Xpeng shares drop 7% after the Chinese electric car maker posts a record quarterly loss

Xpeng on Friday reported a wider-than-expected loss within the second quarter, sending the Chinese electrical automobile maker’s shares down greater than 7% in premarket U.S. commerce.

The internet loss was wider than the two.7 billion yuan ($370.7 million) loss reported for the second quarter of final 12 months. It was additionally the most important quarterly loss that Xpeng has posted since going public in August 2020.

Despite the hit on revenue, the Chinese firm’s second-quarter income met expectations.

Here’s how Xpeng did in opposition to Refinitiv consensus estimates for the second quarter:

• Net loss: 2.8 billion yuan loss vs. 2.13 billion yuan loss anticipated
• Revenue: 5.06 billion Chinese yuan ($693.7 million) vs. 5.06 billion yuan anticipated, representing a 31% year-on-year fall.

Xpeng additionally mentioned its gross margin turned damaging 3.9% in contrast with optimistic 10.9% throughout the identical interval of 2022.

The firm is making an attempt to show across the business this 12 months, after a torrid 2022 throughout which its share value sank by greater than 80%.

Xpeng is working in a weak Chinese economic system with depressed client spending, whereas on the identical time dealing with cut-throat competitors in China from different upstarts like Nio and Li Auto, in addition to giants BYD and Tesla.

Competition remains to be ramping up, as a value conflict develops on this planet’s second-largest economic system. Tesla this week lower the worth of its Model Y and Model S vehicles and supplied reductions on current stock of the Model S and Model X in China.

Xpeng mentioned its car margin was damaging 8.6% within the second quarter, in contrast with optimistic 9.1% in the identical interval of final 12 months. The firm blamed this decline on “inventory write-downs and losses on inventory purchase commitments” associated to its G3i car, in addition to on elevated gross sales promotions and on the expiry of Chinese electrical car subsidies.

Xpeng’s is hoping its newest automobile — the G6 Ultra Smart Coupe SUV — which was launched on the finish of the second quarter, will increase margins.

“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,” Brian Gu, co-president of Xpeng, mentioned within the Friday earnings press launch.

During the same-day earnings name, Xpeng CEO He Xiaopeng mentioned that the corporate is present process cost-saving initiatives throughout the business that ought to “substantially drive gross margin improvement in 2024.”

Gu mentioned on the earnings name that Xpeng goals to interrupt even in 2025.

Xpeng beforehand disclosed that it delivered 23,205 vehicles within the second quarter of 2023, logging a 27% quarter-on-quarter rise and beating its personal forecast. In July, the Guangzhou-headquartered agency delivered 11,008 automobiles in July, up by 28% on the month.

That’s the sixth consecutive month of supply progress, underscoring the early indicators of a restoration, a minimum of for deliveries.

Xpeng mentioned it expects car deliveries to be between 39,000 and 41,000 within the third quarter, representing a year-over-year improve of roughly 31.9% to 38.7%. The determine would additionally sit increased than the deliveries recorded within the second quarter.

He mentioned that deliveries of the G6 — a mannequin of which Xpeng is trying to increase manufacturing — will develop “significantly” in September. Factoring in gross sales of its different vehicles, He mentioned the corporate goals to succeed in “peak” month-to-month deliveries of 20,000 automobiles within the fourth quarter of the 12 months — which might put them at 60,000 vehicles, if that concentrate on is achieved.

The firm forecast its income shall be between 8.5 billion yuan and 9 billion yuan within the third quarter, representing a year-over-year improve of round 24.6% to 31.9%.

Xpeng has additionally reorganized its administration construction and skilled an overhaul over the previous few months, in a bid to unlock progress.

Rising deliveries have given traders some confidence {that a} turnaround is underway, with Xpeng’s refill by greater than 50% this 12 months.

The automaker has additionally received backing from German automobile big Volkswagen, which invested $700 million in Xpeng final month, taking a 4.99% stake. The corporations will collectively develop two electrical automobiles for the Chinese market.