31, 2024. These stores in our sales network include both stores directly operated by us and franchised stores. In addition, we also have entered 30 overseas markets, establishing 150 stores in overseas countries or regions, owned by importers, dealer groups, or XPENG. In addition, we actively engage in online marketing through various channels to further enhance our brand recognition and customer acquisition.

We aim to offer our customers a convenient charging and driving experience by providing them with access to a vast, rapidly-growing charging network. Our customers can choose to charge their Smart EVs using home chargers, at XPENG self-operated charging station network or at third-party charging stations. In addition, we started to launch the 480kW S4 supercharging stations in China in 2022. As of December 31, 2024, XPENG self-operated charging station network further expanded to 1,920 stations, including 1,506 XPENG self-operated supercharging stations and 414 destination charging stations. Our S4 and S5 supercharging stations have covered 165 cities in China, including all of the tier-1and the new tier-1cities.

Our manufacturing philosophy centers on quality, continuous improvement, flexibility and high operating efficiency. We manufacture our vehicles at our own plants in Zhaoqing and Guangzhou, Guangdong province. In addition, as of March 31, 2025, the construction of our new manufacturing base in Wuhan has been completed, which is currently pending inspection and acceptance procedures conducted by relevant government authorities.

Our total revenue grew rapidly from RMB26,855.1 million in 2022 to RMB30,676.1 million in 2023, and further to RMB40,866.3 million in 2024. Our Smart EV deliveries increased from 120,757 units in 2022 to 141,601 units in 2023, and further to 190,068 units in 2024, representing a year-on-yeargrowth rate of 34.2% between 2023 and 2024. Along with strong revenue growth, our gross profit margin decreased from 11.5% in 2022 to 1.5% in 2023, and increased to 14.3% in 2024.

Our Business Model

We offer an innovative mobility experience through our Smart EVs, software and services. Vehicle sales is the primary source of our revenues. We have launched eight Smart EV models as of December 31, 2024, including seven Smart EVs of the XPeng series and one Smart EV of the MONA series, and we plan to continuously introduce new models and facelifts to expand our product portfolio and customer base.

General Factors Affecting the Group's Results of Operations

The demand for our Smart EVs is affected by the following general factors:

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China's macroeconomic conditions and the growth of China's overall passenger vehicle market, especially the mid-to high-endsegment;

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Penetration rate of EVs in China's passenger vehicle market, which is in turn affected by, among other things, (i) functionality and performance of EVs, (ii) total cost of ownership of EVs and (iii) availability of charging network;

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Development, and customer acceptance and demand, of smart technology functions, such as ADAS and smart connectivity; and

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Government policies and regulations for EVs and smart technology functions, such as subsidies for EV purchases and government grants for EV manufacturers.

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Seasonal fluctuations of the customers' demand for our Smart EVs.

Changes in any of these general industry conditions could affect the Group's business and result of operations.

Specific Factors Affecting the Group's Results of Operations

Besides the general factors affecting China's Smart EV market, the Group's business and results of operations are also affected by company specific factors, including the following major factors:

Our ability to attract new customers and grow our customer base

We design our Smart EVs to satisfy the needs and preferences of China's middle-class consumers. We strive to enhance brand recognition among our target customers by consistently delivering smart and upgradable EVs as well as a superior customer experience. Enhanced customer satisfaction will help to drive word-of-mouthreferrals, which will reduce our customer acquisition costs. Our ability to attract new customers also depends on the scale and efficiency of our sales network, which includes direct stores, franchised stores and various online marketing channels. We seek to attract new customers cost-efficiently by, among other things, locating many of our stores in shopping malls, adopting an asset-light franchise model and engaging in online precision marketing. In addition, we intend to strategically expand and strengthen our international market presence, initially primarily focusing on overseas markets with higher Smart EV penetration, such as select European markets. As we continue to develop and launch new EV models, invest in our brand and expand our sales and service network, we expect to attract more customers and grow our revenues.

Competitiveness and continued expansion of our Smart EV portfolio

Our ability to periodically introduce new Smart EV models will be an important contributor to our future growth. As of December 31, 2024, we have launched seven Smart EVs of the XPeng series, which included the P7i, the G9, the G6, the X9, and the P7+, as well as the G3 (including G3i) and P5, which we have ceased manufacturing and selling, and one Smart EV of the MONA series, being MONA M03. We plan to continuously introduce new models and facelifts to expand our product portfolio and customer base. We expect our revenue growth to be driven in part by the continued expansion of our vehicle portfolio.

We differentiate our Smart EVs based on a number of core attributes, which are attractive design, high performance, smart technology functions and proven safety and reliability. Customer acceptance of our Smart EVs also depends on our ability to maintain competitive pricing. We primarily target our Smart EVs to the mid-to high-endsegment in China's passenger vehicle market. With ADAS, smart connectivity and high performance, our Smart EVs offer compelling value proposition in the mid-to high-endsegment.

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Investment in technology and talents

We develop most of our key technologies in-houseto achieve a rapid pace of innovation and tailor our product offerings for Chinese customers. Such technologies encompass both software, including software for our XNGP and XOS Tianji, and core vehicle systems, including powertrain and E/E architecture. Accordingly, we dedicate significant resources towards research and development, and our research and development staff accounted for approximately 40.4% of our total employees as of December 31, 2024. In August 2023, we acquired 100% ownership interest of DiDi's smart auto development business to develop, design and engineer a new smart EV model. In September 2023, we entered into share purchase agreements to acquire shares of Dogotix, which has been dedicated to research and development of robots with human-robot interaction functions since its incorporation. We will continue to recruit and retain talented software developers and engineers to grow our strength in the key technologies. We expect our strategic focus on innovations will further differentiate our Smart EVs as well as software and service offerings, which will in turn enhance our competitiveness.

Improvement of operating efficiency

We aim to improve operating efficiency in every aspect of our business, such as product development, supply chain, manufacturing, sales and marketing, as well as service offerings. We strategically established multiple Smart EV platforms that are scalable for different types of our vehicles with different wheelbases within a wide range, which allows us to develop new models in a fast and cost-efficient manner. Our supply chain affects our cost of sales and gross margin, and we expect to reduce bill-of-materialcost, as we ramp up production volume and achieve economies of scale. We also focus on the efficiency in the manufacturing process, including our operations at our Zhaoqing plant and Guangzhou plant. As we expand our product portfolio and grow our revenues, we expect our expenses as a percentage of our revenues to decrease.

Components of Results of Operations

Revenues

The following table sets forth a breakdown of the Group's revenues, each expressed in the absolute amount and as a percentage of its total revenues, for the periods indicated:

		Year Ended December 31,
		2022								2023								2024
		RMB				%				RMB				%				RMB				%
		(in thousands, except for percentages)
Revenues
Vehicle sales			24,839,637				92.5				28,010,857				91.3				35,829,402				87.7
Services and others			2,015,482				7.5				2,665,210				8.7				5,036,907				12.3
Total			26,855,119				100.0				30,676,067				100.0				40,866,309				100.0

The Group generates revenues from (i) vehicle sales, which represent sales of its Smart EVs, and (ii) services and others, primarily including technical research and development services, services embedded in a sales contract, maintenance service, supercharging service.

