Written by 1:07 pm Science & Technology Views: [tptn_views]

Xpeng shares drop 7% after the Chinese electric automobile maker posts a record quarterly loss

A Xpeng P7 electric automobile is on display through the 18th Guangzhou International Automobile Exhibition at China Import and Export Fair Complex on November 20, 2020 in Guangzhou, Guangdong Province of China.

VCG | Visual China Group | Getty Images

Xpeng on Friday reported a wider-than-expected loss within the second quarter, sending the Chinese electric automobile maker’s shares down greater than 7% in premarket U.S. trade.

The net loss was wider than the two.7 billion yuan ($370.7 million) loss reported for the second quarter of last 12 months. It was also the largest quarterly loss that Xpeng has posted since going public in August 2020.

Despite the hit on profit, the Chinese company’s second-quarter revenue met expectations.

Here’s how Xpeng did against Refinitiv consensus estimates for the second quarter:

  • Net loss: 2.8 billion yuan loss vs. 2.13 billion yuan loss expected
  • Revenue: 5.06 billion Chinese yuan ($693.7 million) vs. 5.06 billion yuan expected, representing a 31% year-on-year fall.

Xpeng also said its gross margin turned negative 3.9% compared with positive 10.9% through the same period of 2022.

The company is attempting to show across the business this 12 months, after a torrid 2022 during which its share price sank by greater than 80%.

Xpeng is working in a weak Chinese economy with depressed consumer spending, while at the identical time facing cut-throat competition in China from other upstarts like Nio and Li Auto, in addition to giants BYD and Tesla.

Competition remains to be ramping up, as a price competition develops on the planet’s second-largest economy. Tesla this week cut the worth of its Model Y and Model S cars and offered discounts on existing inventory of the Model S and Model X in China.

Xpeng said its vehicle margin was negative 8.6% within the second quarter, compared with positive 9.1% in the identical period of last 12 months. The company blamed this decline on “inventory write-downs and losses on inventory purchase commitments” related to its G3i vehicle, in addition to on increased sales promotions and on the expiry of Chinese electric vehicle subsidies.

Xpeng’s is hoping its latest automobile — the G6 Ultra Smart Coupe SUV — which was launched at the tip of the second quarter, will boost margins.

“With the G6 and other latest products accelerating sales growth, we expect gross margin to step by step get better while operating efficiency continues to enhance and free money flow to substantially improve,” Brian Gu, co-president of Xpeng, said within the Friday earnings press release.

During the same-day earnings call, Xpeng CEO He Xiaopeng said that the corporate is undergoing cost-saving initiatives across the business that ought to “substantially drive gross margin improvement in 2024.”

Gu said on the earnings call that Xpeng goals to interrupt even in 2025.

Xpeng forecasts deliveries to leap

Xpeng previously disclosed that it delivered 23,205 cars within the second quarter of 2023, logging a 27% quarter-on-quarter rise and beating its own forecast. In July, the Guangzhou-headquartered firm delivered 11,008 vehicles in July, up by 28% on the month.

That’s the sixth consecutive month of delivery growth, underscoring the early signs of a recovery, not less than for deliveries.

Xpeng said it expects vehicle deliveries to be between 39,000 and 41,000 within the third quarter, representing a year-over-year increase of roughly 31.9% to 38.7%. The figure would also sit higher than the deliveries recorded within the second quarter.

He said that deliveries of the G6 — a model of which Xpeng is seeking to boost production — will grow “significantly” in September. Factoring in sales of its other cars, He said the corporate goals to achieve “peak” monthly deliveries of 20,000 vehicles within the fourth quarter of the 12 months — which might put them at 60,000 cars, if that concentrate on is achieved.

The company forecast its revenue shall be between 8.5 billion yuan and 9 billion yuan within the third quarter, representing a year-over-year increase of around 24.6% to 31.9%.

Xpeng has also reorganized its management structure and experienced an overhaul over the past few months, in a bid to unlock growth.

Rising deliveries have given investors some confidence that a turnaround is underway, with Xpeng’s fill up by greater than 50% this 12 months.

The automaker has also got backing from German automobile giant Volkswagen, which invested $700 million in Xpeng last month, taking a 4.99% stake. The firms will jointly develop two electric vehicles for the Chinese market.

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