Personnel changes become mysterious, whether XPeng can survive the elimination round depends on MONA?

In the second half of the knockout stage, can XPeng (09868) survive?

According to the Securities Times app, XPeng has not been doing well this year. The average monthly sales in the first five months were less than 10,000 vehicles, dropping out of the top tier of new forces. In recent weeks, sales have been sluggish. According to the weekly sales data released by Li Auto, from June 3rd to 9th and from June 10th to 16th, sales were 1,800 units and 2,100 units respectively, ranking ninth among new forces. In the first five months, the company achieved only 14.6% of its annual sales target, making it extremely difficult to meet the goal.

The knockout stage will inevitably involve "multi-dimensional curling," including "marketing curling," such as the enterprise boss IP initiated by Zhou Hongyi, "price curling," in which major car companies are involved, and "value curling," with Huawei as a representative emphasizing value experience. Regardless of the type of curling, the most important thing is to capture customers and secure orders. XPeng insists on taking the intelligent route. However, under the trend of "homogenization," its competitive advantage is becoming weaker, and sales are gradually falling behind other brands in the same tier.

In addition, the company has recently experienced a series of mysterious personnel changes. There were rumors circulating online that the president, Wang Fengying, had submitted her resignation, which the company denied on June 17th. However, the next day, the company announced on Weibo that the head of autonomous driving had been replaced, with Yuan Tingting appointed as the director of autonomous driving products. Frequent changes in senior management may indicate significant adjustments in the company's operations.

However, compared to the same period last year, XPeng's sales performance in the first five months is still decent, with a year-on-year growth of 35%. In the first quarter of 2024 released by the company, profitability has also significantly improved.

Lack of Endurance for Explosive Models

According to the Securities Times app, XPeng's product lineup is rich, with current models including the G series (G3, G6, and G9), the P series (P7 and P5), and the X series (X9), covering a price range of 100,000 to 400,000 RMB. The models cover coupes, sedans, SUVs, and MPVs. In May 2024, the company sold a total of 10,146 vehicles across all three series, with G6/G9/X9 and P7 accounting for 33%, 30%, 16%, and 15% of sales respectively. The total sales in the first five months amounted to 41,360 vehicles, with an average monthly sales of less than 10,000 units.

In fact, the company does not lack explosive models. For example, in May 2020, the first coupe P7 was launched, with monthly sales exceeding 7,000 units at one point. In June 2023, the XPeng G6 was launched, with celebrity spokesperson Jimmy Lin attracting a group of young consumers, with a peak monthly sales of nearly 9,000 units. However, the lifespan of these explosive models is very short. In October 2023, the company launched the upgraded version of G9, but sales declined after only two to three months.

From the perspective of the vehicle launch schedule, XPeng's method of relying on a variety of vehicle models has limited contribution to sales volume. While it has strong explosive power, its sustainability is lacking. Is the company's product competitiveness really that weak?

In fact, XPeng's popular vehicle models lack sustainability mainly due to three factors: first, there are many competing products, with companies like BYD, Nio, ZEEKR, Leapmotor, IM Motors, and Tesla launching new models, some of which are more competitively priced; second, there is a trend of homogenization in intelligence, narrowing the company's advantages; third, insufficient user demand research, where experiential enjoyment is valued more than technological experience, and other vehicle models with features like refrigerators, TVs, and large sofas better meet current user needs.

This year, the company is pinning its hopes on the upcoming MONA model, a vehicle developed in cooperation with Didi, with the expectation that ride-hailing will be the mainstream demand group. The first model in the Mona product series is an A-class pure electric sedan, expected to be priced at less than 150,000 RMB, set to be officially launched in the third quarter for mass delivery. Management plans to introduce multiple different products on the A-class platform and apply XNGP autonomous driving technology to models in this price range.

Additionally, the company will deliver the all-new B-class pure electric sedan F57 in the fourth quarter, with some brokerages stating that this model is expected to achieve the previous target of a 25% cost reduction. Can MONA and F57 save the company's current declining sales, surpassing the 20,000-unit mark again, or will history repeat itself with just a brief surge?

