Prepared remarks
Hello, ladies and gentlemen, thank you for standing by for the First Quarter 2026 Earnings Conference Call for XPeng Inc. Today's conference call is being recorded. I will now turn the call over to your host, Mr. Alex Xie, Head of Investor Relations and Capital Markets of the company. Please go ahead, Alex.
Thank you. Hello, everyone, and welcome to XPeng's First Quarter 2026 Earnings Conference Call. Our financial and operating results were issued by newswire services earlier today and are available online. You can also view the earnings press release by visiting the IR section of our website at ir.xpeng.com. Participants on today's call from our management will include Co-Founder, Chairman and CEO, Mr. He Xiaopeng; Vice Chairman and President, Dr. Brian Gu; Vice President, Mr. Charles Zhang; Vice President of Finance and Accounting, Mr. James Wu; and myself. Management will begin with prepared remarks, and the call will conclude with a Q&A session. A webcast replay of this call will be available on the IR section of our website. Before we continue, please note that today's discussion will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's results may be materially different from those currently expected. Certain information regarding these and other risks and uncertainties is included in the relevant public filings of the company as filed with the U.S. Securities and Exchange Commission. The company does not assume any obligation to update any forward-looking statements, except as required under applicable law. Please also note that XPeng's earnings press release and this conference call include the disclosure of unaudited GAAP financials as well as unaudited non-GAAP financial measures. XPeng's earnings press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited GAAP measures. I will now turn the call over to our Co-Founder, Chairman and CEO, Mr. He Xiaopeng. Please go ahead.
Hello, everyone. In the first quarter of 2026, we formally changed our official Chinese name from Xpeng Motor to Xpeng Group—reflecting Xpeng's transformation from a smart EV company to a physical AI company. Within the Xpeng Group ecosystem, our smart EV business will drive rapid growth while consistently contributing substantial profitability and robust cash flow. Today, physical AI applications stand on the cusp of transforming from research and limited deployment into mass production at scale. We have proven that scaling laws hold true in both autonomous driving and robotics, making the path to breaking technological ceilings through accelerated R&D investment and focused execution. That is why, at this pivotal moment, we are firmly focusing on physical AI and increasing R&D investment in AI. I believe physical AI applications represent one of the most significant global strategic opportunities of the next decade. This year, I'll lead the team to bring robotaxis and humanoid robots into mass production while also building the commercial ecosystem around them. Our goal is to turn our leadership in physical AI technologies, including our next-generation intelligent assisted driving systems, into a powerful new engine for revenue and profit growth and ultimately create substantial commercial value. In the first quarter, amid broad market volatility in China's domestic new energy vehicle market, we delivered a total of 62,680 vehicles. Even in a market downturn, our focus extends beyond scale. We also placed greater emphasis on balancing delivery volume with operating quality, maintaining a long-term perspective. I'm very confident that deliveries will grow substantially quarter-over-quarter in each of the remaining quarters this year. I expect Q2 deliveries to reach between 100,000 and 106,000 units, reflecting quarter-over-quarter growth of over 60%. Starting with the GX, we plan to launch and begin deliveries of all new SUV models within the next six months. These models have been defined and designed from day one as global vehicles. I believe XPeng is entering the strongest delivery growth trajectory in our history. In April 2026, we launched the 2026 XPeng M03, including a new MAX version powered by our Turing AI SoC and an Ultra SE version supporting BLA. This also marks the completion of the Turing AI SoC upgrade across our entire model lineup. Through our four in-house R&D capabilities from ASIC to software to system integration, we have made advanced computing power and technology more accessible. As a result, more than 85% of M03's customers chose the MAX or Ultra SE versions. The M03 has remained China's top-selling A-class pure electric sedan for 19 consecutive months. With its leading technology and stylish design rarely seen in the A-class segment, M03 has become the brand of choice for young users. We're