On the evening of November 19, 2023, XPeng Motors, the Chinese electric vehicle manufacturer, released its third-quarter financial report, revealing both growth in revenue and an alarming increase in net lossThe company achieved a total revenue of 10.1 billion yuan (approximately $1.4 billion) in the third quarter, marking an impressive year-on-year growth of 18.4% and a quarter-on-quarter increase of 24.5%. Despite this growth, XPeng's net loss widened significantly to 1.81 billion yuan, accumulating to a staggering total loss of 4.46 billion yuan over the first nine months of the year.
In the aftermath of the earnings report, He Xiaopeng, the chairman of XPeng Motors, took to social media to reflect on the tumultuous last two years for the companyHe expressed a sense of cautious optimism, acknowledging the challenges faced during the "headwind" period but stating that they had not yet reached the "blue sea" stage in their business journey
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He called for continued efforts, adaptability, humility, and a steady focus on long-term goals, indicating a belief that a substantial breakthrough could be on the horizon, particularly in 2025.
During the earnings conference that evening, He further elaborated on the company's trajectoryHe characterized the past two years as a "stormy" period and presented the current year as a fresh start marking XPeng’s second decadeHe expressed confidence in the company entering a positive growth cycle aimed at achieving profitabilityAccording to He, XPeng is on track to surpass 30,000 units in monthly deliveries by November, with both the XPeng P7+ and the new MONA M03 model in full production modeHe set a target for the P7+ to reach over 10,000 units in monthly deliveries by December.
Industry insiders have indicated that XPeng's ability to reverse its losing streak and achieve profitability will heavily depend on the timely delivery of these new models, particularly the MONA M03 and the P7+.
Despite the robust revenue growth, the company is grappling with the ongoing challenge of widening losses
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The net loss reported in the third quarter represented a significant increase from the previous quarter, where losses amounted to 1.28 billion yuanAlthough XPeng touts its third-quarter report as one of the strongest yet, the reality of its net loss raises critical questions about the sustainability of its business model, especially given the cumulative loss for the year thus far.
A closer look at the figures reveals a 12.1% year-on-year increase in automotive sales revenue, which hit 8.8 billion yuanThe increase in revenue is attributed primarily to a surge in vehicle deliveries, with the third quarter seeing 46,533 units delivered — an increase of 16.3% compared to the same period last yearThe gross margin for the quarter reached 15.3%, reflecting a significant improvement compared to the previous year, transitioning from negative to positive territoryAutomotive gross margin stood at 8.6%.
When compared with some of its competitors, XPeng still lags behind in gross margin metrics
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Li Auto reported a gross margin of 21.5%, while Zeekr and Xiaomi auto reported 16% and 17.1% margins, respectivelyThis disparity indicates that while XPeng shows promise in terms of revenue and sales growth, it still faces significant hurdles in achieving a competitive gross margin.
Internally, XPeng is investing significantly in research and development, with expenditures reaching 1.63 billion yuan in the third quarter — a 25.1% increase year-on-year and an 11.3% increase quarter-on-quarterHe remarked that this investment is necessary to expand the product lineup and support future growth initiatives, including new model developments.
Looking ahead, He Xiaopeng has indicated that the next year will usher in a strong product cycleHe revealed plans to unveil multiple models equipped with advanced AI capabilities and enhanced autonomous driving functionalitiesBy 2025, XPeng aims to launch at least four new vehicles, including an extended-range version, alongside various facelifts of existing models.
The runway for XPeng's efforts intensifies in the fourth quarter
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The company has set ambitious goals, aiming for 87,000 to 91,000 deliveries during this periodThis is a crucial time as the market reacts to the launch of new models like the MONA M03, which is positioned in a more affordable segment priced between 110,000 and 150,000 yuan, while the P7+ is tagged at 186,800 to 198,800 yuan.
The pricing strategy aims to broaden XPeng's appeal and boost sales, especially given the notable success of the MONA M03. Following its launch in September, XPeng saw a remarkable uptick in delivery numbers, consistently hitting the 20,000 unit mark in both September and October, with the MONA M03 alone achieving over 10,000 deliveries in its first two months post-launch.
As of the third quarter, XPeng's total deliveries reached 46,500 units, marking a 16.3% increase and bringing total deliveries for the year to nearly 100,000 unitsThis puts them on track to achieve their annual goal of 280,000 units, but they are running behind the pace needed to meet this objective, with only 35% completion in the first three quarters.
With expectations high due to the momentum from the MONA M03 and the P7+, XPeng hopes to achieve an overall delivery total of around 189,600 units for the year, reflecting a substantial 17.2% to 24.1% growth in revenue compared to the previous year.
However, as demand surges, the delivery schedule for the MONA M03 has reportedly lengthened
As of November 19, data from XPeng's app indicated that the delivery timelines for its long-range version are now between 9 to 13 weeks, while the super-long-range variant ranges from 11 to 15 weeks.
Additionally, it was noted that He Xiaopeng addressed potential delivery delays for the MONA M03 at the launch event for the P7+, promising that production capacity would be increased by 30% to 40% during November and DecemberXPeng has previously encountered pushbacks on deliveries for the P5 and G6 models due to core components supply issues, raising further concerns about their ability to deliver on their commitments.
In sum, while XPeng Motors is experiencing significant operational adjustments and remarkable revenue growth, its struggle to maintain a balance between rapid expansion and financial pragmatism remains evidentWhether or not they can leverage the momentum from the MONA M03 and P7+ models to turn the tide on profitability and ensure timely deliveries will be pivotal in determining their roadmap to success in the fiercely competitive EV landscape.