Xpeng (XPEV) Q2 2023 earnings report

The Xpeng P7 electric car is displayed at the 18th Guangzhou International Automobile Exhibition at the China Import and Export Exhibition Complex on November 20, 2020 in Guangzhou, Guangdong province of China.

VCG | Visual China Group | Getty Images

Xpeng On Friday, it reported a wider-than-expected second-quarter loss, sending shares of the Chinese electric car maker down more than 7% in US premarket trading.

The net loss was wider than the 2.7 billion yuan ($370.7 million) loss reported in the second quarter last year. It was also the biggest quarterly loss Xpeng has posted since going public in August 2020.

Despite the hit to profits, the Chinese company’s second-quarter earnings met expectations.

How Xpeng performed against Refinitiv consensus estimates for the second quarter:

  • Net loss: 2.8 billion yuan loss, expected 2.13 billion yuan loss
  • Revenue: 5.06 billion Chinese yuan ($693.7 million) versus expectations of 5.06 billion yuan, a 31% year-over-year decline.

Xpeng also said its gross margin was negative 3.9%, compared to positive 10.9% in the same period in 2022.

The company is trying to turn around this year after 2022, when its share price fell more than 80%.

Xpeng operates in a weak Chinese economy with weak consumer spending, but also faces stiff competition from other startups in China. Nio and Lee Autoas well as giants BYD and Tesla.

Competition is still intensifying as a price war develops in the world’s second-largest economy. Tesla cut the price of its Model Y and Model S vehicles this week and offered discounts on existing Model S and Model X inventory in China.

Xpeng said its auto margin was negative 8.6% in the second quarter, compared with positive 9.1% in the same period last year. The company attributed the decline to “inventory write-offs and losses on inventory purchase obligations” related to the G3i vehicle, as well as increased sales incentives and the end of Chinese electric vehicle subsidies.

Xpeng’s hopes that its latest vehicle, the G6 Ultra Smart Coupe SUV, launched at the end of the second quarter, will boost margins.

“With the G6 and other new products accelerating sales growth, we expect gross margin to gradually recover and operating efficiency to continue to improve and free cash flow to improve significantly,” Xpeng co-president Brian Gu said in Friday’s earnings press release.

Xpeng CEO He Xiaopeng said during an earnings call the same day that the company is implementing cost-saving initiatives across the business that “should significantly drive gross margin improvement in 2024.”

Xpeng aims to break even in 2025, Gu said on the earnings call.

Xpeng predicts a jump in shipments

Xpeng previously announced that it delivered 23,205 vehicles in the second quarter of 2023, up 27% quarter-over-quarter and beating its forecast. In July, the Guangzhou-based firm delivered 11,008 vehicles in July, up 28% month-on-month.

This is the sixth consecutive month that has highlighted the first signs of recovery, at least for deliveries.

Xpeng said it expects third-quarter vehicle deliveries to be between 39,000 and 41,000, an increase of about 31.9% to 38.7% year-on-year. This figure will be higher than the deliveries recorded in the second quarter.

He said shipments of the G6, the model Xpeng is looking to ramp up production, will increase “significantly” in September. Taking into account the sales of its other vehicles, it said the company aims to reach a “peak” of monthly deliveries of 20,000 vehicles in the fourth quarter of the year – if it hits that target, it will take them to 60,000 vehicles.

The company forecasts third-quarter revenue of between 8.5 billion yuan and 9 billion yuan, an increase of about 24.6% to 31.9% year-on-year.

Xpeng has also reorganized its management structure and undergone a major overhaul over the past few months to unlock growth.

Rising supplies have given investors some confidence that a turnaround is underway, with Xpeng shares up more than 50% this year.

The car manufacturer also received support from the German car giant Volkswagen, invested $700 million in Xpeng last month, taking a 4.99% stake. The companies will jointly develop two electric cars for the Chinese market.

Leave a Reply

%d bloggers like this: