What’s Next For Xpeng After A Mixed Q2?

XPEV: XPeng logo
XPEV
XPeng

Xpeng stock (NYSE:XPEV) posted a mixed set of  Q2 2022 results last week, while also providing a weaker-than-expected delivery outlook for Q3. While revenue rose by 98% year-over-year to RMB 7,436.3 million (around $1.1 billion), net loss came in at a wider than expected RMB 2.7 billion (about $403 million) due to rising operating expenses and weaker gross margins. For perspective, automotive gross margins stood at 9.1% for Q2, compared to 11.0% for the same period of 2021 and 10.4% for Q1 2022, likely due to inflation and supply chain challenges. For the third quarter, Xpeng projects that it will deliver between 29,000 and 31,000 vehicles, marking a year-over-year increase of just between 13% to 21%, well below market expectations. This would also mark a sequential slowdown, as the company delivered about 34,422 vehicles in Q2. While supply issues could be partly responsible for the weak delivery outlook, there are also concerns regarding the Chinese economy with consumption also remaining weak. Xpeng’s rival Li Auto’s guidance for Q3 was also weaker than expected.

Xpeng stock has declined by about 4% over the last five trading days considering the mixed earnings and weak outlook. The stock also remains down by about 63% year-to-date, amid the broader market rotation away from growth stocks and concerns regarding the delisting of Chinese stocks from U.S. exchanges. However, there are a couple of factors that could help Xpeng stock in the near term. The company has an all-new SUV G9 which is likely to see deliveries begin in October, with two new models slated for 2023, one of which is likely to compete with Tesla’s popular Model Y SUV. The new launches could help drive growth for Xpeng. For perspective, the company anticipates that sales of the G9 will eventually exceed those of its P7 sedan (the P7 saw about 16,000 deliveries over Q2). Moreover, overall EV demand and favorable regulation in China remain a big tailwind for Chinese EV players. Between January and July, deliveries of new energy vehicles – a broad term that includes hybrids, EVs, and fuel cell vehicles – rose by over 2x versus last year.

Check out our analysis on Nio, Xpeng & Li Auto: How Do Chinese EV Stocks Compare? for more details on how Li Auto stock stacks up versus its peers Nio and Xpeng.

 Returns Sep 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 XPEV Return 0% -63% -57%
 S&P 500 Return 0% -17% 77%
 Trefis Multi-Strategy Portfolio 0% -16% 236%
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[1] Month-to-date and year-to-date as of 9/1/2022
[2] Cumulative total returns since the end of 2016

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