confident that the M03 lineup will continue to achieve sustained success not only in China but also in overseas markets. On May 20, we launched the GX, a flagship model built for the L4 era. It is also China's first pre-installed, mass-produced global taxi-capable model with full hardware redundancy, representing a new starting point for us to continuously expand our share in the SUV market. Among the initial firm orders for the GX, the Ultra flagship trim priced above RMB 350,000 accounted for over 80%, making the GX one of the most sought-after products in the premium luxury vehicle market. The GX gives us an opportunity to redefine luxury: not only by design, but more importantly, by its leading technology and ultimate safety standards, setting a new benchmark for tech-defined luxury. We are making every effort to work with our supply chain partners to ramp up GX production capacity and deliver vehicles to customers sooner. The three new models launching in the second half of this year will all be equipped with Turing SoC-powered BLA 2.0, featuring single-vehicle-level energy capabilities and will be launched for global markets. With deliveries of the GX and the upcoming three new models ramping up, I'm confident that Xpeng Group's quarterly delivery volume will grow significantly quarter-over-quarter. The success of GX is a key step in elevating the Xpeng Group brands. In the second half of this year, we'll build on this momentum by launching a series of technology products at high price points, including humanoid robots and flying devices, further strengthening our brand equity and profitability. In 2026, we're accelerating international expansion on the back of a growing lineup of high-quality technology-led products and deepening localized operations. The M7 overseas delivery launch in April pushed our monthly international deliveries above 6,000 units for the first time. Starting in Q2, international revenue is expected to exceed 20% of total revenue. In the second half of this year, we plan to introduce four models for global markets, starting with the GX. Every upcoming XPeng model will be built as a global vehicle. Our target is to achieve sustained monthly overseas deliveries of over 10,000 units in the fourth quarter and to more than double full-year overseas deliveries. By embedding international market certification requirements early in the vehicle development process, we will significantly shorten the time gap between domestic and overseas launches and accelerate our overseas sales momentum. Our goal is to be recognized as a company committed to long-term localized operations in every market we operate in, building stronger ties with customers and partners across each region. To that end, we have established three localized production bases overseas since last year, and our Munich R&D center has become our fastest-growing research hub. In April, ADAS mileage penetration on BLA 2.0-equipped XPeng vehicles surpassed 50% for the first time, signaling that advanced intelligent driving is becoming a must-have feature. BLA 2.0, with its generational leap in intelligent driving, has become a key reason customers choose XPeng, creating a strong and lasting user mindshare in the market. The success of BLA 2.0 also reinforces our belief that scaling data and model parameters can drive meaningful breakthroughs in real-world AI capabilities, strengthening our conviction in the scaling law for physical AI. We're set to accelerate our investment in scaling up. With the upcoming release scheduled for Q3 this year, we will substantially elevate the upper limit of our model performance, further widening our lead in the industry. BLA 2.0 features a high capability ceiling and, when combined with our HD Map, offers exceptional ability to generalize, enabling rapid deployment across overseas markets while supporting pre-installed mass-produced robotaxis at scale. Our goal is to become the undisputed #1 in the domestic market and take a critical step towards true global leadership in L4 autonomous driving, including robotaxis. I'm pleased to see the accelerated rollout of the unified ADAS regulatory framework, with Europe—our most important international market—now beginning to open certification pathways for high-level ADAS. BLA 2.0 is currently being tested in Europe, and we hope to receive regulatory approval in multiple countries next year, allowing us to deliver the technology to overseas customers and achieve global generalization of BLA 2.0. Our recent research shows that global user demand for advanced assisted driving systems (BLA) and full-scenario multilingual conversational systems (VML) is far stronger than we had anticipated. In the second half of 2026, XPeng will lead and accelerate the intelligent transformation