Xpeng Chases Tech-Licensing Deals as Car Business Bleeds

Xpeng Inc. (NYSE:XPEV) saw services and other-business revenue nearly double in the second quarter, powered chiefly by its technology partnership with Volkswagen — even as its net loss nearly tripled year over year and vehicle margin declined during a product-generation transition.

The results capture a company pulling in two directions. Xpeng is building an increasingly attractive second revenue stream from licensing its EV platform, electric architecture and software, while its primary car business is moving in the opposite direction and producing losses.

Beyond Volkswagen

Following the success of the Volkswagen partnership, Xpeng is now seeking other automakers and suppliers that could use its technology stack. Volkswagen paid roughly $700 million for a 5% stake in Xpeng, gaining access to those technologies.

To pursue similar opportunities, Xpeng created a strategic commercialization team six months ago focused on finding new partners. The existing Volkswagen relationship, along with component sales, has generated high-margin revenue: services and other-business revenue nearly doubled during the second quarter, while the segment's margin expanded by 2,150 basis points.

CEO He Xiaopeng is also pointing to robotics as a major growth opportunity, arguing that each humanoid robot will out-earn each car sold.

"The lifetime revenue and gross profit contribution of each IRON [humanoid robot], including hardware sales and recurring revenue from upgrades to AI model capabilities, will be substantially higher than the average selling price and gross profit per vehicle of our automotive business," He Xiaopeng said.

A Weakening Core Business

Xpeng's second-quarter results highlighted a growing gap between vehicle volume and profitability. Deliveries reached 103,295 vehicles, roughly flat year over year.

Vehicle margin declined to 12.1% from 14.3% a year earlier. Xpeng attributed the decline to its product-generation transition, against a backdrop of continued industry-wide competitive pressure.

The market has punished the stock accordingly. Xpeng shares have fallen roughly 47% this year, significantly more than BYD's 14% decline.

The sell-off has continued even after positive news. Xpeng secured $900 million for its robotics business and reached a meaningful milestone in automated assembly, yet shares have kept struggling.

Competition is closing in on the robotics opportunity as well. BYD and Li Auto are both targeting humanoid robots, chasing the same market Xpeng has flagged as a growth driver.

The bet for investors is whether high-margin licensing and robotics revenue can scale fast enough to offset a vehicle business under pressure from every side.