The overall contract price under a sales contract is allocated to each distinct performance obligation based on the relative estimated standalone selling price. For example, the revenue for sales of the Smart EV and home chargers is recognized when the control of the Smart EV is transferred to the customer and the home charger is installed at customer's designated location.

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Cost of sales

The following table sets forth a breakdown of the Group's cost of sales, expressed as an absolute amount and as a percentage of its total revenues, for the periods indicated:

		Year Ended December 31,
		2022								2023								2024
		RMB				%				RMB				%				RMB				%
		(in thousands, except for percentages)
Cost of sales
Vehicle sales			22,493,122				83.8				28,457,909				92.8				32,866,163				80.4
Services and others			1,273,606				4.7				1,767,003				5.7				2,154,378				5.3
Total			23,766,728				88.5				30,224,912				98.5				35,020,541				85.7

Cost of vehicle sales primarily includes direct parts, materials, labor cost and manufacturing overheads (including depreciation and amortization of assets associated with production) and reserves for estimated warranty expenses. Cost of services and others primarily includes cost of direct parts, materials, depreciation of associated assets used for providing the services, labor costs and installment costs.

Research and development expenses

The Group's research and development expenses primarily consist of (i) employee compensation, representing salaries, benefits, share-based compensation and bonuses for its research and development personnel, (ii) design and development expenses, which primarily include fees payable to third-party suppliers for designing molds, (iii) materials and supplies expenses in relation to testing materials, and (iv) certain other expenses. All expenses associated with research and development are expensed as incurred.

The Group's research and development expenses are mainly driven by the number of its research and development personnel, as well as the stage and scale of its vehicle development and the development of its key software and hardware technologies. The Group dedicates significant resources towards research and development, and its research and development staff accounted for approximately 40.4% of its total employees as of December 31, 2024.

Selling, general and administrative expenses

The following table sets forth a breakdown of the Group's selling, general and administrative expenses, expressed as an absolute amount and as a percentage of total selling, general and administrative expenses, for the periods indicated:

		Year Ended December 31,
		2022								2023								2024
		RMB				%				RMB				%				RMB				%
		(in thousands, except for percentages)
Selling, general and administrative expenses
Selling expenses			5,028,958				75.2				5,013,734				76.4				5,531,599				80.5
General and administrative expenses			1,659,288				24.8				1,545,208				23.6				1,339,045				19.5
Total			6,688,246				100.0				6,558,942				100.0				6,870,644				100.0

The Group's selling expenses primarily consist of (i) employee compensation, including salaries, benefits, share-based compensation and bonuses for its sales and marketing staff, (ii) marketing, promotional and advertising expenses, (iii) operating and lease expenses for direct stores, (iv) commissions to franchised stores, and (v) certain other expenses. The Group's general and administrative expenses primarily consist of (i) employee compensation, including salaries, benefits, share-based compensation and bonuses for its general corporate staff, (ii) professional service fees, and (iii) certain other expenses.

The Group's selling, general and administrative expenses are mainly driven by the number of its sales, marketing, general corporate personnel, marketing and promotion activities and the expansion of its sales and service network.

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Other income, net

The Group's other income primarily consists of government grants that are not contingent upon the Group's further actions or performance.

Fair value gain on derivative liability relating to the contingent consideration

The Group's fair value gain on derivative liability relating to the contingent consideration consists of the fair value change of the contingent consideration related to the acquisition of DiDi's smart auto business.

Interest income

The Group's interest income primarily consists of interest earned on cash deposits in banks.

Interest expenses

The Group's interest expenses primarily consist of interest expenses with respect to its bank borrowings and other non-currentliabilities.

Fair value gain (loss) on derivative assets or derivative liabilities

Fair value gain (loss) on derivative assets or derivative liabilities consists of net gain (loss) from the change in the fair value of derivative assets or derivative liabilities, which are primarily related to forward exchange contracts and the forward share purchase agreement with the Volkswagen Group.

Investment gain (loss) on long-term investments

Investment gain (loss) on long-term investments consists of net gain (loss) from the change in the fair value of long-term investments, which include equity investments, over which the Group has neither significant influence nor control, and debt investments.

Taxation

Cayman Islands

We are incorporated in the Cayman Islands as an exempted company with limited liability under the Companies Act (Revised) of the Cayman Islands and accordingly, are exempted from Cayman Islands income tax. As such, we are not subject to tax on either income or capital gain. In addition, no Cayman Islands withholding tax is imposed upon any payments of dividends by us to our shareholders.

British Virgin Islands

XPeng Limited is exempted from income tax on its foreign-derived income in the BVI. There are no withholding taxes in the BVI.

Hong Kong

Under the current Hong Kong Inland Revenue Ordinance, our Hong Kong subsidiaries are subject to 16.5% Hong Kong profit tax on their taxable income generated from operations in Hong Kong. Additionally, payments of dividends by our Hong Kong subsidiaries to us are not subject to any Hong Kong withholding tax.

United States

The applicable income tax rate in the United States where our subsidiaries have significant operations for the years ended December 31, 2022, 2023 and 2024 is 27.98%, which is a blended state and federal rate.

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PRC

The PRC Enterprise Income Tax Law, or the EIT Law, which became effective on January 1, 2008 and was most recently amended on December 29, 2018, applies a uniform enterprise income tax rate of 25% to both FIEs and domestic enterprises. Pursuant to the Administrative Measures on Certification of High and New Technology Enterprises promulgated by the MOST, MOF and State Taxation Administration on January 29, 2016, certified high and new technology enterprises, or HNTEs, are entitled to a favorable statutory tax rate of 15%, subject to renewal every three years. During the three-year period, an HNTE must conduct a qualification self-review each year to ensure it meets the HNTE criteria and is eligible for the 15% preferential tax rate for the given year. If an HNTE fails to meet the criteria for being an HNTE in any year, the enterprise cannot enjoy the 15% preferential tax rate in the given year, and must instead use the uniform enterprise income tax rate of 25%. Upon the expiration of qualification, re-accreditationof certification from the relevant authorities is necessary for the enterprise to continue enjoying the preferential tax treatment.

Guangzhou Xiaopeng Motors Technology Co., Ltd. applied for the HNTE qualification and received approval in December 2022. Guangzhou Xiaopeng Motors Technology Co., Ltd. is entitled to continue to enjoy the beneficial tax rate of 15% as an HNTE for the years 2022 through 2024.

Zhaoqing Xiaopeng Automobile Co., Ltd. applied for the HNTE qualification and received approval in December 2020 and renewed in December 2023. Zhaoqing Xiaopeng Automobile Co., Ltd. is entitled to continue to enjoy the beneficial tax rate of 15% as an HNTE for the years 2023 through 2025.

Beijing Xiaopeng Automobile Co., Ltd. applied for the HNTE qualification and received approval in December 2020. This enterprise is entitled to continue to enjoy the beneficial tax rate of 15% as an HNTE for the years 2020 through 2022. Since the qualification was expired in 2023, this enterprise applies tax rate of 25% for the year 2023. This enterprise re-applied for the HNTE qualification and received approval in December 2024, then entitled to enjoy the beneficial tax rate of 15% as an HNTE for the years 2024 through 2026.

Shanghai Xiaopeng Motors Technology Co., Ltd. applied for the HNTE qualification and received approval in December 2022. Shanghai Xiaopeng Motors Technology Co., Ltd. is entitled to continue to enjoy the beneficial tax rate of 15% as an HNTE for the years 2022 through 2024.

