Xpeng Inc. (NYSE:XPEV) is looking to expand its technology partnership with Volkswagen by pursuing similar deals with other automakers. The move follows a quarter in which services and other-business revenue nearly doubled, with the Volkswagen deal providing the key boost. However, the same results also highlighted growing pressure on the company's core vehicle business.
Its net loss nearly tripled year over year, while vehicle margin declined amid a product-generation transition. This leaves Xpeng with an increasingly attractive second source of revenue, while its primary car business is moving in the opposite direction and producing losses. Following the success of its Volkswagen partnership, the company is now seeking other automakers and suppliers that could use its EV platform, electric architecture, and software.
Volkswagen paid roughly $700 million for a 5% stake in Xpeng, giving it access to these technologies. To pursue similar opportunities, the company 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 businesses 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 another major growth opportunity, saying; 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. 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, which Xpeng attributed to its product-generation transition, against a backdrop of continued industry-wide competitive pressure. Xpeng's stock has also fallen roughly 47% this year, significantly more than BYD's 14% decline.
Shares have continued to struggle even after the company secured $900 million for its robotics business and reached a meaningful milestone in automated assembly. At the same time, Xpeng faces growing competition in humanoid robots from companies such as BYD and Li Auto, which are targeting the same opportunity. According to Insider Monkey's database, the number of hedge funds holding Xpeng decreased from 21 at the end of Q1 2026 to 19 at the end of Q2 2026.
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