The conference call for Xpeng’s Q1 2022 financial report just ended, with the most exciting information being about their new car and intelligent driving.
G9 is officially confirmed to be launched in Q3 and delivered at scale in Q4. He XPeng personally stated that the new car will be the market’s strongest intelligent driving product, setting a benchmark for comfort and luxury, and is expected to become a bestseller in the mid-to-large-sized pure electric SUV market.
Additionally, Xpeng will launch a new car on the B-class and C-class platforms respectively in 2023, with prices rising to 400,000-500,000 RMB. Officials even used the description “appearance leader” to refer to the new vehicle. The electrification conference also addressed many issues concerning supply, the pandemic, and software payment strategies, with the remaining content containing details from the financial report.
Q1 2022 Financial Report Overview
Q1 Financial Data
- Total revenue of RMB 7.455 billion, a year-on-year increase of 153% and a quarter-on-quarter decrease of 13%;
- Automotive business revenue of RMB 6.999 billion, a year-on-year increase of 149% and a quarter-on-quarter decrease of 15%;
- Total gross profit of RMB 911 million, a year-on-year increase of 176% and a quarter-on-quarter decrease of 11%;
- Overall gross profit margin of 12.2%, compared to 11.2% for the same period last year and 12% for the previous quarter;
- Single vehicle gross profit margin of 10.4%, which declined from the previous quarter (10.9%);
- Sales cost of RMB 6.544 billion, a year-on-year increase of 150% and a quarter-on-quarter decrease of 13%;
- Net loss of RMB 1.701 billion, compared to a net loss of RMB 1.287 billion for the previous quarter;
- The company’s cash reserves (including cash, restricted cash, and the balance of fixed deposits and short-term investments) totaled RMB 41.714 billion, compared to RMB 43.544 billion for the previous quarter;
- Xpeng’s R&D expenditures for Q1 was RMB 1.221 billion, a decrease of 16% from the previous quarter, accounting for 16% of the quarterly total revenue;
- Sales and general administrative expenses were RMB 1.642 billion, a year-on-year increase of 128% and a quarter-on-quarter decrease of 19%.
Q2 2022 Business Expectations
- It is expected that 31,000 to 34,000 vehicles will be delivered, a year-on-year increase of about 78% to 95% compared to Q2 2021;
- The expected total revenue will be between RMB 6.8 billion and RMB 7.5 billion, an increase of about 81% to 99% compared to Q2 2021.
Financial Report Opening Remarks
Xpeng ranked first in new EV insurance in Q1 2022 among new energy vehicle startups. The competitiveness of Xpeng’s products and brand has been increasing this year, with record high new orders in March, and a pure EV penetration rate above 24%. The upward trend of pure electric vehicles will continue. Xpeng’s main production is in Guangzhou, and in May, production in Zhaoqing factory was restored to double shifts before the pandemic.### New Car News:
G9 to be released in Q3 and delivered in Q4, XPeng hopes that the comfort and luxury of G9 will become the benchmark of its peers, and become a popular model in the mid-to-large-sized pure electric SUV. The new generation of assisted driving will be introduced starting from G9, and it will become the best product in terms of safety, cost, and scenario performance.
In 2023, a new car will be built on the B and C-level platforms respectively, and it is expected that they will become the beauty representatives of their peers, and both new cars will cover the range of 400,000 to 500,000 yuan. The development of flying cars is progressing smoothly, and most of the time, the two-seater flying car can run on the road, and can fly when needed.
Supply and Production
The epidemic has posed great challenges to the supply chain. XPeng has done early preparations for key components, starting at the end of 2021, XPeng began to connect with multiple battery suppliers, and after Q2, it will have a positive and long-term impact on XPeng’s supply stability, cost, and gross profit.
The problem of chip shortage may last longer than expected, the depth of self-research in embedded systems enables XPeng to have higher flexibility in chip validation and switching, which will enable XPeng to respond more efficiently to related issues.
Business Outlook
In Q1, the penetration rate of high-speed NGP has reached 70%, and the cumulative mileage has reached 24 million kilometers. XPeng has already OTA the fusion of laser radar for cross-floor parking, and will OTA the adaptive cruise with vision and laser radar fusion later. In mid-May, the public test of city NGP has been completed in Guangzhou, and the test performance has exceeded expectations. Next, NGP will be further expanded in terms of city coverage.
