Financial Results
XPeng Inc. released its Q2 2021 financial results, reporting an overall gross profit margin of 11.9%, and a vehicle gross profit margin of 11.0%. The company had a cash reserve of CNY 32.87 billion.
Delivery Data
In Q2 2021, XPeng delivered 17,398 vehicles, including 11,522 P7s and 5,876 G3s. This is a YoY increase of 439% and a MoM increase of 30.4%.
Financial Data
- The total revenue was CNY 3.761 billion, a YoY increase of 536.7% and a QoQ increase of 27.5%.
- The revenue from car sales was CNY 3.584 billion, a YoY increase of 562.4% and a QoQ increase of 27.5%.
- The gross profit margin for Q2 was 11.9%, compared to -2.7% YoY and 11.2% for Q1 of this year.
- The vehicle gross profit margin was 11.0%, compared to -5.6% YoY and 10.1% for Q1 of this year.
- The net loss was CNY 1.1946 billion, compared to CNY 0.146 billion YoY and CNY 0.7866 billion for Q1 of this year.
- The cash, cash equivalents, restricted funds, and short-term investments totaled CNY 32.87 billion, compared to CNY 36.2 billion for Q1 of this year.
- As of June 30, XPeng had 200 sales outlets, 64 service outlets, and covered 74 cities. The brand’s supercharging stations numbered 231 and covered 65 cities.
Sales Cost
In Q2 2021, XPeng’s sales cost was CNY 3.3127 billion, a YoY increase of 445.7% and a 26.4% increase from Q1 2021. The growth was mainly driven by a rise in delivery volume.
R&D Expenses
In Q2 2021, XPeng’s R&D expenses were CNY 0.8635 billion, a YoY increase of 170.0% and a QoQ increase of 61.4%. The increase was due to higher staff costs and research and development costs for vehicles and software technology.
Sales and Administrative Expenses
In Q2 2021, XPeng’s sales and administrative expenses were CNY 1.031 billion, a YoY increase of 116.0% and a QoQ increase of 43.0%. The growth was mainly due to higher marketing and advertising expenses to support vehicle sales, as well as increased labor and real estate costs as the sales network expanded.
Q3 2021 Expectations## Conference Call
The key information is summarized as follows:
Speech by He XPeng
Delivery: XPeng’s delivery volume reached a new quarterly high, with a total of 30,738 deliveries so far this year, exceeding last year’s total annual deliveries. In July, the delivery volume exceeded 8,000 with record orders. Gross profit margin of 11.9% reached an all-time high, demonstrating market recognition of electric vehicles.
XPILOT: In Q2 of this year, XPILOT 3.0 penetration rate reached 25%. The NGP usage rate exceeded 65% per month. XPILOT 4.0 will cover more scenarios, including those without high-precision maps, which will increase user stickiness.
Safety Issues: Safety is of utmost importance. XPeng is the first automaker to require examinations and to use redundant LiDARs. They will strengthen handling of special scenarios to ensure safety.
Products: As battery supply increases, the proportion of deliveries of the G3 and P7 phosphate iron lithium versions will continue to increase. The transition from G3 to G3i will affect production at first, but XPeng plans to deliver small quantities of G3is at the end of August and gradually increase production volume afterwards. P5 will be launched in mid-September with the official price disclosed and deliveries to follow in October, helping to popularize intelligent cars in the 160,000-230,000 RMB price range.
Several ideas for future development:
- The price range of 150,000-400,000 RMB will be the fastest-growing segment of the intelligent EV market, and will subvert tradition.
- High-level intelligent driving will greatly change users’ driving habits.
- China will lead the world’s intelligent automotive industry.
New Cars and R&D:
Starting in 2023, XPeng plans to release two to three new cars per year. All new models will support XPILOT 4.0, and will be fully synchronized with global markets in terms of hardware, software, and services. In the domestic market, XPeng’s pricing will expand from 150,000-300,000 RMB to 150,000-400,000 RMB. As of the end of last year, XPeng’s R&D team had a size of 3,000, and is expected to reach 4,500 by the end of this year.
Domestic Market:
In April, the new energy vehicle penetration rate exceeded 10% in China for the first time, indicating a turning point. XPeng will accelerate the layout of direct sales networks and charging infrastructure. In overseas markets, from 2020-2022, XPeng will complete the basic layout of overseas markets (left and right-hand drive), including software and hardware, infrastructure, and policies.
