Can XPeng spread its wings?
Xiaomi Group-W (01810.HK), a newcomer to the automotive market, delivered 39,800 units of its Xiaomi SU7 series in Q3 2024, a quarter-on-quarter increase of 45.71%. Since its launch in March, Xiaomi's cumulative deliveries have reached 67,200 units as of September 30. The company announced that it had achieved its target of producing 100,000 vehicles ahead of schedule by November 13 and raised its full-year delivery target to 130,000 units.
In Q3 2024, Xiaomi's smart EV revenue reached RMB 9.5 billion (in Chinese yuan, same below), with other related income at RMB 200 million, bringing total smart automotive and related industry revenue to RMB 9.7 billion. During the period, the gross profit of the smart automotive segment reached RMB 1.66 billion, with gross margin improving by 1.74 percentage points from 15.38% in Q2 to 17.12%.
Despite being a newcomer, Xiaomi has outperformed many "new energy vehicle (NEV) startups" still struggling on the edge of profitability.
In contrast, XPeng (09868.HK) reported Q3 2024 results with record-high gross margins but failed to impress the market. After the earnings release, XPeng's U.S. stock (XPEV.US) fell 3.77%, and its Hong Kong shares also underperformed the next day.
NEV Startups' Delivery Comparison
In Q3 2024, XPeng delivered 46,500 vehicles, up 54.05% QoQ and 16.31% YoY. For the first three quarters of the year, XPeng's deliveries totaled 98,600 units, a 21.02% YoY increase.
Comparatively, Leapmotor (09863.HK) delivered 86,200 vehicles in Q3, up 61.7% QoQ and 94.4% YoY, with cumulative deliveries of 172,900 units in the first three quarters, a 94.6% YoY rise.
Li Auto (02015.HK) delivered 152,800 vehicles in Q3, up 45.40% YoY, with cumulative deliveries of 341,800 units in the first three quarters, a 39.96% YoY increase.
Nio (09866.HK) delivered 61,900 vehicles in Q3, up 11.59% YoY and 7.81% QoQ, with cumulative deliveries of 149,300 units in the first three quarters, a 35.72% YoY rise.
While XPeng's growth rate outpaced Nio's, it still lagged behind Leapmotor and Li Auto. Monthly growth rates for Leapmotor and XPeng were strong, but XPeng's monthly deliveries remained behind Leapmotor and Li Auto, though the gap with Nio narrowed significantly.
Improved Quarterly Losses
In Q3, XPeng's automotive sales revenue rose 12.12% YoY to RMB 8.795 billion, while service and other income surged 90.68% YoY to RMB 1.307 billion.
XPeng's gross margin improved significantly, rising from 14.00% in Q2 to 15.26%, compared to a -2.67% gross loss in the same period last year. However, its automotive sales gross margin remained in single digits at 8.59%, with the overall double-digit gross margin supported by a 60.13% gross margin in services and other businesses.
Compared to Xiaomi's 15%-17% gross margin at entry, XPeng still has room for improvement.
Among peers, Leapmotor reported a Q3 gross margin of 8.1%, with an average of 4.8% for the first three quarters. Li Auto's Q3 vehicle gross margin was 20.9%, down 0.3 percentage points YoY but up 2.2 percentage points QoQ.
XPeng's Q3 R&D expenses rose 25.06% YoY to RMB 1.633 billion, accounting for 16.17% of revenue. Non-GAAP operating loss narrowed by nearly half YoY to RMB 1.571 billion, while non-GAAP net loss attributable to shareholders fell 45.11% YoY to RMB 1.532 billion.
Profitability Outlook
He Xiaopeng, XPeng's CEO, commented on industry prospects: "From 2025 to 2027, China's auto industry will enter an elimination phase. NEV penetration may exceed 85%, with AI driving consolidation. Winners will have full-stack R&D capabilities. We plan to leverage AI for rapid iteration. Autonomous driving will see breakthroughs next year."
On November 7, 2024, XPeng launched its AI car P7+, with over 30,000 orders confirmed on launch night. Production is ramping up, with December deliveries expected to exceed 10,000 units. He projected Q4 deliveries to hit a record, exceeding 30,000 units in November.
XPeng forecasts Q4 deliveries of 87,000-91,000 units (up 87%-95.6% QoQ) and revenue of RMB 15.3-16.2 billion (up 51.5%-60.4% QoQ). CFO Wu Jiaming noted improved margins from cost cuts and battery price declines. P7+'s higher margins are expected to boost profitability.
He Xiaopeng expects positive free cash flow in H2 2024, with year-end cash exceeding RMB 40 billion. XPeng plans to launch four new models in 2025, including extended-range vehicles, targeting double-digit gross margins.
Global Expansion
XPeng has expanded to 30+ countries with 110+ sales outlets. Q3 overseas sales grew 70% QoQ, contributing 15% of total sales. It aims for 300+ international stores by 2025, targeting leadership in premium EV exports.
Peers are also expanding globally: Leapmotor launched C10 and T03 in Europe, targeting 500+ channels by 2025. Neta signed distribution deals in South America, with plans for 10+ stores in Bolivia by 2025.
As domestic and global competition intensifies, XPeng faces challenges to stand out.
Author: Mao Ting
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