Pinning Hopes on MONA

XPeng entered the new car-making forces with intelligence by releasing the first-generation intelligent driving system in 2018, transitioning to full-stack self-research in April 2020. Huawei officially released its intelligent driving system in April 2021, becoming the first in the industry to achieve high-speed NGP. However, with the widespread adoption of NOA, NGP is no longer leading. In March 2023, the company plans to launch XNGP without maps, while Huawei only began pushing out NCA without maps in February this year.

In Q1 2024, the company's R&D expenses amounted to 1.35 billion RMB, significantly lower than Li Auto and Nio in terms of value. However, the R&D expense ratio is 20.52%, higher than the industry average.

Clearly, XPeng's R&D achievements are lower than the industry average. For example, Li Auto's R&D expense ratio is 11.9%, yet a single model's sales volume can surpass XPeng's entire lineup. To gain a greater competitive advantage, XPeng has increased its investment in AI R&D this year, focusing on promoting the use of AI large models in smart vehicles. In April, the company launched its new brand MONA (Made Of New AI), positioning itself as a global advocate for AI-driven smart cars. While many car companies are promoting smart driving, XPeng is one of the few companies bold enough to label its products with AI smart driving.

XPeng has few remaining product competitive advantages. Currently, there are two potential factors outside of products that could support the company's performance: first, cooperation with Volkswagen to gain technology service income. However, models developed in collaboration with Volkswagen will not hit the market until 2026, making technology income growth somewhat elusive. Second, cooperation with Didi, where MONA represents a visible growth point. With Didi's scale, if ride-hailing chooses MONA, it will bring in good sales

High Future Risks

The automotive industry is all about sales. Only when sales pick up can profitability and long-term development be discussed. Currently, the industry landscape is dominated by a few strong players, with intense competition in the tail market. BYD leads the pack with a significant market share, while traditional car manufacturers such as Geely and SAIC are rapidly transforming based on their manufacturing advantages. The tail market is where new carmakers are concentrated, with Xiaomi reshaping the competitive landscape.

Although XPeng's sales have maintained double-digit growth over the past three years, it lags behind the industry average. Its market share is declining, and its position among new carmakers is also slipping. With Xiaomi entering the market, competition has intensified, making it increasingly difficult to grab market share. Losses are common, but only those who persevere will emerge as winners. How long can XPeng's cash reserves last?

Last year, the company took the lead in proposing cost reduction and efficiency improvement measures. By reducing costs through die-casting, self-developed technology, and supply chain management, the company also underwent a major overhaul in the procurement department. Wang Fengying, a former Great Wall Motors executive, was brought in for marketing. Through channel expansion, penetration, and optimization, costs were reduced. In 2023, due to price wars in marketing, the gross profit margin was only 1.5%, a decrease of 10 percentage points. However, in Q1 2024, it rebounded significantly to 13%.

In Q1 2024, XPeng incurred a net loss of 1.368 billion RMB, with accumulated losses exceeding 24 billion RMB over the past three years (2021-2023). This was partially supplemented through financing, with net assets evaporating by only 5.8 billion RMB. As of March 2024, the company had cash and cash equivalents of 14.543 billion RMB, short-term deposits of 11.64 billion RMB, totaling 26.13 billion RMB. If the ideal state of a 13% gross margin in Q1 is maintained, the cash on hand can still last 3-5 years.

Currently, XPeng's top priority is to scale up. Only when it achieves scale can it realize net profits even with thin gross margins. However, in the current competitive environment, relying on the current three major series, the second half of the year is unlikely to perform outstandingly. Several products have already been outperformed by competitors in terms of sales. The company is pinning its hopes on MONA domestically while accelerating its international expansion, attempting to mitigate domestic competitive risks through overseas markets Overall, XPeng's situation is quite precarious. Its intelligent features have been smoothed out by competitors, sales are falling behind, there is a lack of popular models, and the MONA model labeled with AI smart driving faces high uncertainties in sales after its listing. Moreover, continuous losses are depleting the company's cash reserves, painting a less optimistic future. The company's market value is still bottoming out, with institutions like BlackRock and Morgan Stanley continuously reducing their holdings. The market value has shrunk by nearly 50% this year, indicating high risks. It may be prudent to wait for a turnaround opportunity in Q3