XPeng's Margins Turned Positive As A Result Of Cost Cuts

XPeng Inc XPEV delivered a less-than-feared fourth quarter loss due to cost cuts that brought margin improvements. However, the China-based EV maker provided a muted EV delivery guidance amid the economic and demand slowdown, joining the EV king Tesla Inc TSLA who also warned of a slowdown by stating this year’s vehicle volume growth could be “notably lower” compared to last year. Both Tesla and XPeng confirmed the launch dates of their affordable EVs in response to the rising competition amid a weakening macroeconomic backdrop. 

Fourth Quarter Highlights

During the quarter that ended on December 31st, XPeng reported its net loss lowered from last year’s comparable quarter when it amounted to $330 million to $190 million.

XPeng delivered 60,158 vehicles, which translates to an impressive YoY growth of 170.9%. Total revenue expanded 153.9% YoY to $1.84 billion, surpassing $1.76 billion that analysts expected. Non-GAAP net loss that includes share-based compensation and fair value adjustments on derivative liabilities, along with other items, amounted to $250 million, also improving from last year’s comparable quarter when it amounted to $310 million.

The ongoing EV price war that Tesla ignited took a toll on vehicle margins. Gross margin improved from Q3’a -2.7% to 6.2% but contracted 8.7% on a YoY basis. Vehicle margin improved from Q3’s -6.1% as it amounted to 4.1% but also dropped 5.7% on a YoY basis.

Q1 Guidance

Production-wise, XPeng is expecting the output to be between 21,000 and 22,500 vehicles, which translates to an annual growth between 15.2% and 23.4%. XPeng guided for revenue growth between 43.8% and 53.7% with the outlook range between $800 million and $860 million.

Both XPeng and Tesla are expanding their EV lineups with an affordable model

On Saturday, XPeng also confirmed the launch of its affordable EV that will be equipped with artificial intelligence features. The new brand’s concept revolves around making the first AI-assisted driving car for young people and it will be priced between 100,000 yuan and 150,000 yuan, which equates to a range between $14,000 and $21,000. XPeng confirmed that the new brand will be launched as early as next month. But, Tesla is also bringing its affordable EV to life but production is planned for mid-2025. Tesla has confirmed the compact EV model will cost around $25,000.

The China Passenger Car Association reported that EV sales in China slowed to 18.2% during the first two months of the year, after increasing 20.8% in 2023. In response, XPeng is speeding up its EV lineup and entering new markets as it narrowed losses and boosted revenue. But even the XPEng CEO is aware that 2024 will be the first year of intense competition on the China’s EV front, one that will even threaten Tesla.

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