Chinese EV maker XPeng reports wider second-quarter loss, expects to deliver fewer vehicles amid strained supply chain

  • Carmaker reports an underlying net loss of 2.88 yuan per share, widening from a loss of 1.38 yuan per share in the previous quarter
  • G9 SUV to boost sales at XPeng in the fourth quarter and 2023, Deutsche Bank says

Guangzhou-based Chinese smart electric vehicle (EV) start-up XPeng on Tuesday reported a wider underlying net loss for the second quarter, and said it expected a slower pace of deliveries in the next three-month period.

The carmaker said it expected to deliver 29,000 to 31,000 EVs between July and September, falling short of a forecast of 35,000-37,000 units made by Deutsche Bank last week. The weak guidance comes despite its new model – the G9 medium-sized sport utility vehicle (SUV) equipped with a semi-autonomous driving system – receiving 23,000 orders in the first 24 hours after its launch on August 10.

XPeng’s forecast suggests a strained supply chain is still dragging down sizzling growth in mainland China’s EV sector.

“Supply chain remains an issue that is hindering the growth of XPeng and its rivals,” said Ivan Li, a fund manager at Shanghai-based Loyal Wealth Management. “The estimated delivery volume appears to be much lower than market expectations.”

The carmaker, which is backed by Chinese e-commerce giant Alibaba Group Holding, is viewed as a credible local challenger to US carmaker Tesla, which dominates the luxury EV market in China, the world’s largest market for such cars. Other Chinese carmakers with similar potential include Shanghai-based Nio and Beijing-headquartered Li Auto.

XPeng raked in 7.4 billion yuan (US$1.1 billion) in revenue in the second quarter, higher than a median forecast of 7.2 billion yuan forecast in a survey of analysts by Bloomberg. It, however, reported an underlying net loss of 2.88 yuan per share for the period, widening from a loss of 1.38 yuan per share in the previous quarter.

Its earnings also missed an average analysts’ estimate of 2.17 yuan due to higher research and development (R&D) expenses and lower gross margin, the gap between the selling price and tangible costs such as raw materials, labour and logistics, which narrowed to 9.1 per cent from 10.4 per cent in the previous quarter.

The carmaker delivered 34,422 units in the second quarter, when a two-month citywide Covid-19 lockdown in Shanghai disrupted the supply chain and sales. It was the best-performing Chinese smart EV maker in this period, which saw Tesla’s Shanghai Gigafactory losing about 70,000 vehicles in production due to the lockdown.

The company is, however, ramping up new model development to attract more Chinese drivers amid an accelerated pace of electrification on mainland Chinese roads.

“We expect our investment in R&D to bear fruit in the coming quarters with the roll-out of multiple new products, which will unleash new growth potential and reinforce our leading position in the smart EV industry,” Brian Gu, XPeng’s president, said in a statement on Tuesday.

The G9 SUV is expected to boost sales at XPeng.

“Demand for this vehicle will be key to rejuvenating growth in the fourth quarter and 2023, so we could envision management releasing a higher pre-order milestone in the coming month,” Deutsche Bank said.

The G9 is expected to be priced above 400,000 yuan. It will have a driving range of 702 kilometres and will be delivered to customers in the fourth quarter.

Author: Daniel Ren, SCMP

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