Shenzhen Pengxing Smart Research Co., Ltd. applied for the HNTE qualification and received approval in October 2023. Shenzhen Pengxing Smart Research Co., Ltd. is entitled to continue to enjoy the beneficial tax rate of 15% as an HNTE for the years 2023 through 2025.

Zhaoqing Xiaopeng New Energy Investment Co., Ltd. applied for the HNTE qualification and received approval in December 2024. Zhaoqing Xiaopeng New Energy Investment Co., Ltd. is entitled to enjoy the beneficial tax rate of 15% as an HNTE for the years 2024 through 2026.

Guangzhou Zhipeng Manufacturing Co., Ltd. applied for the HNTE qualification and received approval in December 2024. Guangzhou Zhipeng Manufacturing Co., Ltd. is entitled to enjoy the beneficial tax rate of 15% as an HNTE for the years 2024 through 2026.

Under the EIT Law, dividends generated after January 1, 2008 and payable by an FIE in the PRC to its foreign investors who are non-residententerprises are subject to a 10% withholding tax, unless any such foreign investor's jurisdiction of incorporation has a tax treaty with the PRC that provides for a different withholding arrangement. Under the taxation arrangement between the PRC and Hong Kong, a qualified Hong Kong tax resident which is the "beneficial owner" and directly holds 25% or more of the equity interest in a PRC resident enterprise is entitled to a reduced withholding tax rate of 5%. The Cayman Islands, where the Company was incorporated, does not have a tax treaty with the PRC. In accordance with the accounting guidance, all undistributed earnings are presumed to be transferred to the parent company and are subject to the withholding taxes. All FIEs are subject to the withholding tax from January 1, 2008. The presumption may be overcome if we have sufficient evidence to demonstrate that the undistributed earnings will be re-investedand the remittance of the dividends will be postponed indefinitely. We did not record any dividend withholding tax, as we have no retained earnings for any of the years presented.

The EIT Law also provides that an enterprise established under the laws of a foreign country or region but whose "de facto management body" is located in the PRC be treated as a "resident enterprise" for PRC tax purposes and consequently be subject to the PRC income tax at the rate of 25% for its global income. The implementing rules of the EIT Law merely define the location of the "de facto management body" as "the place where the exercising, in substance, of the overall management and control of the production and business operation, personnel, accounting, properties and others of a non-PRCcompany is located." Based on a review of surrounding facts and circumstances, we do not believe that it is likely that our operations outside of the PRC will be considered a resident enterprise for PRC tax purposes. However, due to limited guidance and implementation history of the EIT Law, there is uncertainty as to the application of the EIT Law. If our holding company in the Cayman Islands or any of our subsidiaries outside of China were deemed to be a resident enterprise under the EIT Law, it would be subject to enterprise income tax on its worldwide income at a uniform enterprise income tax rate of 25%.

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According to relevant policies promulgated by the State Tax Bureau of the PRC and effective from 2008 onwards, enterprises engaged in R&D activities are entitled to claim an additional tax deduction amounting to 75% or 100% of qualified R&D expenses incurred in determining its tax assessable profits for that year. The additional deduction of 100% or 75% of qualified R&D expenses can only be claimed directly in the annual EIT filling and subject to the approval from the relevant tax authorities.

Critical Accounting Policies and Estimates

An accounting policy is considered critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time such estimate is made, and if different accounting estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the consolidated financial statements.

We prepare our consolidated financial statements in conformity with U.S. GAAP, which requires us to make judgments, estimates and assumptions. We continually evaluate these estimates and assumptions based on the most recently available information, our own historical experiences and various other assumptions that we believe to be reasonable under the circumstances. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from our expectations as a result of changes in our estimates. Some of our accounting policies require a higher degree of judgment than others in their application and require us to make significant accounting estimates.

The following descriptions of critical accounting policies, judgments and estimates should be read in conjunction with our consolidated financial statements and other disclosures included in this annual report. When reviewing our consolidated financial statements, you should consider (i) our selection of critical accounting policies, (ii) the judgments and other uncertainties affecting the application of such policies and (iii) the sensitivity of reported results to changes in conditions and assumptions.

Revenue Recognition

Revenue is recognized when or as the control of the goods or services is transferred upon delivery to customers. Depending on the terms of the contract and the laws that apply to the contract, control of the goods and services may be transferred over time or at a point in time. Control of the goods and services is transferred over time if our performance:

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provides all of the benefits received and consumed simultaneously by the customer;

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creates and enhances an asset that the customer controls as we perform; or

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does not create an asset with an alternative use to us and we have an enforceable right to payment for performance completed to date.

If control of the goods and services transfers over time, revenue is recognized over the period of the contract by reference to the progress towards complete satisfaction of that performance obligation. Otherwise, revenue is recognized at a point in time when the customer obtains control of the goods and services.

Contracts with customers may include multiple performance obligations. For such arrangements, we allocate overall contract price to each distinct performance obligation based on its relative standalone selling price in accordance with ASC 606. We generally determine standalone selling prices for each individual distinct performance obligation identified based on the prices charged to customers. If the standalone selling price is not directly observable, it is estimated using expected cost plus a margin or adjusted market assessment approach, depending on the availability of observable information, the data utilized, and considering our pricing policies and practices in making pricing decisions. Assumptions and estimations have been made in estimating the relative selling price of each distinct performance obligation, and changes in judgments on these assumptions and estimates may affect the revenue recognition. The discount provided in the contract are allocated by us to all performance obligations as conditions under ASC 606-10-32-37are not met.

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Vehicle Sales

We generate revenue from sales of our Smart EVs, together with a number of embedded products and services through a contract. There are multiple distinct performance obligations explicitly stated in a sales contract including sales of vehicle, free battery charging within three to six years, extended lifetime warranty, option between household charging pile and charging card, vehicle internet connection services, services of lifetime free battery charging in XPENG-branded supercharging stations and lifetime warranty of battery, which are defined by our sales policy and accounted for in accordance with ASC 606. The standard warranty provided by us is accounted for in accordance with ASC 460, Guarantees, and the estimated costs are recorded as a liability when we transfer the control of vehicle to a customer.

Car buyers in the PRC were entitled to government subsidies when they purchase EVs before December 31, 2022. For efficiency purpose and better customer service, we or Zhengzhou Haima Automobile Co., Ltd., which collaborated with us for manufacturing of the G3 from 2018 to 2021, applies for and collects such government subsidies on behalf of the customers. Accordingly, customers only pay the amount after deducting government subsidies. We determined that the government subsidies should be considered as part of the transaction price because the subsidy is granted to the buyer of the EVs and the buyer remains liable for such amount in the event the subsidies were not received by us due to the buyer's fault such as refusal or delay of providing the relevant application information. The new energy vehicle subsidies policy had expired since January 1, 2023.

In the instance that some eligible customers select to pay by installments for vehicles or batteries under an auto financing program provided to the customers by us, such arrangement contains a significant financing component and as a result, the transaction price is adjusted to reflect the impact of time value of the transaction price using an applicable discount rate (i.e. the interest rates of the loan reflecting the credit risk of the borrower). We allocate the financing amount to all performance obligations proportionately based on their relative selling prices, as conditions prescribed under ASC 606-10-32-37are not met.