of China's automotive exports. In the process, I see substantial commercial opportunities emerging on both the B2B and B2C fronts. The GX's full redundancy hardware and software are decoupled from the vehicle platform, making them deployable across our entire lineup, including the M03 series. I believe our robotaxi offering has a clear edge over incumbent global taxi companies in terms of generalization ability, cost efficiency and scalability. These advantages position us to build a multi-stakeholder ecosystem where operating partners and XPeng work together to create and share commercial value. Following the overseas rollout of BLA 2.0, we will actively pursue bringing XPeng's cost-effective global testing evolutions to overseas and domestic markets. The software and hardware development for our mass-production humanoid robot is progressing smoothly, and it's about to enter the ETA software-hardware integration stage. The mass-production version of the robot will be built to automotive-grade safety and reliability standards, and many of our existing automotive supply chain partners have also become component partners or suppliers for the robot. We have also recently completed development of our proprietary next-generation dexterous arm, which is significantly more agile and substantially lowers costs. We have built a multidimensional data system to train the robot and scale models, with our training data scaling rapidly and outcomes improving significantly. XPeng is the only robotics company in China with a full set of in-house R&D capabilities spanning both hardware and software—from SoCs to physical AI foundation models, data generation to pre-training and fine-tuning, to the robot's hands and next-generation motion control, to perception and planning. Through deep in-house software and hardware R&D and cross-domain innovation, the robot will deliver a more refined design, higher quality and more comprehensive capabilities. I look forward to showcasing the next-generation arm in the third quarter, featuring multi-lingual communication, human-like full-body motion and gradually autonomous execution of professional tasks. We are targeting to achieve mass production of the robot by year-end with initial trial commercial deployments in experience centers, followed by commercial customer deliveries in China and overseas next year. I believe that once humanoid robots reach mass production, the data flywheel will drive technology iteration and sales growth at a pace likely to outstrip what we saw in EVs. Starting next year, revenues from humanoid robot hardware and AI models are expected to emerge as a key driver for revenue and growth for Xpeng Group. Xpeng is now fully committed to advancing the mass production and global expansion of three physical AI applications: BLA 2.0, robotaxis and humanoid robots. We firmly believe these three areas present enormous potential in terms of both commercial scale and investment returns. Looking at our roadmap, the B2B market will be the first to take off, while international markets will generate greater commercial returns than domestic markets. Backed by the deep experience we've gained through our partnership with Volkswagen, along with business models proven through mass production, Xpeng is well positioned to execute this next phase of growth. We are making the large-scale commercialization of physical AI a company-wide strategic priority and will move decisively towards large-scale deployment. For the second quarter of 2026, we expect deliveries of 100,000 to 106,000 units, up 59.5% to 69.1% quarter-over-quarter with revenue of RMB 19.6 billion to RMB 20.8 billion, up 50.4% to 59.6% quarter-over-quarter. Having passed the seasonal trough, we are entering a period of strong growth driven by four new models, increasing production capacity and expanding international business. In the third and fourth quarters, we'll continuously strive for higher sales targets, and our operational quality will improve significantly. Our supplier payment terms remain at an industry-leading level, gross margins demonstrate strong resilience against cost pressures, and economies of scale in our EV business continue to strengthen. I expect Xpeng Group to build an entirely new business model anchored by our leadership in physical AI technology with scale and network effects. Both Xpeng vehicles, robotaxis and humanoids will become highly differentiated physical AI agents. Moving forward, both hardware sales scale and recurring AI model revenue are poised for high-speed expansion, unlocking immense returns on our AI R&D capital. Thank you, everyone. With that, I'll now turn the call over to our VP of Finance, James Wu, who will walk you through our financial performance for the first quarter of 2026.