XPeng’s strategy is to create high-security, price-friendly, and easy-to-use intelligent driving. XPeng will further integrate intelligent driving with intelligent cabin and intelligent chassis. In May, XPeng has integrated XPLIOT’s software and hardware operation into sales, which is of great significance for expanding the penetration of intelligent driving and reducing costs. XPeng will achieve L4 level automatic driving in 2026.
XPeng will start to deploy the next generation of high-power supercharging on a large scale from Q4 this year, and it can replenish 200 km in 5 minutes.
Q&A Session
Q1: XPeng started to promote the NGP software as a standard in May. Will it be difficult to return to the software charging model if everyone starts to use it as standard later?
A1: XPeng’s software charging business is very successful among Chinese companies, but the effect of separating hardware and software charging may not be as good as unified charging. And in the integration of intelligent cabin and intelligent chassis, with higher hardware and intelligent experience, software charging under such an integrated solution will be more acceptable. After having a better experience of advanced intelligent driving, XPeng may introduce a charging mechanism based on mileage or time. At this stage, improving the penetration rate of intelligent driving is more important.#### Q2: The loss of production capacity in Q2 was significant. Can these lost orders be regained in Q3? What is the impact of chip problems, and how should we see the battery prices?
A2: XPeng was heavily affected in April and May. XPeng is confident to achieve a significant sales recovery after the pandemic, and most of the orders will be delivered in June and July after the price increase. Currently, a smart car needs about 5,000 chips, and the major ones are fine. On the contrary, there are many uncertainties for a few smaller chips. The chip challenge will probably continue until the end of this year or even next year. The important thing is how to build a strong technical team, which can track the chip supply situation and adjust the vehicle’s platform accordingly within a few months. XPeng has done a lot of work in this regard.
As for battery production capacity and prices, the battery production capacity was seriously insufficient before. The industry’s battery supply ability will significantly improve from the end of 2022 to 2023. In addition, although the lithium ore prices in China have increased significantly, the overseas prices are similar to the first half of last year. Moreover, the prices of lithium battery raw materials have fallen. After introducing new suppliers in Q2, XPeng has already begun to reverse the cost of batteries. Besides the battery, XPeng is confident that combining multiple measures on new three-electricity platforms and energy consumption will improve the vehicle’s electrification performance.
Q3: Will XPeng’s profit margin rise in Q2, and how will the adjustment of software operation affect the gross profit? Can you introduce the situation of the new car? Can the gross profit of the new car reach 20%?
A3: Due to the pandemic, the gross profit in Q2 will be affected. There will be a slight increase in gross profit in Q3 and a continuous increase in Q4. The price of the new car on the C-class platform next year will reach 400,000 yuan. It is reasonable to have a 20% gross profit below this price. We hope the capabilities of these two cars can exceed those of the two P7 models.
Q5: The integrated hardware and software sales are more effective. Will XPILOT4.0 be included as standard in the future or continue to charge for software? In addition, the standard software will no longer include free charging. Will this affect gross profit? Will XPeng launch faster charging technology after the 800V high-voltage charging?
A5: XPeng hopes to offer software as standard in the future. However, the company has not determined the pricing strategy for XPILOT4.0. Canceling free charging for standard software may have some impact on gross profit. XPeng will continue to launch faster charging technology after the 800V high-voltage charging.A5: The strategy for software payment of G9 has not been decided yet. The impact of software standard on gross profit has been offset by adjusting equity. Actually, XPeng has developed two charging systems beyond the supercharging capability, including 360 kW and 480 kW. However, it was decided to release 480 kW in the end. The actual data is subject to further testing, and a faster charging system will be available after 480 kW. XPeng will also continue to deploy charging facilities to make energy supplementation more convenient. With the improvement of wind resistance and energy efficiency, electric vehicles will have a comprehensive advantage in terms of cost and user experience compared to gasoline vehicles. In 2023, with the upgrade of the new generation of intelligent driving and cockpit experience, the market will also usher in an intelligent turning point.
Q6: Will the integration of software and hardware sales of new models cause a greater price difference in the versions of car models? Will the increase of competitors in the 200,000-250,000 RMB range have a significant impact on our old platform models currently on sale?
A6: On G9 and subsequent new cars, the price difference between models equipped with and without advanced assisted driving will increase. However, the company will make more effort to reduce the impact of hardware costs and make advanced assisted driving more competitive. In addition, after the adjustment of the software strategy, the proportion of optional advanced assisted driving has greatly increased.
The company is not worried about the increase in competition. P5 is priced quite low in the case of two laser equipped. Its advantage in intelligence level will still be quite competitive compared to its competitors for some time to come, which will not be affected much.
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.