Receivables related to the vehicle and battery installment payments are recognized as installment payment receivables. The difference between the gross receivable and the respective present value is recorded as unrealized finance income. Interest income resulting from arrangements with a significant financing component is presented as other sales.

The overall contract price of electric vehicle and related products/services is allocated to each distinct performance obligation based on the relative estimated standalone selling price. The revenue for sales of the Smart EVs and household charging pile is recognized at a point in time when the control of the Smart EV is transferred to the customer and the charging pile is installed at customer's designated location. For vehicle internet connection service, we recognize the revenue using a straight-line method. For the extended lifetime warranty and lifetime battery warranty, we recognize revenue over time based on a cost-to-cost method. For the free battery charging within three to six years and charging card to be consumed to exchange for charging services, we consider that a measure of progress based on usage best reflects the performance, as it is typically a promise to deliver the underlying service rather than a promise to stand ready. For the services of lifetime free battery charging in XPENG-branded supercharging stations, we recognize the revenue over time based on a straight-line method during the expected useful life of the vehicle.

Initial refundable deposits for intention orders and non-refundabledeposits for vehicle reservations received from customers prior to vehicle purchase agreements are signed are recognized as refundable deposits from customers (accruals and other liabilities) and advances from customers (accruals and other liabilities). When vehicle purchase agreements are signed, if the consideration for the vehicle and all embedded services must be paid in advance, which means the payments received are prior to the transfer of goods or services by us, we record a contract liability (deferred revenue) for the allocated amount relating to those unperformed obligations. At the same time, advances from customers are classified as a contract liability (deferred revenue) as part of the consideration.

Our intelligent driving system, provides assisted driving and parking functions tailored for different driving behaviors and road conditions in China. A customer can subscribe for such services by either making a lump sum payment or paying annual installments over a three-year period, or purchasing a vehicle equipped with such system. Revenue related to such system is recognized at a point in time when intelligent driving functionality of such system is delivered and transferred to the customers.

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Other services

We provide other services to customers, including services embedded in a sales contract, supercharging service, maintenance service, technical support services, auto financing services, license and technical services and others. Other services included supercharging service, maintenance service, technical support service, technical research and development services and second-hand vehicle sales services. These services are recognized either over time or point in time, as appropriate, under ASC 606.

We licensed a car manufacturer with rights to use our in-housedeveloped platform and technology, and provided technical research and development services to integrate our technology into the car manufacturer's vehicles and platforms.

Before the start of production of the car manufacturer's vehicles ("SOP"), we provide technical research and development ("R&D") services, provide license of our proprietary intellectual property, or transfer our know-how pack to the car manufacturer. We conclude that the licensing and know-how pack transfers are bundled with technical R&D services as one single performance obligation, since the customer cannot benefit from the licenses and know-how pack either on its own or together with other resources that are readily available to itself.

The licensing involved in the post-SOPphase primarily represents the right to enable the car manufacturer's vehicles produced and sold with the technology and software developed based on the Group's owned intellectual property. Other promises identified in the post-SOPphase are immaterial in the context of the contract. For those contracts with sales-based royalties, the sales-based royalty revenue is recognized when the car manufacturer's subsequent sales occur.

For contracts pursuant to which we create an asset with no alternate use to us and has an enforceable right to payment from the car manufacturer for performance completed to date, licenses and technical R&D services revenue is recognized over a period of the contract based on the progress towards completion of the performance obligation using input method, which is measured by reference to the contract costs incurred for the work performed up to the end of the reporting period as a percentage of the total estimated costs to complete the contract. Contract costs contains labor cost, material cost and other direct costs.

Fees entitled by us upon or post SOP of the car manufacturer's vehicles are considered as variable consideration as there are binary outcomes regarding the fee entitlement. We estimate the amount of variable consideration using the most likely amount method and include the estimated amount in the transaction price to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. No amount of variable consideration is included in the transaction price in the current reporting period after considering the facts and uncertainties as of the period end. We will update our estimate at each reporting date until the uncertainty is resolved.

Practical expedients and exemptions

We follow the guidance on immaterial promises when identifying performance obligations in the vehicle sales contracts and concludes that lifetime roadside assistance, traffic ticket inquiry service, courtesy car service, on-sitetroubleshooting, parts replacement service, extended warranty of 10 years or 200,000 kilometers, basic maintenance service of 6 times in 4 years and others, are not performance obligations considering these services are value-added services to enhance customer experience rather than critical items for vehicle driving and forecasted that usage of these services will be very limited. We also perform an estimation on the standalone fair value of each promise applying a cost plus margin approach and concludes that the standalone fair value of foresaid services are insignificant individually and in aggregate, representing less than 1% of vehicle gross selling price and aggregate fair value of each individual promise.

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Considering the qualitative assessment and the result of the quantitative estimate, we concluded not to assess whether promises are performance obligation if they are immaterial in the context of the contract and the relative standalone fair value individually and in aggregate is less than 1% of the contract price, namely the lifetime roadside assistance, traffic ticket inquiry service, courtesy car service, on-sitetroubleshooting and parts replacement service and others. Related costs are then accrued instead.

Customer Upgrade Program

In the third quarter of 2019, due to the upgrade of the G3 vehicle from the 2019 version ("G3 2019") to its 2020 version ("G3 2020"), we voluntarily offered all owners of G3 2019 the options to either receive loyalty points, valid for five years from the grant date, which can be redeemed for goods or services, or obtain an enhanced trade-inright contingent on a future purchase starting from the 34th month of the original purchase date but only if they purchase a new vehicle from us. The owners of G3 2019 had to choose one out of the two options within 30 days after receiving the notice. Anyone who did not make the choice before the date was deemed to forgo the rights to the options. At the time the offers were made, we still had unfulfilled performance obligations for services to the owners of G3 2019 associated with their original purchase. We considered this offering is to improve the satisfaction of the owners of G3 2019 but not the result of any defects or resolving past claims regarding the G3 2019.

As both options provide a material right (a significant discount on future goods or services) for no consideration to existing customers with unfulfilled performance obligations, we consider this arrangement to be a modification of the existing contracts with customers. Further, as the customers did not pay for these additional rights, the contract modification is accounted for as a termination of the original contract and commencement of a new contract, which will be accounted for prospectively. The material right from the loyalty points or the trade-inright shall be considered in the reallocation of the remaining consideration from the original contracts among the promised goods or services not yet transferred at the time of the contract modification. This reallocation is based on the relative standalone selling prices of these goods and services.

For the material right attached with loyalty points, we estimated the probability of points redemption when determining the standalone selling price. Due to the fact that most merchandises can be redeemed without requiring a significant amount of points, as compared with the amount of points granted to the customers, we believe it is reasonable to assume all points will be redeemed and no forfeiture is estimated currently. The amount allocated to the points as a separate performance obligation is recorded as a contract liability (deferred revenue) and revenue will be recognized when future goods or services are transferred. We will continue to monitor forfeiture rate data and will apply and update the estimated forfeiture rate at each reporting period.

