Credit: Visual China

BEIJING, October 10 (TMTPost) – China’s smart-EV company XPeng Motors announced internally on Monday that the head of its procurement department had been suspended from his work, and several employees were cooperating with an investigation.

The suspension was part of an internal anti-corruption effort within XPeng’s supply chain, which involves multiple levels of the company. The police also joined the investigation.

The company stated that it was just conducting normal anti-corruption moves. It emphasized that this incident had a limited scope and would not affect the business or production sections.

At the end of 2022, XPeng restructured its supply chain business department, merging the Supply Chain Service Department, Marketing Service Procurement Department, and Parts Procurement Department into a single Procurement Department, led by Li Feng, the vice president of the company.

According to insiders, XPeng held a meeting on Monday, during which Li’s suspension was announced, while other named employees continued to cooperate with the investigation.

In June 2023, Li served as a representative of XPeng at public events such as the China Automobile Chongqing Forum and the World New Automotive Technology Cooperation Ecological Exhibition. At the end of June, China Society of Automotive Engineers was preparing to establish an Automotive Supply Chain Innovation Branch, and Li was listed as the vice chairman. However, he had rarely appeared in public since then.

In 2021, the automotive industry was hampered by chip shortages, power supply difficulties, and fragmented supply chains, leading to a general decline in production capacity. Insiders at XPeng explained that Li had led the supply chain team in coordinating component supplies and finding alternative solutions, which had earned him recognition within the company. In 2021, the company delivered a total of 98,200 vehicles, surpassing NIO's 91,100 vehicles and Li Auto's 90,500 vehicles.

However, individuals close to XPeng believed that the decision-making abilities of the company's supply chain team and their understanding of the industry were in question, leading to problems in product and sales businesses. For example, there were frequent changes in the supplier of power batteries, and the XPeng P7 had more than 20 different configuration combinations, making it challenging for even sales teams to keep track.

In 2023, XPeng launched two models, the P7i and G6, both of which faced delivery challenges in initial stages. The procurement team was partly responsible for this. For instance, the delivery time for the G6 model was once 12 weeks, much longer than competing models like the Tesla Model Y. XPeng explained in the car owners' community that the slow delivery was mainly due to inadequate stock from the laser radar supplier, and they had sent personnel to address the capacity issue.

Since 2023, XPeng has made cost reduction and efficiency improvement a key goal, with one of the most critical aspects being reducing the Bill of Material (BOM) costs.

On July 26, 2023, XPeng and Volkswagen Group (China) jointly announced a technology cooperation framework agreement, with Volkswagen investing $700 million in XPeng. XPeng's Chairman, He Xiaopeng, mentioned in interviews with media outlets on September 19 that Volkswagen had conducted due diligence on XPeng and was satisfied with the products but found that some components were too costly.

Insiders at XPeng stated that there were signs of internal anti-corruption in the supply chain as early as the beginning of 2023, with some individuals being taken away for investigation. The number of people involved in this incident is higher compared to then, and adjustments within the supply chain personnel appear to be unstoppable.