EXCLUSIVE: XPeng President Sees Strong EV Growth Trajectory Despite Competition, Supply Chain Issues

After XPeng Inc. XPEV reported first-quarter results Thursday, Brian Gu, the company's president and vice chairman, spoke to Benzinga in an exclusive chat on the financial results and the electric vehicle manufacturer's path forward.

Software revenue is a key element of XPeng's sustainable revenue trend and reflects the company's ability to monetize its R&D efforts, the EV exec told Benzinga.

"We are seeing very exciting momentum in terms of take rate."

The volume of software subscriptions and fees is increasing, he said.  

XPeng's Software Penetration: The metric has increased from a 20% software penetration rate for the P7 sold in the fourth quarter to 25% in March.

With the commercial launch of the P5 model in the fourth quarter, the company expects a further increase in software subscriptions, as the newest model will have a higher proportion of autonomous driving hardware.

Gu On XPeng's Margins: On the expansion in gross margin and the vehicle margin, Gu said the software margin stemming from P7 software sold last year and activated in the first quarter positively impacted margins by over 1%.

It was also aided by all the accumulated software activation from last year, he said. 

XPeng expects the expansion in gross margin to continue with scale, efficiency and cost reduction in batteries and some components, Gu said.

This would be partly offset by higher costs for some raw materials such as commodities and semiconductors, the XPeng president said. 

The Chip Shortage And XPeng: The chip shortage is an industrywide phenomenon, and XPeng is weathering the crisis better than some other players due to being small and nimble, he said. 

The guidance has discounted the chip crunch, Gu said, adding that long-term visibility on the supply chain is limited.

XPeng's Services Revenue, LFP Vehicles: Regarding services revenue, which increased from 4.06% in the fourth quarter to 4.8% in the first quarter, Gu said he expects it to grow in size as XPeng's installed base expands and vehicle sales increase.

This segment includes commissions on financing and insurance products the company sells; sales of accessories through its e-commerce site; and income from charging business.

Related Link: XPeng Unveils The P5, A LiDAR-Equipped New Sedan Model With Advanced Features And Tech

Regarding the uptake of lithium phosphate iron battery-powered XPeng models, Gu said these are now accounting for 15%-20% of the G3 and P7 models sold.

The record order momentum the company is experiencing is partly aided by the LFP models, he added.

The order backlogs exclude the recently launched P5 sedan given that pricing is not announced yet and only reservations are accepted.

What's Next For XPeng: Gu has a positive outlook on the Chinese EV market and suggested that EV penetration there doubled from 5% one year ago to 10% in the first quarter. This figure increases to 20% in tier-1 cities, he said. 

It's an exciting time for EV players, Gu said.  

Despite several new model launches and the entry of technology companies such as Xiaomi Corporation XIACF and Baidu, Inc. BIDU into the EV arena, XPeng sees a strong window for maintaining its growth trajectory and powering ahead with its technology and product approach. 

XPEV Price Action: At last check, XPeng shares were down 5.2% at $23.45.

Courtesy photo.