According to the terms of the trade-inprogram, owners of G3 2019 who elected the trade-inright have the option to trade in their G3 2019 at a fixed predetermined percentage of its original G3 2019 purchase price (the "guaranteed trade-invalue") starting from the 34th month of the original purchase date but only if they purchase a new vehicle from us. Such trade-inright is valid for 120 days. That is, if the owner of a G3 2019 does not purchase a new vehicle within that 120-dayperiod, the trade-inright expires. The guaranteed trade-invalue will be deducted from the retail selling price of the new vehicle purchase. The customer cannot exercise the trade-inright on a standalone basis solely as a function of their original purchase of the G3 2019 and this program, and therefore, we do not believe the substance of the program is a repurchase feature that provides the customer with a unilateral right of return. Rather, the trade-inright and purchase of a new vehicle are linked as part of a single transaction to provide a loyalty discount to existing customers. We believe the guaranteed trade-invalue will be greater than the expected market value of the G3 2019 at the time the trade-inrights become exercisable, and therefore, the excess value is essentially a sales discount granted on the new vehicle purchase. We estimated the potential forfeiture rate based on the market expectation of the possibility of future buying and applied the forfeiture rate when determining the standalone selling price at the date of contract modification. The amount allocated to the trade-inright as a separate performance obligation is recorded as a contract liability (deferred revenue) and revenue will be recognized when the trade-inright is exercised and a new vehicle is purchased. As of December 31, 2022, the trade-inprogram has been closed. If the owners of G3 2019, who elected the trade-inright, did not sign the trade-incontracts or reach an additional agreement with us in 2022, the trade-inright will be expired.

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Warranties

We provide a manufacturer's standard warranty on all vehicles sold. We accrue a warranty reserve for the vehicles sold by us, which includes our best estimate of the future costs to be incurred in order to repair or replace items under warranties and recalls when identified. These estimates were made based on actual claims incurred to date and an estimate of the nature, frequency and magnitude of future claims with reference made to the past claim history. These estimates are inherently uncertain given our relatively short history of sales, and changes to our historical or projected warranty experience may cause material changes to the warranty reserve in the future. The portion of the warranty reserve expected to be incurred within the next 12 months is included within accruals and other liabilities, while the remaining balance is included within other non-currentliabilities on the consolidated balance sheets. Warranty expense is recorded as a component of cost of sales in the consolidated statements of comprehensive loss.

We do not consider standard warranty as being a separate performance obligation as it is intended to provide greater quality assurance to customers and is not viewed as a distinct obligation. Accordingly, standard warranty is accounted for in accordance with ASC 460, Guarantees. We also provide extended lifetime warranty which is sold separately through a vehicle sales contract. The extended lifetime warranty is an incremental service offered to customers and is considered a separate performance obligation distinct from other promises and is accounted for in accordance with ASC 606.

Business Combination and Goodwill

We account for business combinations under ASC 805, Business Combinations. Business combinations are recorded using the acquisition method of accounting, and the transaction consideration of an acquisition is determined based upon the aggregate fair value at the date of exchange of the assets transferred, liabilities incurred, and equity instruments issued, including any consideration contingent upon future events as defined. The costs directly attributable to the acquisition are expensed as incurred. Identifiable assets and liabilities acquired or assumed are measured separately at their fair value as of the acquisition date, irrespective of the extent of any noncontrolling interests.

The excess of the total transaction consideration over the aggregate fair value of the acquired identifiable net assets is recorded as goodwill. If the total transaction consideration is less than the fair value of the net assets of the subsidiaries acquired, the difference is recognized directly in the consolidated statements of comprehensive loss. Goodwill is not amortized but is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, by performing the quantitative test through comparing each reporting unit's fair value to its carrying value, including goodwill.

Fair Value Determination Related to the Accounting for Business Combination

In 2023, we estimated the fair value of acquired vehicle platform technology ("VPT") and VMTUD from the acquisition of DiDi's smart auto business using the relief from royalty method and multiperiod excess earnings method, respectively. Our determination of the fair value of acquired VPT and VMTUD involved the use of estimates and assumptions related to projected revenues, royalty rate and discount rate for VPT, and in the case of VMTUD, projected revenues and discount rate. We estimated the useful life of VPT to be 10 years, based on the expected technical obsolescence and innovations and industry experience of such intangible asset. The VMTUD acquired is considered indefinite-lived until the completion of the associated research and development efforts and a determination related to commercial feasibility. As of December 31,2024, the VMTUD was transferred into vehicle model technology ("VMT") as finite-lived intangible assets. Research and development expenditures that were incurred after the acquisition, including those for completing the research and development activities, were expensed as incurred during the year ended December 31, 2024.

We estimated the acquisition date fair value of the contingent consideration liability based on the total contingent shares to be issued, considering projected delivery volume, and the closing price of the Company's common share on the acquisition date.

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Results of Operations for Continuing Operations

The following tables set forth a summary of the Group's consolidated results of operations for the periods presented, in absolute amount and as a percentage of our revenues. This information should be read together with our consolidated financial statements and related notes included elsewhere in this annual report. The operating results in any period are not necessarily indicative of the results that may be expected for any future period.

		Year ended December 31,
		2022								2023								2024
		RMB				%				RMB				%				RMB				%
		(in thousands, except percentages)
Revenues
Vehicle sales			24,839,637				92.5				28,010,857				91.3				35,829,402				87.7
Services and others			2,015,482				7.5				2,665,210				8.7				5,036,907				12.3
Total revenues			26,855,119				100.0				30,676,067				100.0				40,866,309				100.0
Cost of sales
Vehicle sales			(22,493,122	)			(83.8	)			(28,457,909	)			(92.8	)			(32,866,163	)			(80.4	)
Services and others			(1,273,606	)			(4.7	)			(1,767,003	)			(5.7	)			(2,154,378	)			(5.3	)
Total cost of sales			(23,766,728	)			(88.5	)			(30,224,912	)			(98.5	)			(35,020,541	)			(85.7	)
Gross profit			3,088,391				11.5				451,155				1.5				5,845,768				14.3
Operating expenses
Research and development expenses			(5,214,836	)			(19.4	)			(5,276,574	)			(17.2	)			(6,456,734	)			(15.8	)
Selling, general and administrative expenses			(6,688,246	)			(24.9	)			(6,558,942	)			(21.4	)			(6,870,644	)			(16.8	)
Total operating expenses			(11,903,082	)			(44.3	)			(11,835,516	)			(38.6	)			(13,327,378	)			(32.6	)
Other income, net			109,168				0.4				465,588				1.5				589,227				1.4
Fair value gain on derivative liability relating to the contingent consideration			-				-				29,339				0.1				234,245				0.6
Loss from operations			(8,705,523	)			(32.4	)			(10,889,434	)			(35.5	)			(6,658,138	)			(16.3	)
Interest income			1,058,771				3.9				1,260,162				4.1				1,374,525				3.4
Interest expenses			(132,192	)			(0.5	)			(268,666	)			(0.9	)			(343,982	)			(0.8	)
Fair value gain (loss) on derivative assets or derivative liabilities			59,357				0.2				(410,417	)			(1.3	)			-				-
Investment gain (loss) on long-term investments			25,062				0.1				(224,364	)			(0.7	)			(261,991	)			(0.6	)
Exchange (loss) gain from foreign currency transactions			(1,460,151	)			(5.4	)			97,080				0.3				(49,543	)			(0.1	)
Other non-operatingincome, net			36,318				0.1				41,934				0.1				108,154				0.3
Loss before income tax (expenses) benefit and share of results of equity method investees			(9,118,358	)			(34.0	)			(10,393,705	)			(33.9	)			(5,830,975	)			(14.3	)
Income tax (expenses) benefit			(24,731	)			(0.1	)			(36,810	)			(0.1	)			69,780				0.2
Share of results of equity method investees			4,117				0.0				54,740				0.2				(29,069	)			(0.1	)
Net loss			(9,138,972	)			(34.1	)			(10,375,775	)			(33.8	)			(5,790,264	)			(14.2	)