Thank you, Xiaopeng. Now let me provide a brief overview of our financial results for the first quarter of 2026. I'll reference RMB only in my discussion today, unless otherwise stated. Our total revenues were RMB 13.03 billion for the first quarter of 2026, a decrease of 17.6% year-over-year and a decrease of 41.4% quarter-over-quarter. Revenues from vehicle sales were RMB 11.00 billion for the first quarter of 2026, a decrease of 23.5% year-over-year and a decrease of 42.3% quarter-over-quarter. The year-over-year and quarter-over-quarter decreases were mainly attributable to lower vehicle deliveries. Revenues from services and others were RMB 2.03 billion for the first quarter of 2026, representing an increase of 41.2% year-over-year and a decrease of 36.1% quarter-over-quarter. The year-over-year increase was primarily attributable to increased revenues from technical R&D services and parts and accessories sales. The quarter-over-quarter decrease was primarily due to the reduction of technical R&D services revenues following a significant milestone catch-up in the prior quarter as well as no revenue contribution from carbon credit trading in the current quarter. Gross margin was 20.6% for the first quarter of 2026 compared with 15.6% for the same period of 2025 and 21.3% for the fourth quarter of 2025. The vehicle margin was 12.1% for the first quarter of 2026 compared with 10.5% for the same period of 2025 and 13.0% for the fourth quarter of 2025. The year-over-year increase was primarily attributable to cost reduction and improvement in product mix of M03. The quarter-over-quarter decrease was due to higher unit vehicle costs resulting from increased memory chip and battery-related costs. R&D expenses were RMB 2.91 billion for the first quarter of 2026, representing an increase of 46.8% year-over-year and an increase of 1.1% quarter-over-quarter. The year-over-year increase was mainly due to higher expenses related to the development of new vehicle models and AI-related technologies as the company expanded its product portfolio to support future growth. SG&A expenses were RMB 1.88 billion for the first quarter of 2026, representing a decrease of 3.2% year-over-year and a decrease of 32.5% quarter-over-quarter. The year-over-year and quarter-over-quarter decreases were primarily due to lower commissions to franchise stores. As a result of the foregoing, loss from operations was RMB 1.87 billion for the first quarter of 2026 compared with loss from operations of RMB 1.04 billion year-over-year and RMB 0.04 billion quarter-over-quarter. Net loss was RMB 1.78 billion for the first quarter of 2026 compared with net loss of RMB 0.66 billion year-over-year and net profit of RMB 0.38 billion quarter-over-quarter. As of March 31, 2026, our cash position was RMB 42.09 billion. To be mindful of the length of our earnings call, I would encourage listeners to refer to our earnings press release for more details on first quarter 2026 financial results. This concludes our prepared remarks. We'll now open the call to questions. Operator, please go ahead.
Questions and answers
Your first question comes from Tim Hsiao with Morgan Stanley.
My first question is about the GX because we noticed the new model has been selling very well since its launch on May 20. Could management share the current order book, your steady-state sales volume target and how we should think about the vehicle gross margin?
Thank you for the question. To be honest, the performance of the GX is above our expectation. It's been performing really well. We also observed some interesting data regarding the sales numbers of GX. Currently, if you look at the ultra flagship version right now, the lead time has passed 30 weeks, and even under the expectation of converting more to the auto version, it's still growing very, very fast. On the other hand, our flagship model with initial orders over 80% of the total orders continues to grow in the mix as well. We also observed something very interesting: for example, the MAX version is right now less than 5% of the mix, which is a little bit lower than our expectation. The extended-range version initially was less popular than our BEV variant but the EREV is approaching the level of BEV popularity, especially with our increased promotion and marketing campaigns in the western and northern parts of China, which is very promising. We definitely have high hopes for GX to be one of the top-selling vehicles in the above-RMB 300,000 price range in the high-end luxury segment. We are working very closely with our supply chain partners to support capacity ramp-up, and we will ensure top quality products and top quality service and after-sales support to sustain GX deliveries. Our priority right now is not only about the deliveries of the product, but also the sustainability of those deliveries. With GX being a flagship model, obviously the gross profit margin of GX is quite good. As I mentioned earlier, within the GX lineup, one SKU is performing with a lower gross margin than our expectation, but the majority of GX SKUs are actually delivering higher-than-expected gross margin performance. I also would like to add that starting this year, all of our new vehicles—when it comes to configuration and pricing—will be considered for their commercial value. Commercial considerations will be one of our key priorities starting this year. We are looking for long-term sustainable sales performance, rather than having a big beginning followed by diminishing sales. So we're looking for better quality in terms of product planning and the modular management of the whole supply chain to secure supply and production capacity ramp-up to support vehicle deliveries. So starting with GX we are expecting to achieve a better balance between commercial value, sales, and long-term stable demand. Thank you.