Capacity:
…肇庆工厂 has begun production of P5, P7, and G3i, currently operating with two shifts. It is estimated that the monthly peak delivery in Q4 will reach 15,000 units. With the completion of Phase II of the factory construction, the annual production capacity is expected to increase from 100,000 to 200,000 units by the end of H1 next year. The main factory of Guangzhou plant is expected to be completed in Q1 of next year, and formal production will begin in Q3. The company will work hard to overcome challenges such as battery cell and chip shortage, pandemic impact and production capacity challenges for the transition from G3 to G3i to meet delivery expectations.
Q&A:
Q: 1. How will you cope with the shortage of key components and chips next year? 2. What is the demand for P5? How does it compare with P7? Will the parts affect the delivery of P5 in Q4?
There are two types of impacts, predictable ones such as chips, and unpredictable ones such as the pandemic, such as the recent outbreak in Nanjing. If a level one or level two supplier is located in the pandemic area, there will be an impact.
Chip shortage: Clear orders should be placed in advance, strategic agreements should be reached with primary suppliers, investment methods can be used, and joint purchases with the government can also be considered. The chip shortage is an industry-wide issue, but new forces like XPeng Motors can leverage this situation to obtain better possibilities because XPeng is recognized and is in a priority position. At present, the delivery volume is not particularly large, so the supply volume is more flexible, and more procurement methods in overseas markets can also be considered.
Regarding P5: Compared with P7 at the same time, the demand for P5 is significantly higher, and the planning is more accurate. The order volume for each week is gradually approaching the planned range, which will improve the delivery efficiency in Q4. Orders for key parts have already been placed last year and earlier this year, so the challenge is relatively small.
Q: 1. What are the fifth and sixth products? 2. Can you quantify the reasons for the increase in Q2 gross profit margin and the trend of the second half of the year? 3. Software penetration rate.
Regarding the fifth and sixth products, XPeng plans to develop a new platform and launch a product with a higher price (over RMB 400,000) in 2023.
In terms of gross profit margin, P7 accounts for a higher proportion of Q2 sales, batteries guarantee supply, and costs are well controlled. Software penetration rate has increased from 20% in Q1 to 25% in Q2. The user feedback is positive, with an NGP average monthly usage rate exceeding 65%.
Q: Regarding management and data security.
From XPeng’s perspective, the new management opinions issued by the Ministry of Industry and Information Technology are very beneficial. Our security and data compliance not only meet domestic standards, but also conform to international standards. Full-stack self-development capabilities are required for safe management of autonomous driving. The improvement of policies and laws is good for the development of high-level autonomous driving, especially for car companies with full-stack self-development capabilities.
Q: 1. Is wholesale the same as retail in overseas markets? 2. How much advantage can OTA bring in terms of regulation and safety?Currently, we are collaborating with local dealers and planning to open direct stores in the capitals of various European markets. Regarding OTA, we believe that strict regulations are good for Xpeng, as it will help us widen the gap between us and our competitors.
Q: 1. What are the different strategies for entering the high-end market, such as brand positioning or services? 2. What is the pricing for XPILOT 3.5?
XPILOT 3.5 will be priced higher than 3.0. Last month, the P7 demonstrated that it has already surpassed the Audi A4 in the nearly 300,000 RMB market. We mainly focus on differentiation and will see typical differentiation in research and development from 2023 to 2025 to form our next competitive barrier. The flying car will position itself in a higher-end market segment, around 500,000 to 1 million RMB.
Q: Will the expansion of direct stores be by ourselves or through third parties? Will the focus be on coverage or single-store efficiency? The strategy for new car releases is very different from Tesla’s. Can you share your considerations on the number of vehicle models and distribution channels?
We will have both methods of store expansion from 200 to 350 stores, but we will increase the proportion of internally-developed stores. Compared with last year, our conversion rate for single-car type stores has improved a lot. We have found that after the charging facilities and services in a city catch up, sales will increase significantly a few months later, which is also what we will focus on next.
Xpeng will adhere to our boutique path, which is to rank among the top two in the market with a single product, such as the P7. With the increase in the number of vehicle models, we will not only maintain flagship stores located in shopping malls and other locations that display mainstream models required by local users, but also display all models in other stores.
🔗 Source: XPeng Motors
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This article is a translation by ChatGPT of a Chinese report from 42HOW. If you have any questions about it, please email bd@42how.com.