Year Ended December 31, 2024 compared to year ended December 31, 2023

Revenues.The Group's revenues increased from RMB30,676.1 million in 2023 to RMB40,866.3 million in 2024, which was primarily due to an increase in revenues from vehicle sales. The Group recorded revenues from vehicle sales of RMB35,829.4 million in 2024, as compared to RMB28,010.9 million in 2023. The increase was mainly attributable to the strong growth of our vehicle sales. We delivered a total of 141,601 units of vehicles in 2023, and a total of 190,068 units of vehicles in 2024. The Group recorded revenues from services and others of RMB5,036.9 million in 2024, as compared to RMB2,665.2 million in 2023. The increase was mainly attributable to the increased revenue from technical research and development services related to the platform and software strategic technical collaboration, as well as the EEA technical collaboration with the Volkswagen Group.

Cost of sales. The Group's cost of sales increased from RMB30,224.9 million in 2023 to RMB35,020.5 million in 2024. Such increase was mainly in line with vehicle deliveries as described above. The Group recorded cost of sales from vehicle sales of RMB32,866.2 million in 2024, as compared to RMB28,457.9 million in 2023. The Group recorded cost of sales from services and others of RMB2,154.4 million in 2024, as compared to RMB1,767.0 million in 2023.

Gross profit. The Group's gross profit increased from RMB451.2 million in 2023 to RMB5,845.8 million in 2024, mainly due to the cost reduction and the improvement in product mix of models as well as the higher gross margin from the aforementioned revenue from technical services arising from the technical collaboration with the Volkswagen Group.

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Vehicle margin. The Group's vehicle margin was 8.3% in 2024, compared with negative 1.6% for the prior year. The year-over-year increase was explained by cost reduction.

Services and others margin. The Group's services and others margin was 57.2% in 2024, compared with 33.7% for the prior year. The year-over-year increase was primarily attributable to the higher gross margin from the aforementioned revenue from technical R&D services.

Research and development expenses. The Group's research and development expenses increased by 22.4% from RMB5,276.6 million in 2023 to RMB6,456.7 million in 2024, mainly related to the development of new vehicle models as the Company expanded its product portfolio to support future growth.

Selling, general and administrative expenses. The Group's selling, general and administrative expenses increased by 4.8% from RMB6,558.9 million in 2023 to RMB6,870.6 million in 2024, primarily due to the higher commission to the franchised stores driven by higher sales volume and higher marketing, promotional and advertising expenses to support vehicle sales.

Other income, net. The Group's other income increased by 26.6% from RMB465.6 million in 2023 to RMB589.2 million in 2024, primarily due to the increase in government subsidies.

Fair value gain on derivative liability relating to the contingent consideration. The Group recorded a fair value gain on derivative liability relating to the contingent consideration of RMB234.2 million in 2024, as compared to RMB29.3 million in 2023, primarily due to the fair value change of the contingent consideration related to the acquisition of DiDi's smart auto business.

Loss from operations. As a result of the foregoing, the Group incurred a loss from operations of RMB6,658,1 million in 2024, as compared to RMB10,889.4 million in 2023.

Interest income. The Group recorded interest income of RMB1,374.5 million in 2024, as compared to RMB1,260.2 million in 2023, primarily due to higher cash balances deposited with banks in 2024.

Interest expenses. The Group recorded interest expenses of RMB344.0 million in 2024, as compared to RMB268.7 million in 2023, primarily due to an increase in bank borrowings.

Fair value loss on derivative assets or derivative liabilities. The Group recorded fair value loss on derivative assets or derivative liabilities of nil in 2024, as compared to the fair value loss on derivative assets or derivative liabilities of RMB410.4 million in 2023, which was primarily due to the fluctuation in the fair value of the forward share purchase agreement, measured through profit or loss, related to the issuance of Class A ordinary shares by us for strategic minority investment by the Volkswagen Group.

Investment loss on long-term investments. The Group recorded investment loss on long-term investments of RMB262.0 million in 2024, as compared to the investment loss on long-term investments of RMB224.4 million in 2023 as a result of as a result of fair value fluctuation on the Company's equity and debt investments.

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Net loss. As a result of the foregoing, the Group incurred a net loss of RMB5,790.3 million in 2024, as compared to RMB10,375.8 million in 2023.

Year Ended December 31, 2023 compared to year ended December 31, 2022

For a discussion of the Group's results of operations for the year ended December 31, 2023 compared with the year ended December 31, 2022, see "Item 5. Operating and Financial Review and Prospects - A. Operating Results - Year Ended December 31, 2023 Compared to Year Ended December 31, 2022" in our annual report on Form 20-Ffor the year ended December 31, 2023, filed with the SEC on April 17, 2023.

B. Liquidity and Capital Resources

The Group's primary sources of liquidity have been through issuance of preferred shares, ordinary shares and bank borrowings, which have historically been sufficient to meet its working capital and capital expenditure requirements. As of December 31, 2022, 2023 and 2024, the Group had cash and cash equivalents, restricted cash, short-term investments and time deposits of a total of RMB38,251.8 million, RMB45,698.5 million and RMB41,962.5 million, respectively. The Group's restricted cash, which amounted to RMB3,153.4 million as of December 31, 2024, primarily represents bank deposits for letters of guarantee, bank notes and cash restricted as to withdrawal or use due to legal disputes.

In July and August of 2020, we received cash proceeds of US$900.0 million from our Series C+ round financing.

In August 2020, we completed our initial public offering in which we issued and sold an aggregate of 114,693,333 ADSs (including 14,959,999 ADSs sold upon the full exercise of the underwriters' over-allotment option), representing 229,386,666 Class A ordinary shares, at a public offering price of US$15.00 per ADS for a total offering size of over US$1.72 billion. The net proceeds raised from the initial public offering were approximately US$1,655.7 million.

In December 2020, we completed our follow-onpublic offering in which we offered and sold an aggregate 55,200,000 ADSs (including 7,200,000 ADSs sold upon the full exercise of the underwriters' over-allotment option), representing 110,400,000 Class A ordinary shares, raising a total of US$2,444.9 million in net proceeds.

In January 2021, we signed a strategic cooperation agreement with leading domestic banks, which provides us with the option to secure a credit line of RMB12.8 billion with an extensive range of credit facilities. Under the terms of the strategic cooperation agreement, five domestic commercial banks, including the Agricultural Bank of China, the Bank of China, China Construction Bank, China CITIC Bank and Guangzhou Rural Commercial Bank, will provide credit facilities to support our business operations and expansion of our manufacturing, sales and service capabilities. These facilities will help us optimize the efficiency of our cash management, cost control and other corporate functions.

In July 2021, we completed our listing on the Hong Kong Stock Exchange and public offering of 97,083,300 Class A ordinary shares, raising a total of approximately HK$15,823.3 million (or US$2,039.0 million based on an exchange rate of HK$7.7604 to US$1.00 as of June 11, 2021) in net proceeds to us after deducting underwriting fees and the offering expenses.

