Xpeng's New Year Showcase, Targeting Physical AI

On February 24th, Wall Street Insights learned that He Xiaopeng, Chairman and CEO of XPeng Motors, sent an internal startup letter. The theme of this letter is “Steady Progress and Breakthrough, Moving Toward a New Decade of Physical AI by 2026,” which sets the strategic direction and goals for XPeng in 2026.

Steady progress and breakthrough—these seemingly contrasting words precisely outline XPeng’s current position in history: maintaining the scale and quality in the mainstream automotive market while launching a comprehensive assault into the uncharted territory of physical AI and autonomous driving.

In 2025, XPeng concluded the year with 429,400 deliveries, achieving a 126% and 113% target completion rate year-over-year, and became the first among new pure electric forces to produce over one million vehicles. However, as he states in the letter, “We have created a few blockbuster models before, but that’s not enough.” In this highly competitive industry, XPeng still needs more leverage to reach the final goal.

01 The “DeepSeek Moment” in Autonomous Driving

He Xiaopeng dedicates significant space in the letter to his views on autonomous driving. He believes that the inflection point for autonomous driving has already arrived. For XPeng, standing at a historic crossroads, it is crucial to seize the DeepSeek moment in China’s autonomous driving development.

The DeepSeek moment refers not only to the emergence of technological capabilities but also to the dramatic cost reductions and widespread adoption of user experience.

He Xiaopeng revealed that he spent the entire Spring Festival testing the “Second-Generation VLA (Visual-Language-Action) Model,” describing its performance as “stunning.” This model, regarded as “the first version aimed at L4 full autonomous driving,” will be officially launched this quarter.

To support this, XPeng has also undergone organizational adjustments. Wall Street Insights confirmed from an internal source that in early February, XPeng merged its Autonomous Driving Center and Intelligent Cockpit Center into a General Intelligent Center. This means driving decision-making and human-machine interaction are no longer managed by separate logic systems but share the same AI foundational model.

He Xiaopeng paints a vivid picture: in the future, users will only need to say, “Take the small road ahead and avoid the red lights,” and the vehicle will automatically execute the command. This integrated cockpit-driving experience is evolving from a tech enthusiast’s novelty to a standard feature indispensable to families.

The most significant update in this letter is that the public will be the first customer to adopt XPeng’s second-generation VLA model.

Since Volkswagen’s investment in 2023, the cooperation between the two has deepened from platform procurement to electronic and electrical architecture, chips, and even intelligent driving systems. Making a global sales giant pay for China’s AI technology is not just a business contract but a milestone in XPeng’s evolution from a technology importer to a technology exporter.

For Volkswagen, the joint venture in China urgently needs advanced intelligent solutions to regain market share; for XPeng, large-scale procurement by Volkswagen not only helps reduce R&D costs but also indicates that its autonomous driving technology has achieved a level of global competitiveness that can be exported and reused.

02 The Production Threshold of Physical AI

If the automotive business is today, then physical AI is XPeng’s tomorrow.

He Xiaopeng explicitly states that 2026 will be a watershed year for XPeng’s embodied intelligence, transitioning from “capable” to “mass-producible.” XPeng aims to become the world’s first tech company to fully mass-produce three cutting-edge AI businesses—robots, flying cars, and Robotaxi—in the same year.

Regarding Robotaxi, XPeng plans to pilot ride-hailing services this year, focusing on testing the technology, customer experience, and initial commercial cycles.

Notably, among the four new SUVs XPeng plans to launch, aside from the small-sized MONA series, the other three will be equipped with Robotaxi autonomous driving systems.

This design, based on a shared architecture for private cars and autonomous fleets, also facilitates scaling hardware costs, laying the groundwork for the “initial rapid growth phase” of Robotaxi in 2027-2028.

Currently, the split-type flying car “Land Carrier” has completed trial production and will enter mass production and delivery this year. From taking to the skies to delivering to customers, this marks a critical leap from concept to reality in low-altitude economy.

Meanwhile, He Xiaopeng also revealed that the highly anticipated new IRON robot will begin mass production by the end of the year, aiming to become the world’s first high-end humanoid robot with mass production capability. It will initially be deployed in scenarios such as guiding and shopping, with SDKs open to global developers.

In November last year, the IRON robot drew attention for its walking gait resembling that of a human, and a video of He Xiaopeng “self-affirming” after addressing doubts went viral online. This indirectly confirms that its technological accumulation has gained market recognition.

These three business lines may seem dispersed, but they are highly unified at their core—they are different carriers of physical AI, sharing the same underlying technology base. He Xiaopeng’s ambition is to transfer the perception, decision-making, and planning capabilities accumulated in the automotive field to bipedal robots and low-altitude flying devices, building a multi-terminal embodied intelligence ecosystem.

