Xpeng's And Porsche's Latest Results- What A Difference Pricing Power Makes

On March 13th, luxury automaker Porsche Automobile Holding POAHY issued an ambitious growth outlook after record 2022 earnings. Meanwhile, in the all-EV world, XPeng Inc XPEV wrapped up a disappointing year on March 17th. Put together, these two reports amplify what a difference pricing can make, even in a weakened macroeconomic environment, as it is still Porsche’s superpower and XPeng’s Achilles heel.

XPeng’s Fourth Quarter

For the quarter ended on December 31st, XPeng posted a wider-than-expected net loss of 2.36 billion yuan ($342 million), below the 2.1 billion yuan deficit analyst were expecting and last year’s loss of 1.29 billion yuan. Revenue melted 40 percent to 5.14 billion yuan, below the forecasted 5.7 billion yuan.

XPeng’s Outlook

What’s even more concerning than a disappointing 2022 is that XPeng guided that deliveries could drop as much as 48 percent in the undergoing quarter compared to 2022’s first quarter, as it expects to deliver 18,000 to 19,000 vehicles, with total revenue in the range between 4 billion yuan and 4.2 billion yuan, which would mark a decrease in the range between 44 percent to 46 percent compared to last year’s quarter.

Co-President Brian Gu stated that sales and market share growth should be resumed with product portfolio optimization and the significant marketing improvements while CEO He Xiaopeng assured that the company has “comprehensively” reviewed its strategy. But Bloomberg Intelligence said in a recent note that the launch of new models and capacity expansion over the next two years could continue capping the gross marging, despite China’s EV sales being expected to rise as the resurfaced covid crisis fades away.

XPeng’s Susceptibility To Price Competition

Compared to its U.S.-listed rivals Nio Inc. NIO and Li Auto Inc. LI, Xpeng is more similar to Tesla Inc TSLA when it comes to its product portfolio and pricing which makes it more susceptible to price competition. In its own, facing off Tesla, the EV pioneer, is daunting in itself. Earlier this year, XPeng slashed prices of its two flagship models only a fewdays after Tesla announced significantly discounted prices of its locally-built models.

Wrapping Up A Disappointing Year

In 2022, XPeng delivered 120,757 vehicles, which is less than half of its initial goal, with its shares slumping 80 percent as it also postponed its target of reaching operating profitability to 2025. Despite challenges and against many odds, Tesla fulfilled its profitability promise back in 2020.

Porsche

On March 13th, Porsche issued an ambitious long-term outlook of more than 20% of return on sales, along with record 2022 revenue and operating profit owed to higher deliveries. 2022 revenue amounted to 37.6 billion euros, $40.22 billion, which translates to a 13.6% YoY increase. 2022 operating profit rose by 27% as it amounted to 6.77 billion euros ($7.23 billion) as deliveries rose by 2.6% to 309,884 units. Supply chain constraints caused only Taycan sales to drop.

EV Lineup

One might think that besides playing in different leagues, these two automakers are playing in entirely different fields altogether. But, Porsche aims for 80% of its new sales to be made by EVs by the end of the decade. During its latest report, it revealed it will add a full-sized all-electric SUV to its line-up before 2030 ends. Based on the Volkswagen Group Scalable Systems Platform, the SUV will be Porsche’s fifth electric vehicle. The first EV, the Taycan, was launched in 2019, the all-electric Macan is expected to go on sale in 2024, followed by the Porsche 718 EV sometime near 2025 and last but not least, the Cayenne EV which will represent a new approach for Porsche, but combined with its traditional values, such as the very luxurious experience for customers, according to the CEO Oliver Blume. The newly reported SUV is part of its Road to 20 strategy, which aims to increase operating return on sales beyond 20% with Porsche well on the way with return on sales already having improved from 16% to 18% last year.

Pricing Makes All The Difference

Because of its luxurious positioning, Porsche is able to reach high pricing levels and it is rising prices continuously within what is a very clear pricing strategy, as opposed to jumping up and down. During the first week of being listed on the German stock market on September 29th, Porsche dethroned Volkswagen AG VWAGY, who owns 75% less one ordinary share of Porsche’s total share capital, as it became Europe’s most valuable automaker. With a profit margin of 18%, CEO Oliver Blume finds that a strong year is a result of a well-made product mix and efficient cost strategy that helped the luxurious automaker thrive in a gloom and doom environment. Meanwhile, XPeng is battling fiercely in China for its market share, needing plenty of EV martial arts to stay in the game. What a difference pricing can make!

DISCLAIMER: This content is for informational purposes only. It is not intended as investing advice.