In February 2022, we completed a debt issuance of RMB775.0 million automobile leasing carbon-neutral asset-backed securities, or the ABS. The ABS was listed on the Shenzhen Stock Exchange in March 2022. The issued ABS of RMB624.0 million in the senior A tranche with a debt rating of AAA has a coupon rate of 3.00%. The issued ABS of RMB31.0 million in the senior B tranche with a debt rating of AA+ has a coupon rate of 3.50%. In September 2023, the ABS issued by us in February 2022 has matured. In November 2022, we completed another debt issuance of RMB964.0 million ABS on the Shanghai Stock Exchange. The issued ABS of RMB805.0 million in the senior A tranche with a debt rating of AAA has a coupon rate of 2.80% and the issued ABS of RMB39.0 million in senior B tranche with a debt rating of AA+ has a coupon rate of 3.00%.

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In August 2023, we completed an asset-backed notes ("ABN") issuance of RMB975.0 million on the inter-bank bond market. The issued ABN of RMB798.0 million in the senior A tranche with a debt rating of AAA has a coupon rate of 3.20% and the issued ABN of RMB44.0 million in senior B tranche with a debt rating of AA+ has a coupon rate of 3.20%. As of December 31, 2024, the total balance of the ABN was RMB82.1 million.

In December 2023, we completed the Volkswagen Investment, in which we issued 94,079,255 Class A ordinary shares representing 4.99% of our outstanding share capital immediately following the Volkswagen Investment for a total consideration of US$705.6 million. The Volkswagen Investment was part of our strategic partnership with the Volkswagen Group.

In March and October 2024, the Company, through its wholly-owned subsidiary, completed the launch of an ABS respectively amounting to RMB1,016.0 million and RMB595.0 million by issuing debt securities to investors. As of December 31, 2024, the total balance of the ABS was RMB820.3 million.

As of December 31, 2024, the Group had short-term borrowings from banks in the PRC of total principals of RMB4,609.1 million and total long-term borrowings (including current and non-currentportion, bank loan, ABS, and ABN) of RMB7,523.2 million.

We believe that the Group's existing cash and cash equivalents will be sufficient to meet its anticipated working capital requirements, including capital expenditures in the ordinary course of business for at least the next 12 months. We may, however, need additional cash resources in the future if we experience changes in business condition or other developments, or if we find and wish to pursue opportunities for investments, acquisitions, capital expenditures or similar actions. If we determine that our cash requirements exceed the amount of cash and cash equivalents the Group has on hand at the time, we may seek to issue equity or debt securities or obtain credit facilities. The issuance and sale of additional equity would result in further dilution to our shareholders. The incurrence of indebtedness would result in increased fixed obligations and could result in operating covenants that would restrict our operations. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all.

The following table sets forth a summary of the Group's cash flows for the periods presented:

		Year Ended December 31,
		2022				2023				2024
		(RMB in thousands)
Summary of Consolidated Cash Flow Data:
Net cash (used in) provided by operating activities			(8,232,376	)			956,164				(2,012,343	)
Net cash provided by (used in) investing activities			4,845,966				631,168				(1,255,099	)
Net cash provided by financing activities			6,003,835				8,015,247				669,321
Cash, cash equivalents and restricted cash at beginning of the year			11,634,881				14,714,046				24,302,049
Cash, cash equivalents and restricted cash at end of the year			14,714,046				24,302,049				21,739,664

Operating Activities

Net cash used in operating activities was RMB2,012.3 million in 2024, primarily attributable to net loss of RMB5,790.3 million, adjusted for the positive non-cashitems primary consisted of: (i) depreciation of property, plant and equipment of RMB1,571.8 million, (ii) inventory write-downs of RMB943.7 million, (iii) amortization of intangible assets of RMB537.7 million, (iv) share-based compensation of RMB473.7 million, (v) amortization of right-of-useassets of RMB413.3 million, (vi) investment loss on long-term investments of RMB262.0 million and (vii) impairment of property, plant and equipment of RMB137.5 million, partially offset by the negative non-cashitems including primarily fair value gain on derivative liability relating to the contingent consideration of RMB234.2 million primarily due to the fair value change of the contingent consideration related to the acquisition of DiDi's smart auto business. The amount was further adjusted for changes in itemized balances of operating assets and liabilities that have a negative effect on operating cash flow which were primary consisted of: (i) an increase in installment payment receivables of RMB2,081.0 million primarily due to the increase in sales volume and (ii) an increase in inventory of RMB1,060.2 million primarily in relation to materials for volume production and finished goods, as well as certain changes in itemized balances of operating assets and liabilities that have a positive effect on cash flow, including primarily (i) an increase in accruals and other liabilities of RMB1,533.0 million, (ii) an increase in accounts and notes payable of RMB870.1 million in relation to the increase of purchase of raw materials for volume production and (iii) an increase in deferred revenue of RMB798.5 million primarily due to the increase in sales volume.

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Net cash provided by operating activities was RMB956.2 million in 2023, primarily attributable to net loss of RMB10,375.8 million, adjusted for the positive non-cashitems primary consisted of: (i) depreciation of property, plant and equipment of RMB1,645.8 million, (ii) inventory write-downs of RMB1,054.7 million, (iii) share-based compensation of RMB550.5 million, (iv) fair value loss on derivative assets or derivative liabilities of RMB410.4 million, (v) amortization of intangible assets of RMB230.5 million, (vi) investment loss on long-term investments of RMB224.4 million, (vii) amortization of right-of-useassets of RMB182.2 million; and further adjusted for changes in itemized balances of operating assets and liabilities that have a positive effect on operating cash flow which were primary consisted of: (i) an increase in accounts and notes payable of RMB7,955.9 million in relation to the increase of purchase of raw material for volume production, (ii) a decrease in accounts and notes receivable of RMB1,138.4 million in relation to collection of new energy vehicle subsidies, (iii) an increase in accruals and other liabilities of RMB1,089.1 million primarily due to the increased accrued cost and expense of research and development, selling and marketing as well as purchase commitments relating to the cessation of the G3i and upgrades of certain models, and (iv) an increase of other non-currentliabilities of RMB443.5 million primarily due to the increased warranty provision in relation to the increased vehicles delivered. However, the positive operating cash flow was partially offset by below negative factors, including non-cashitems with negative effect consisted of (i) interest income of RMB352.2 million, (ii) exchange gain from foreign currency transactions of RMB97.1 million; and changes in itemized balances of operating assets and liabilities that have a negative effect which were consisted of an increase in inventory of RMB2,358.8 million primarily in relation to materials for volume production and finished goods and an increase in installment payment receivables of RMB1,473.6 million primarily due to the increase in sales volume.

Net cash used in operating activities was RMB8,232.4 million in 2022, primarily due to net loss of RMB9,139.0 million, adjusted to add back depreciation of property, plant and equipment of RMB915.5 million, share-based compensation of RMB710.5 million, amortization of right-of-useassets of RMB379.2 million, inventory write-downs of RMB220.3 million, and to deduct investment gain on long-term investments of RMB25.1 million. The amount was further adjusted by changes in itemized balances of operating assets and liabilities that have a negative effect on cash flow, including primarily (i) an increase in inventory of RMB2,475.8 million in relation to materials for volume production and finished goods, (ii) an increase in accounts and notes receivable of RMB1,210.7 million in relation to the government subsidies that we are entitled to receive, (iii) an increase in installment payment receivables of RMB776.6 million primarily due to the increase in sales volume, as well as certain changes in itemized balances of operating assets and liabilities that have a positive effect on cash flow, including primarily an increase in accounts and notes payable of RMB1,860.7 million primarily in relation to the grace period we enjoyed for the payment payable to third-party suppliers.

