Tesla's Chinese Rival Chooses Scaling Production Over Pricing Strategy After Much Thought

EV startup XPeng Inc XPEV Chairman and CEO Xiaopeng He addressed the issue of pricing competition within the industry in the company’s first-quarter earnings call on Wednesday.

What Happened: The company internally considered both aggressive pricing and following the lineup with cheaper versions after volume taking off to battle severe pricing competition, Xiaopeng said.

“First of all, we will prioritize scale before considering pricing, and we definitely expect to have long-term stable pricing,” he said.

The EV maker will consider the cost structure of its products including inflation of LFP batteries and other parts together with cost control measures to consider long-term stable pricing for its G6 SUV and other upcoming models. “But in a nutshell, we will prioritize scale,” the CEO said.

Why It Matters: The Guangzhou, China-based EV maker reported a first-quarter FY23 sales decline of 45.9% year-on-year, to RMB4.03 billion ($587.31 million), missing the consensus of $741.07 million. Quarterly deliveries slumped 17.9% year over year to 18,230.

Operating loss for the quarter was RMB2.59 billion or $0.38 billion versus a loss of RMB1.92 billion last year.

For the upcoming quarter, XPeng sees vehicle deliveries of 21,000 – 22,000, down 36.1% – 39.0% from last year, and revenue of $657.7 million- $686.9 million, representing a year-over-year decrease of 36.8% – 39.5%, below the consensus of $1 billion.

Wall Street analysts have not been big fans of EV leader Tesla, Inc’s TSLA string of aggressive pricing moves, with some saying that it produces a “sugar high” but lacks long-term benefits.

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