My second question is about robotaxi. Could you please update us on your domestic operations and overseas expansion plans? Has the recent regulatory tightening in China had any adverse impact to the progress? And how do you view the impact of that on the robotaxi business and on passenger vehicle sales?
Thank you for the question, and thank you for mentioning the recent tightening of autonomous vehicle regulation in China. However, it hasn't adversely affected our rhythm of development yet. From our perspective, after 2028 we're going to see a huge commercial opportunity for robotaxis. Right now, we are doing step-by-step preparation for that opportunity both in China and internationally with BLA 2.0. We are confident that we can achieve success. In China, we are conducting rapid R&D and retaining our current vehicle models. In 2027, we're going to launch an economy car model to demonstrate and validate how to start the robotaxi business model in China. We are sure that we have the capability to achieve a high level of success. I want to clarify that with Xpeng, first of all, we want to focus on the products; we can take a technology licensing fee and work with operational partners. We are not going to directly operate the robotaxi fleets ourselves. Hence, we expect to have many domestic and international partners operating robotaxi services. We will work not only in China but also globally because we believe global robotaxi has significant commercial potential. Regarding the impact of our B2B robotaxi efforts on our B2C business: we believe that current testing, R&D and experimentation on robotaxi actually have a positive impact on our B2C business because our BLA models will offer intelligent driving assistance strategies—such as different driving modes and reduced human intervention modes—that can be transferred to consumer products. We believe the market will diversify, and policies and regulations will evolve, creating distinct B2B and B2C market segments. That is our expectation for the future.
Your next question comes from Y.C. Lai with JPMorgan.
My first question is about BLA 2.0 and medium- and long-term strategy, including production roadmap and VLA. I wonder if Chairman can also share with us the major change and advantage that we can anticipate from here. My second question is related to the robot in terms of cost advantage compared with our competitors and the 2027 plans to export robots to overseas markets. Can you also share more about that long-term strategy?
Thank you. I believe that within 2026, Xpeng's BLA and VML capability is going to experience two key development phases. The first phase will happen in Q3, around August. During this period, BLA will have its second version, which will be smarter, more communicative and will have better generalization capability with reduced human takeover or intervention. Whereas in the past, BLA 1.0 mainly focused on basic safety and engineering experience and we were not able to significantly increase the user-experience capability, by August and Q3 this year we are expecting significant performance improvements. With the combination of BLA and VML, we're expecting not just ADAS capabilities, but also language communication capability approaching a Butler-like experience. We are going to achieve gradual implementation through OTA releases in August and additional OTAs at the end of this year. With continued R&D development, we believe we can achieve L4 software capability on L2 hardware in the future, and by that time we expect to see tremendous changes in business models across the ecosystem. We are actively working on this and are not discussing all details today. Regarding humanoid robots and cost advantages: we encountered many differences between mass-producing humanoid robots and producing EVs, especially in aspects like safety, reliability, maintainability and supply chain stability. Many existing products in the market are consumer-grade, whereas we aim for automotive-grade quality and reliability. Many competitors have not fully considered supply chain capabilities needed for mass production. Questions such as whether compute runs locally or on the cloud impact privacy, safety and data consumption. Since early 2025 we have designed for these considerations, building a full-stack hardware and software capability. We develop many components in-house to secure supply and scale. Today, the cost structure of humanoid robots is still similar to that of a car, but we believe we can drive down costs over time. Robots are designed as global products from day one, and we expect stronger commercial potential overseas where payback periods for robotic automation can be shorter. We have prepared for hardware, software and data privacy regulatory requirements in our design. For our BLA models, we estimate high compute usage, which impacts how much computation is done locally versus on cloud. Our humanoid robots have been designed for global deployment since day one, and we expect to see more international progress as our domestic R&D continues to evolve.
