Chinese language EV firm Xpeng Motors (NYSE: XPEV) which posted a document internet lack of 2.8 billion yuan in Q2 2023 has mentioned that its partnership with auto large Volkswagen and continued price cuts would assist it slender losses.
Whereas Xpeng Motors posted revenues in step with analysts’ estimates, its Q2 losses have been wider than anticipated whereas its gross margins went into detrimental territory. At its peak, the corporate posted optimistic double-digit gross margins.
Nonetheless, the previous few quarters have been fairly troublesome for Xpeng Motors, and never solely have its deliveries sagged however its losses have additionally widened.
Xpeng Motors’ deliveries have fallen YoY in 2023
Its month-to-month deliveries have been under 10,000 in all of the months within the first half of 2023. It delivered 11,008 EVs in July which was 28% greater than the earlier month and the sixth consecutive month when its deliveries rose on a month-to-month foundation. Nonetheless, as has typically been the case over the previous few months, its deliveries fell YoY within the month.
It delivered 52,443 EVs within the first seven months of 2023 which took its cumulative deliveries to 303,521. Final yr, Xpeng Motors was forward of Li Auto by way of cumulative deliveries however after the luxurious efficiency this yr, the latter is now forward by over 100,000 models.
XPEV started delivering the G6 SUV in July
Xpeng Motors is banking on its G6 SUV – which it priced virtually 20% under Tesla Mannequin Y – to revive its fortunes. It delivered 3,900 G6 SUVs in July and added, “The sturdy gross sales momentum of G6 has led to a surge in showroom visits, which, in flip, has elevated prospects’ enthusiasm for different XPENG Good EV fashions and the superior good know-how outfitted inside.”
It emphasised, “The Firm is concentrated on ramping up the G6’s manufacturing with its manufacturing services working at its full load. The Firm additionally elevated devoted logistics assets to make sure the velocity of G6 deliveries.”
The corporate started G6 deliveries in July and throughout the firm’s Q2 earnings name, its CEO He Xiaopeng mentioned, “The G6 has turn out to be the dominant BEV mannequin within the 200,000 RMB to 300,000 RMB value market phase, turbocharging our gross sales development momentum.”
Xpeng Motors’ partnership with Volkswagen
Chinese language EV corporations are attracting the eye of world traders. In June, CYVN Holdings L.L.C., an funding automobile majority owned by the Abu Dhabi Authorities invested round $740 million in NIO by buying newly issued shares.
Like Xpeng Motors, NIO’s deliveries additionally disenchanted within the first half of 2023 and its common month-to-month deliveries have been lower than 10,000.
In the meantime, final month, Volkswagen additionally introduced a $700 million funding in Xpeng Motors. Commenting on the partnership, Xiaopeng mentioned throughout the Q2 earnings name “We’ll frequently deepen our cooperation with the Volkswagen Group and construct stronger synergies within the next-generation EV platforms, software program applied sciences, and provide chain capabilities, sharing economies of scale.”
Brian Gu, vice chairman and co-president of XPEV reiterated comparable views throughout an interview with CNBC and mentioned, “With the Volkswagen settlement, we additionally anticipate significant contribution to our backside line beginning subsequent yr. In order that’s additionally one other device we will use to extend our profitability.”
XPEV expects its losses to slender
Whereas Xpeng Motors posted its biggest-ever loss in Q2, it expressed optimism that not solely will it submit optimistic gross earnings in This fall but in addition generate optimistic working money flows in that quarter.
Gu mentioned, “With the intention to acquire higher profitability, we even have endeavor to spend so much of time on price chopping. Later subsequent yr, we count on our complete automobile BOM [bill of materials] prices to be diminished by as much as 25%. That can give us a giant device to extend profitability as nicely.”
He added, “From an expense perspective, we went by a really vital enterprise reorganization in addition to adjustments that we’ve made. We begin to see the regaining of the expansion momentum that we’ve in our enterprise.”
China EV demand
There have been considerations over EV demand in China amid the worsening financial slowdown within the nation. Most brokerages now count on the nation’s GDP development to be lower than 5% in 2023 amid a sputtering financial rebound.
Tesla by the way lowered automobile costs in China final week in an obvious bid to extend gross sales. In the course of the Q2 earnings name, Xpeng was considerably dismissive of the value conflict and mentioned that its merchandise are competitively priced.
Gu can also be bullish on the demand surroundings in China and mentioned, “The demand facet really stays fairly sturdy. I believe it continues to develop regardless of the financial backdrop.” He nonetheless cautioned, “However the identical time, the competitors has intensified within the first half, with extra gamers launching extra new fashions and being very aggressive on value competitors.”
The value conflict may additionally take a toll on startup EV corporations virtually all of that are in any case battling perennial losses. Even Ford scaled again its bold EV manufacturing targets amid the brutal value conflict and now expects to hit a manufacturing objective of 600,000 models by 2024 as a substitute of 2023.
Analysts on Xpeng Motors’ inventory
In the meantime, at the same time as Xpeng Motors inventory has come off its 2023 highs, it’s up handsomely for the yr and a few brokerages see the inventory working greater from these ranges. BofA upgraded the inventory from impartial to purchase whereas elevating its goal value from $16.30 to $22.
Jefferies analyst Johnson Wan additionally upgraded the inventory to a purchase final month and mentioned, “Harvest season for Xpeng’s AD (autonomous driving) initiatives has simply began.”
Wan who now has a $25.30 goal value for XPEV pressured that the partnership between Xpeng Motors and Volkswagen alerts “the beginning of China [original equipment manufacturers] exporting applied sciences to international gamers [and] will assist Xpeng to extend its model picture globally.”
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