Shares of Chinese electric vehicle maker Xpeng Motors jumped 33.4% to $44.73 on Thursday after the company recorded positive results for the third quarter following bullish analyst comments. Now perceived as a strong challenger to Tesla, the EV upstart is gearing up for an ambitious goal: setting a benchmark for driver assistance technology in China that rivals will have to beat.

In the first report since its August debut on the New York Stock Exchange, the carmaker said it raked in RMB 1.99 billion ($293.1 million) in the third quarter of 2020, making for a 342% year-on-year surge in revenue, boosted by an uptick in vehicle deliveries. Quarterly deliveries grew 266% year-on-year to 8,578 units. That number included 6,210 P7 sedans—the company’s second mass production model directly targeting Tesla’s Model 3.

Xpeng CEO He Xiaopeng said during the earnings call that the company’s goal is to provide “the most advanced” assisted self-driving system in China. The dedication to in-house research and development on autonomous driving, he added, would be the key to build up core competencies and set it apart from its rivals. More notably, more than 98% of all the P7 vehicles delivered were equipped with hardware that supports software upgrades to the latest version of its advanced driver assistance system (ADAS) Xpilot.

The company’s quarterly losses grew to RMB 1.15 billion from RMB 776 million in 2019 but its gross margin shrunk to 4.6% from -10.1% for the same period. Operating expenses climbed 60% quarter-on-quarter, to RMB 1.8 billion. This is even more than the RMB 1.47 billion in expenses that Nio incurred in the second quarter. The rival Chinese EV maker has gained notoriety for its high cash-burning rate.

Boasting of being one of only two automakers in the world to have developed all core self-driving capabilities in-house, Xpeng is the only Chinese automaker taking the same approach as Tesla. However, the cost has been high and the payoff is uncertain, as it has taken much longer than initially promised by industry players to get mature self-driving technologies ready for the road.

How much of an advantage is Xpeng in targeting Tesla in a self-driving race? Here are some of the notable takeaways gleaned from analysts and Xpeng executives, including Wu Xinzhou, vice president of autonomous driving who recently spoke to TechNode.

Upcoming features

Xpeng is currently on track to release its semi-self-driving function, called Navigation Guide Pilot (NGP), in the beginning of next year. The feature enables a car to self-drive on urban highways, including navigating from a highway on-ramp to off-ramp, changing lanes, and taking exits.

The NGP technology is expected to handle real-world scenarios on the busy Chinese urban highways, taking a burden off the drivers, enabling users to remain engaged in driving but without their hands on the steering wheel all the time. NGP is similar to Tesla’s Navigate on Autopilot (NOA), that carmaker’s most advanced driver-assisted offering. Nio launched a similar feature in late September.

The company has set a goal to achieve “a single-digit number” of times per 1,000 kilometers (621 miles) on highways that drivers are required to take control of the vehicles, according to Wu.

On city roads, human intervention will still often be needed, as the company’s current ADAS features are unable to recognize traffic lights and handle requests such as lane merging. Still, a “future-proof” hardware and software architecture would allow the company to push forward more advanced features, Wu said.

Long-term benefits

In reply to an analyst during the earnings call, the CEO said the company plans to launch more driver-assistance features beginning in the second half of 2021. One of these features, called “autonomous following,” will be specifically designed for the complex traffic conditions in major Chinese cities. It will enable drivers to closely follow the cars in front of them to make sure that they are not left behind.

“ADAS is not going to be a major boost to overall sales in the short term. Most consumers are not overly focused on those functions if it’s not standard or part of a luxury package,” said Daniel J. Kollar, head of Automotive & Mobility Practice at consultancy Intralink Group, on Thursday. However, he said the internal focus on self-driving development likely would have long-term benefits as the industry moves towards commercialization of semi- and above-vehicle autonomy.

“China market consolidation will likely favor Tesla and a few surviving EV upstarts,” according to a Thursday report from Chinese online firm Tiger Brokers. The report noted, though, that the release of NGP and continuous roll-out of ADAS functions could “bring a high-margin software revenue stream throughout 2021.”

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Jill Shen

Jill Shen is Shanghai-based technology reporter. She covers Chinese mobility, autonomous vehicles, and electric cars. Connect with her via e-mail: jill.shen@technode.com or Twitter: @yushan_shen