Investing Activities

Net cash used in investing activities in 2024 was RMB1,255.1 million, which was primarily attributable to (i) placement of short-term deposits of RMB2,984.2 million, (ii) purchase of property, plant and equipment of RMB2,226.1 million and (iii) placement of restricted long-term deposits of RMB1,100.0 million, partially offset by maturities of long-term deposits of RMB5,179.7 million.

Net cash provided by investing activities in 2023 was RMB631.2 million, which was primarily attributable to maturities of short-term deposits of RMB5,441.4 million, partially offset by (i) placement of long-term deposits of RMB3,128.8 million and (ii) purchase of property, plant and equipment of RMB2,096.3 million.

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Net cash provided by investing activities in 2022 was RMB4,846.0 million, which was primarily attributable to maturity of short-term deposits of RMB11,922.2 million, partially offset by (i) purchase of property, plant and equipment of RMB4,275.8 million and (ii) placement of long-term deposits of RMB3,822.3 million.

Financing Activities

Net cash provided by financing activities in 2024 was RMB669.3 million, which was primarily attributable to proceeds from borrowing of RMB10,718.1 million, and partially offset by repayment of borrowings of RMB9,489.6 million and repayment of debt from third party investors of RMB500 million.

Net cash provided by financing activities in 2023 was RMB8,015.2 million, which was primarily attributable to (i) proceeds from borrowings of RMB8,271.8 million and (ii) proceeds from issuance of our Class A ordinary shares to the Volkswagen Group of RMB5,019.6 million, and partially offset by repayment of borrowings of RMB5,162.2 million.

Net cash provided by financing activities in 2022 was RMB6,003.8 million, which was primarily attributable to proceeds from borrowing of RMB6,800.7 million, and partially offset by repayment of borrowings of RMB681.7 million.

Capital Expenditures

The Group made capital expenditures of RMB4,680.0 million, RMB2,311.5 million, and RMB2,427.9 million in 2022, 2023 and 2024, respectively. In these years, the Group's capital expenditures were used primarily for the construction of plants and Guanzhou Xiaopeng Technology Park and purchase of manufacturing equipment, intangible assets and land use rights. The Group expects to make capital expenditures primarily on the construction of plants and Guanzhou Xiaopeng Technology Park and purchase of equipment, intangible assets and land use rights in relation to our new manufacturing bases, as well as mold and tooling for new vehicle models.

Contractual Obligations

The following table set forth the Group's indebtedness and contractual obligations as of December 31, 2024:

		Payment due by period
		Total				Less than 1 Year				1 - 3 Years				3 - 5 Years				More than 5 Years
		(RMB in thousands)
Short-term and long-term borrowings			12,132,254				6,467,736				2,582,711				1,645,201				1,436,606
Operating lease liabilities			1,934,620				395,180				555,243				733,362				250,835
Finance lease liabilities			956,091				31,767				66,602				857,722				-
Capital commitments for property, plant and equipment			312,417				312,417				-				-				-
Interest on borrowings			852,845				287,445				316,135				184,123				65,142
Purchase commitments for raw materials			3,516,597				2,759,183				367,130				390,284				-
Capital commitment for investments			404,846				174,621				230,225				-				-
Total			20,109,670				10,428,349				4,118,046				3,810,692				1,752,583

Holding Company Structure

The Group began its operations in 2015 through Chengxing Zhidong. The Group undertook the Reorganization to facilitate our initial public offering in the United States. As part of the Reorganization, the Group incorporated XPeng Inc., its holding company in December 2018. As a transitional arrangement of the Reorganization, Xiaopeng Motors, our wholly-owned subsidiary, entered into a series of contractual agreements with Chengxing Zhidong and its shareholders in September 2019, pursuant to which Xiaopeng Motors exercised effective control over the operations of Chengxing Zhidong. In May 2020, Xiaopeng Motors completed its purchase of 100% equity interest in Chengxing Zhidong. Consequently, Chengxing Zhidong became an indirect wholly-owned subsidiary of XPeng Inc.

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XPeng Inc., the Group's holding company, has no material operations of its own. The Group conducts its operations primarily through its subsidiaries, the Group VIEs and their subsidiaries in China. As a result, XPeng Inc.'s ability to pay dividends depends upon dividends paid by the Group's PRC subsidiaries. If the Group's existing PRC subsidiaries or any newly formed ones incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to the Group. In addition, the Group's subsidiaries in China are permitted to pay dividends to the Group only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. Under PRC law, each of the Group's subsidiaries, the Group VIEs and their subsidiaries in China is required to set aside at least 10% of its after-taxprofits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of its registered capital. In addition, the Group's subsidiaries in China may allocate a portion of its after-taxprofits based on PRC accounting standards to enterprise expansion funds and staff bonus and welfare funds at its discretion, and the Group VIEs and their subsidiaries may allocate a portion of their after-taxprofits based on PRC accounting standards to a discretionary surplus fund at their discretion. The statutory reserve funds and the discretionary funds are not distributable as cash dividends. Remittance of dividends by a wholly foreign-owned company out of China is subject to examination by the banks designated by SAFE. Our PRC subsidiaries have not paid dividends and will not be able to pay dividends until they generate accumulated profits and meet the requirements for statutory reserve funds. For more information, see "Item 4. Information of the Company-B. Business Overview-Regulation-Regulation Related to Foreign Exchange and Dividend Distribution."

Recent Accounting Pronouncements

Please see Note 3 to our consolidated financial statements included elsewhere in this annual report.

Off-BalanceSheet Arrangements

The Group has not entered into any off-balancesheet financial guarantees or other off-balancesheet commitments to guarantee the payment obligations of any third parties. The Group has not entered into any derivative contracts that are indexed to its shares and classified as shareholder's equity or that are not reflected in the Group's consolidated financial statements. Furthermore, the Group does not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. The Group does not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to the Group or engages in leasing, hedging or product development services with the Group.

C. Research and Development, Patent and Licenses, etc.

Technological innovation is critical to our success, and we strategically develop most of key technologies in-house,such as ADAS, intelligent operating system, powertrain and E/E architecture. We have been and will continue to invest heavily on our research and development efforts.

The Group's research and development expenses were RMB5,214.8 million, RMB5,276.6 million, and RMB6,456.7 million in 2022, 2023, and 2024 respectively.

See "Item 4. Information of the Company-B. Business Overview-Our Technologies" and "Item 4. Information of the Company-B. Business Overview-Research and Development."

D. Trend Information

Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the year ended December 31, 2024 that are reasonably likely to have a material effect on our total net revenues, income, profitability, liquidity or capital reserves, or that caused the disclosed financial information to be not necessarily indicative of future operating results or financial conditions.

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E. Critical Accounting Estimates

See "Item 5. Operating and Financial Review and Prospects-A. Operating Results-Critical Accounting Policies and Estimates."