xpeng reports big drop in deliveries in q1 2023

The Chinese electric vehicle manufacturer Xpeng reported today a significant drop in its car deliveries during the first quarter of the year as competition in China by both domestic and foreign companies keeps heating up.

During these first three months, Xpeng delivered 18,230 vehicles to customers resulting in a 47% drop compared to the figure reported back in Q1 2022. Deliveries have been on a downtrend for multiple quarters now and are less than half what they were back in the fourth quarter of 2021 when they appeared to have peaked.

Tesla’s Aggressive Price Cuts are Hurting Domestic EV Companies

Apart from increasing competition from companies like Li Auto, Nio, Tesla (TSLA), and others, the economic situation in China has not fully picked up despite the government’s decision to lift its COVID-19 restrictions in December 2022. In addition, the Chinese government suspended its subsidies for new electric vehicles on 1 January this year.

In addition, Tesla, one of the most powerful rivals of local EV firms in China, has engaged in an aggressive price war that could push some of its smaller competitors out of business. The price cuts started to be rolled over in October 2022 when the price of Model 3 and Y were slashed by nearly 10%. Meanwhile, in January this year, Tesla reduced its Model 3 and Model Y prices by 13.5% and 10% respectively.

“We’ve taken a view that pushing for higher volumes and a larger fleet is the right choice here versus a lower volume and higher margin”, the head of the American EV manufacturer, Elon Musk, emphasized during the company’s most recent earnings call.

Xpeng Sees Revenues Plummet by 46% While Vehicle Margins Turn Negative

By the end of this first quarter, Xpeng operated 425 stores spread across 145 cities along with 1,016 charging stations including 816 owned and operated by the company directly.

As a result of its lower deliveries, Xpeng’s sales dropped to $590 million resulting in a 46% year-on-year decline. In addition, its vehicle’s gross margins swung to negative territory, moving from 10.4% back in Q1 2022 to minus 2.5% during these first three months of the year.

The head of Xpeng, He Xiaopeng, highlighted that he has made several changes to the firm’s strategic approach, organizational structure, and leadership to change course and hopefully restore growth, team morale, and customer satisfaction.

“As the upcoming G6 launch and other new product launches fuel rapid sales growth, we expect our cash flow from operations to improve significantly”, commented Hongdi Brian Gu, the Co-President of Xpeng.

In February this year, Xpeng made two of its most popular models, the P7 Sports Sedan and the G9 SUV, in a handful of European markets. Meanwhile, the firm is expecting to deliver its first G6 SUV vehicles before the end of the first semester of 2023.

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This quarter’s continued downtrend in its sales prompted the company to report operating losses of $380 million and net losses of $340 million, both on a GAAP basis. However, the company’s cash reserves remain strong as they stood at nearly $5 billion.

For the second quarter of 2023, Xpeng expects to deliver between 21,000 and 22,000 electric-powered vehicles resulting in a 36.1% to 39% drop compared to the same period a year ago. Meanwhile, revenues are expected to drop in a range between 37% and 40% during this upcoming quarter.

The price of Xpeng stock is dropping precipitously this morning in early stock trading activity by 11.5% following the publication of the firm’s Q1 2023 financial results.

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