Your next question comes from Tina Hou with Goldman Sachs.
My first question is regarding our robotaxi business. I'm wondering what is our plan in terms of expanding to more cities outside Guangzhou and the timing of that? Also, what has been the progress of our licensing approvals? My second question is regarding our second-quarter gross margin. On the one hand, we have higher volume as well as better model mix with GX. On the other hand, we have some headwind from higher raw material and some component costs. What would be the guidance for vehicle gross margin as well as company-level gross margin?
Thank you, Tina. Our robotaxi testing and exploration is currently focused in Guangzhou, where we already obtained the necessary license. Our plan is to test here in Guangzhou, and after we successfully develop the technology, product and business model, we will expand and work with local partners across China and outside of China. We have received many inquiries and strong interest from potential business partners both domestically and internationally who are closely watching our progress. After 2027, when we launch our new economy model for robotaxis and can offer better total solutions, we believe we can increase our commercialization capability for robotaxis both in China and abroad.
Yes, Tina, this is James. As you can see, in the first quarter our total gross profit was pretty close to the prior quarter, Q4 of last year. We saw some level of cost increase, as mentioned earlier, around memory chip cost increases as well as battery raw material cost. That impacted Q1 and we expect those pressures to continue into the following quarters this year. You mentioned that we have launched the GX, the new SUV, in Q2 and will start deliveries in the following quarters. The GX gross profit is the highest in our portfolio. From a product mix perspective, we'll start to see a better mix in Q2 as well as in the second half of the year. Considering these factors, we expect Q2 total gross margin to be around the same level as Q1.
Your next question comes from Ming-Hsun Lee with Bank of America.
Could you elaborate more about your long-term overseas market growth drivers, especially for your overseas production profitability versus your export business model?
First of all, overseas market expansion is one of our four most important strategies. In the coming five years, we expect maybe 50% of our revenue and profit to come from overseas markets. As we approach the second half of the year with the launch of our four new models, we believe we will be able to tap into overseas markets even more in 2027 and 2028. In the past, we mainly had two models serving international markets; going forward, with more global vehicles and our robotics strategy, overseas markets remain an important component of our roadmap. We have been investing in capability development—hardware, software, distribution channels, service networks and localized charging and supercharging capabilities—for several years. We believe we are well positioned to capture overseas market growth in the coming years.
Let me add here. If you look at international sales volume contribution in the latest month, it's already close to 20% of our volume. Last year, international sales were roughly 10% of our global volumes, so you can see a significant increase in the proportion represented by international sales. Second, the profitability of our international vehicle sales is significantly better, even with some tariff issues and cost increases this year. The international business generates significantly better gross profit and net profit contribution to our bottom line. The new models for global markets have yet to be fully launched, so we anticipate momentum will carry through the year. We believe contributions at the 30% level can be consistent throughout the year, and we expect China to also see significant growth. In terms of tariffs and other challenges, we are increasing local investment. I'm currently with our partner in Austria to make sure we have capacity to tackle expected growth for Europe as well as global markets. So I think it will be a very exciting contributor to our overall momentum and profitability.
Your next question comes from Ping Le Wu with Citic Securities.
My first question is regarding localization of production. We've seen significant progress on export and overseas production localization this year. Could you share more color on what percentage of cost for overseas market will be produced locally this year and next year? Does the localization rate vary materially by region? My second question is about humanoid robots. Management mentioned mass production by year-end and initial commercial deployment in first quarter 2027. Could you give a few specific examples of what functions the robot will perform in experience centers, retail stores and in client applications? Additionally, could you elaborate on the specific external corporate application scenarios and what's your pricing strategy?
