The Xpeng P7 electric vehicle is displayed at the 18th Guangzhou International Automobile Exhibition at the China Import and Export Fair Complex in Guangzhou, Guangdong Province, China, Nov. 20, 2020.

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Xpeng A larger-than-expected second-quarter loss on Friday sent shares of the Chinese electric car maker down more than 7% in U.S. premarket trading.

The net loss was higher than the 2.7 billion yuan ($370.7 million) loss reported in the second quarter of last year. This is also the largest quarterly loss for Xiaopeng Motors since it went public in August 2020.

Despite the profit hit, the Chinese company’s second-quarter revenue met expectations.

The following is the performance expected by Xpeng Motors and Refinitiv in the second quarter:

  • Net loss: loss of 2.8 billion yuan vs expected loss of 2.13 billion yuan
  • Revenue: RMB 5.06 billion ($693.7 million), compared with expectations for RMB 5.06 billion, down 31% year-over-year.

Xiaopeng Motors also said that its gross profit margin turned from positive 10.9% in the same period in 2022 to negative 3.9%.

The company is trying to turn around its business this year after a tough 2022 in which its stock price will fall more than 80%.

Xpeng Motors is operating in a weak Chinese economy and low consumer spending, while facing stiff competition in China from other upstarts such as Nioh and ideal carAnd the giant BYD and tesla.

Competition is still heating up as a price war develops in the world’s second-largest economy. Tesla this week cut prices on its Model Y and Model S vehicles and offered discounts on existing Model S and Model X inventory in China.

Xpeng Motors said its auto margin was negative 8.6% in the second quarter, compared with a positive 9.1% in the same period last year. The company blamed the drop on “inventory write-downs and loss of inventory purchase commitments” related to its G3i car, as well as increased promotional activities and the expiry of EV subsidies in China.

Xpeng is hoping that its latest model, the G6 Ultra Smart Coupe SUV, launched at the end of the second quarter, will boost margins.

Gu Brian, co-president of Xiaopeng Motors, said at Friday’s financial report conference: “With the accelerated growth of new product sales such as the G6, we expect gross margins to gradually recover, operating efficiency to continue to improve, and free cash flow to improve significantly. .”

In an earnings conference call on the same day, Xpeng Motors CEO He Xiaopeng said the company is taking cost-saving initiatives across its business, which will “significantly drive gross margin improvement in 2024.”

Gu said on the earnings call that Xpeng aims to break even by 2025.

Xpeng Motors Expects Big Growth in Deliveries

Xiaopeng Motors previously revealed that it will deliver 23,205 vehicles in the second quarter of 2023, a 27% increase from the previous quarter, exceeding its own expectations. In July, the Guangzhou-based company delivered 11,008 vehicles in July, up 28% month-on-month.

It was the sixth straight month of growth in deliveries, underscoring early signs of recovery, at least in terms of deliveries.

Xiaopeng Motors said that it expects to deliver between 39,000 and 41,000 vehicles in the third quarter, an increase of about 31.9% to 38.7% year-on-year. The figure would also be higher than the deliveries recorded in the second quarter.

Deliveries of the G6 model, which Xpeng hopes to ramp up production, will increase “significantly” in September, he said. Taking into account sales of other vehicles, the company aims to reach a “peak” monthly delivery of 20,000 vehicles in the fourth quarter of this year — if achieved, that would take monthly deliveries to 60,000, he said.

The company expects third-quarter revenue to be between 8.5 billion yuan and 9 billion yuan, an increase of about 24.6% to 31.9% year-on-year.

Xpeng Motors has also restructured its management structure and undertook an overhaul in the past few months to unleash growth momentum.

The increase in deliveries has given investors some confidence that the company is turning a profit, and Xpeng shares are up more than 50% this year.

The automaker also has support from the German auto giant VolkswagenLast month, it invested 700 million US dollars in Xiaopeng Motors, holding 4.99% of the shares. The two companies will jointly develop two electric vehicles for the Chinese market.

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