Chinese electric-car maker Xpeng Inc. reported a wider-than-expected quarterly loss as it struggles to ramp up deliveries amid intense competition in the world’s biggest EV market.
(Bloomberg) — Chinese electric-car maker Xpeng Inc. reported a wider-than-expected quarterly loss as it struggles to ramp up deliveries amid intense competition in the world’s biggest EV market.
Guangzhou-based Xpeng posted a net loss of 2.8 billion yuan ($380 million) in the three months ended Jun. 30, according to a company statement Friday, more than the 2.1 billion yuan deficit estimated by analysts. It had a 1.77 billion-yuan loss in the same quarter a year ago.
The carmaker delivered 23,205 vehicles in the quarter, beating its original guidance of 21,000 to 22,000 units. While recording a quarter-over-quarter increase of 27%, the company’s deliveries dropped 33% from the same period a year ago. Revenue declined 32% to 5.06 billion yuan, which beat analysts’ forecast of 4.91 billion yuan.
Xpeng has worried financial markets with its sluggish sales and weak gross margins, which fell to as low as 1.7% in the first quarter of the year. The company was forced to delay its profitability target to 2025, and overhaul its internal management and product platforms as sales and shares plunged.
Shares of the company traded in the US pared a drop on Friday of as much as 9.2%, falling 5.7% to $14.75 as of 11 a.m. in New York. The stock is up about 48% so far this year.
It’s now betting on the G6, an intelligent sport utility vehicle that was launched in late June to take on Tesla’s most popular Model Y and win more market share.
The company looks to deliver between 39,000 and 41,000 vehicles in the three months ending Sept. 30, and post revenue between 8.5 billion and 9.0 billion yuan, a year-over-year increase of approximately 25% to 32%.
“With the G6 and other new products accelerating sales growth, we expect gross margin to gradually recover while operating efficiency continues to improve and free cash flow to substantially improve,” said Brian Gu, honorary vice chairman and co-president of Xpeng.
Xpeng expects overall cash flow from operations and gross margin to turn positive in the second half of 2023, Chief Executive Officer He Xiaopeng and James Wu, the vice president for finance, said on an earnings call Friday. It reported a gross margin of negative 3.9% in the second quarter, below analysts’ consensus estimate of 4.8%.
The recent investment of $700 million from Volkswagen AG is providing another boost. The German automaker will eventually hold a 4.99% stake in the company, and jointly develop two battery-electric vehicle models for sale in China under the Volkswagen brand. The collaboration will leverage the core competencies of both companies, using Xpeng’s G9 platform, connectivity and driving-assistance software.
“The tie-up helps confer confidence in and reflects the value of Xpeng’s EV platform and software technologies, and should put away any ‘going concern risk’ that some investors have for the company,” Sanford C. Bernstein analysts led by Eunice Lee wrote in a note.
But Tesla Inc. is adding to the pressure. It implemented two rounds of price cuts for some models in China this week, fueling concern about a rekindled price war that had shown signs of abating. Geely Automobile Holdings Ltd. also marked down the price of its signature model, the Zeekr 001, which together with Tesla’s Model Y rivals Xpeng’s G6.
(Updates with executive comments in eighth paragraph; Adds shares traded in New York.)
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