On localization and production, right now we have two plants in Southeast Asia—in Indonesia and Malaysia—mostly addressing local demand. We also have the partnership with Magna in Austria, where we manufacture vehicles for the European market. All three of these manufacturing locations will see increased capacity this year, and the new models will be produced in those local markets. For Southeast Asian countries, production is mostly for the local market. Austria is primarily for Europe, and I expect the majority of our European sales will have local manufacturing. Elsewhere we don't have manufacturing facilities yet, so we will continue with exports for now. As we increase volume and market share in these large markets, we are actively looking at ways to increase production capacity and localization to satisfy local content rules and deepen local production. Localization rates will therefore vary by region depending on demand and local partnerships.
Thank you for the question about humanoid robots. Our humanoid robots are designed to interact with humans in environments like stores and dealerships. When we consider business models and application scenarios, one initial responsibility could be assisting customers or guiding shoppers. For example, in our offline stores or dealerships, robots can introduce cars and products, provide basic product introduction and information, and perform high-efficiency tasks that complement human sales staff. As capability becomes more sophisticated, we can open up more opportunities for collaboration with ecosystem partners who have different domain-specific requirements. We can create specialized models for different scenarios—retail, hospitality, logistics, and other service roles. In retail, robots could act as greeters, product guides, or check-out assistants for higher-efficiency customer service. Regarding commercialization and pricing, we're still discussing the exact models. Even though the mechanical structure of a humanoid robot shares some similarities with cars, the ASP for a humanoid robot may be higher initially, and the hardware margin could be attractive. However, there's also significant commercial value in software, cloud compute and recurring model usage revenue. From a buyer's perspective, payback period is critical. Overseas markets may offer shorter payback periods for automation than the domestic market, making adoption more economical abroad in some segments. We'll continue to refine the pricing and commercialization strategy as we approach mass production and initial deployments.
Your next question comes from Yuqian Ding with HSBC.
I have two questions: one on the mid- to long-term strategy and second on near-term financials. First, we noticed the company changed the name to Xpeng Group and it's shaping into a physical AI platform company. Can management share more about the strategic thinking for business model evolution in the mid- to long run? How do you compartmentalize the strategic divisions and commercialization timeline, and how do you expect the revenue structure to change over time? Second, can management share the trend for services revenue this year and whether it's possible to expand service partnerships from China to overseas?
Thank you for the broad question. Right now, our main revenue stream definitely comes from hardware—vehicle sales—and from our ecosystem. Globally, only a few car manufacturers can build a software platform and form network effects based on hardware sales. The network effects include software fees and lateral network effects, which we have the potential to achieve. Going forward, we believe intelligent agents will produce network effects and scale effects, interacting together within Xpeng to enhance our competitive moat. In the short to medium term, we will prioritize scale, brand equity and improving gross profit margins. With globalization and improved gross margins, we expect positive effects on overall profitability. Adequate profitability will support R&D investment, which will bring new technological competitiveness and convert into value creation for the company. We expect a gradual evolution from predominantly hardware revenue to a more balanced mix including recurring software and service revenue as our AI capabilities commercialize.
This is Charles. We continue to maintain the guidance that total revenue generated from technology and services and IP licensing in 2026 will be comparable to that of 2025. Starting in Q2, we will begin delivery of the Turing SoC to our partner Volkswagen at scale, and we continue to believe that commercialization of technology through such collaborations is a very attractive business opportunity. Given all the proprietary technology we have in-house, we are open to expanding commercialization opportunities for our technologies and scaling service and licensing revenues, including exploring expansion of those partnerships outside China.
Thank you. As there are no further questions, now I'd like to turn the call back over to the company for closing remarks.
Okay. Thank you once again for joining us today. If you have further questions, please feel free to contact Xpeng's Investor Relations through the contact information provided on our website or through our investor communications contacts.
Thank you. This concludes today's conference call. You may now disconnect your lines.