Of course, there is a huge gap between capable and mass-producible, involving engineering, supply chain, cost control, and regulatory approval. By 2026, the market will test whether XPeng can simultaneously cross these three hurdles.

03 A Year of Product Expansion and Globalization

Returning to specific automotive products, He Xiaopeng admits, “We have created a few blockbuster models before, but that’s not enough.” This signals a profound shift in XPeng’s product strategy—from relying on single blockbuster models to competing in every core niche with a “product matrix.”

2026 is defined as an unprecedented year of product launches, with intense offensive momentum. In the first quarter, three super-range extended models will be launched, fully implementing the dual-energy strategy. This marks XPeng’s official departure from relying solely on pure electric vehicles. The first model with super-range extension, the XPeng X9, delivered 5,424 units in December 2025 and 4,219 units in January 2026, initially validating the feasibility of the range-extended route in the high-end MPV market.

According to publicly available information, XPeng plans to release more than ten new models this year, including the 2026 versions of P7+ and G7 with super-range extension, G6, G9, and four new SUVs. Behind this product density is XPeng’s desire for scale effects. Only with a large enough sales base can it dilute the high costs of intelligent R&D and support a global channel and service network.

This year, XPeng will not only expand its product lineup but also sell these vehicles worldwide.

In 2025, XPeng’s overseas deliveries exceeded 45,000 units, a 96% increase, ranking first among Chinese new energy vehicle startups in overseas sales. However, He Xiaopeng is clearly not satisfied. In the letter, he set more ambitious goals: doubling overseas sales in 2026, reaching 1 million annual overseas sales by 2030, and contributing over 70% of profits.

He summarized the approach as eight words: “Sharp knives” to break through, “Red carpet” to attract talent.

“Sharp knives” refer to precise product and market choices. On the product side, XPeng will introduce six global models covering price ranges from 100,000 to 200,000 yuan; on the market side, it will focus on benchmark markets such as Israel, Germany, Norway, Thailand, and France, using these as hubs to radiate across Europe and Asia. Channel expansion plans include doubling overseas outlets to 680 this year.

“Red carpet” refers to delivery and service. He Xiaopeng emphasizes the importance of avoiding the pitfalls of global expansion—many automakers fail due to poor team building and capabilities, leading to quality and reputation issues. Therefore, he repeatedly stresses the need to solidify global supply, manufacturing, logistics, and spare parts services, achieving global coordination.

It’s worth noting that XPeng’s overseas efforts are no longer just about selling cars. With the P7+ completing trial production in Austria and soon delivering across 25 European countries, XPeng is working to replicate China’s intelligent experience abroad. Whether it can establish a differentiated advantage in Europe’s BBA-dominated market through intelligent driving will be a key test of XPeng’s technological export strength.

04 Challenges Continue

The core of strategic implementation is people. He Xiaopeng disclosed that by 2026, XPeng’s total global workforce will increase by 8,000, including 5,000 new campus recruits.

Regarding talent philosophy, he emphasizes two points: first, cultivating more “battle-hardened” and capable individuals on the global stage, encouraging more young talents to go overseas and fight; second, making AI Agents everyone’s “productivity extension,” from coding to training and generation, to improve efficiency and benefits.

This reflects a deepening of XPeng’s organizational thinking. As the company grows, simply appointing high-level executives from outside cannot solve cultural integration issues. He emphasizes that “future XPeng leaders will mostly come from internal growth and promotion.” This strategy of nurturing “internal talents” will be key to maintaining organizational stability and ensuring consistent execution worldwide.

While outlining a grand blueprint, XPeng also faces real financial challenges. Despite record sales in 2025, price competition in the automotive industry persists, and R&D investments in AI and robotics are at historic highs.

Sources also indicate that XPeng’s internal strategy meeting set a sales target of 550,000 to 600,000 units for 2026, with brokerages projecting annual sales of 600,000 units. This requires approximately 40% growth over 2025’s 429,400 units, a challenging goal amid intensifying competition in China.

From 2023 to 2025, XPeng has been “steady and far-reaching,” and in 2026, it aims for “steady progress and breakthrough.” The company is transitioning from survival to growth.

For He Xiaopeng, the 2026 track offers both unlimited opportunities and numerous obstacles. Whether XPeng can seize the “DeepSeek moment” in autonomous driving and turn its three frontier AI businesses from blueprints into products will determine if it can become a key player in the “new decade of physical AI.”

Risk Warning and Disclaimer

Market risks exist; investments should be cautious. This article does not constitute personal investment advice and does not consider individual user’s specific investment goals, financial situation, or needs. Users should consider whether any opinions, viewpoints, or conclusions herein are suitable for their particular circumstances. Invest at your own risk.