SUMMARY
- Xpeng faces a sharp 7% stock dip following an unexpected Q2 loss.
- A competitive market sees Xpeng's vehicle margins decline, yet hope remains with the new G6 model.
- Strong delivery numbers and Volkswagen's backing signal potential turnaround.
![broken image](http://custom-images.strikinglycdn.com/res/hrscywv4p/image/upload/c_limit,fl_lossy,h_9000,w_1200,f_auto,q_auto/9596329/406865_344324.jpeg)
Xpeng, a prominent Chinese electric vehicle player, recently announced a second-quarter loss that took the market by surprise, causing their shares to tumble over 7% in U.S. premarket trading.
This loss, to the tune of 2.8 billion yuan ($370.7 million), exceeded last year's Q2 loss and marked the most significant quarterly deficit since their public debut in August 2020. On the brighter side, the company's revenue for the quarter was on par with market predictions.
The competitive landscape in China's EV market isn't making things any easier for Xpeng. With giants like Tesla making aggressive moves like slashing prices and new entrants like Nio and Li Auto pushing boundaries, the battlefield is heated. This competition reflects in Xpeng’s vehicle margin, which took a dip to -8.6% in Q2, attributed to multiple factors such as reduced electric vehicle subsidies and increased promotional activities.
However, the company remains hopeful. Their new release, the G6 Ultra Smart Coupe SUV, is expected to bring a positive shift in margins. Xpeng's co-president, Brian Gu, expressed confidence in their sales growth, expecting improvements in both gross margin and operational efficiency. CEO He Xiaopeng echoed this sentiment, emphasizing cost-saving strategies aimed at significantly enhancing gross margins by 2024.
Despite the financial speed bumps, Xpeng’s delivery game seems strong. They've consistently improved delivery numbers over six months, with Q2 2023 witnessing 23,205 car deliveries, a notable 27% jump from the previous quarter. The momentum is anticipated to continue, with a projected surge of up to 38.7% year-on-year in the third quarter. The firm is particularly bullish on the G6 model, expecting a significant sales boost in September, aiming for an ambitious 60,000 cars delivered by year-end.
Revamped management, organizational shifts, and a 50% surge in their stock this year suggest a silver lining. Xpeng's trajectory is further bolstered by German heavyweight Volkswagen, which recently invested $700 million, acquiring a 4.99% stake, with plans to collaboratively roll out two EV models for the Chinese audience.
WOM Money Picks
Be a part of the winning team | 81% Success Rate.