Xpeng Q2 report: higher than expected revenue, but more net losses

Only last month we were reporting on Xpeng offering big discounts on its vehicles signalling trouble in the house. We didn’t need to wait long to see how big the trouble is - today Xpeng released its Q2 earnings reports and while its revenue nearly doubled on a yearly basis, the bottom line is in the red.

The reported revenue of RMB 7.44 billion ($1.11 billion) is slightly above the analysts' expectations, who were around RMB 7.2 billion. It’s nearly double the revenue for the same quarter last year, but virtually flat from last quarter.

Production has remained on the same level since the beginning of this year, XPEng sold 34,442 cars in Q2 - slightly below the 34,561 cars sold in Q1. The production numbers are as expected and again are nearly double the results from Q2 of the last year.

The reported net loss in the second quarter has gone up to RMB 2.7 billion making it double the loss for the Q2 last year and nearly 60% increase on the last quarter. Non-GAAP (Generally Accepted Accounting Practices) net loss was RMB 2.5 billion which was 2.5 times higher than it was in Q2 last year and RMB 1 billion higher than in the first 3 months of this year.

As a result, the gross margin fell to 10.9% from 12.2% in the previous quarter and to the lowest level since Q4 2020. Vehicle margin fell even lower to 9.1% from 11% in the first quarter.

R&D expenses went up in the last quarter by 46.5% to RMB 1.27 billion which was the highest reported R&D spent since Xpeng went public. It was mainly due to increased numbers of employees in the department and higher than expected costs of new vehicle development.

Xpeng CEO, He Xiaopeng, claims the company is preparing to launch two new models next year; the expected price range for new products is between RMB 150,000 and RMB 500,000. Company is convinced it will see rapid sales growth with the new models.

Xpeng expects to sell 31,000 vehicles in Q3 with a revenue of up to RMB 7.2 billion. Year on year it would mean a healthy, 25% increase, but it would mean a 3% drop in revenue compared to the current quarter.

The final interesting bit of the report are cash reserves. The company's coffers still have RMB 41.3 billion, but it’s made up of restricted cash, short term deposits and investments. It’s enough to keep the lights for a while longer, but not indefinitely.

Xpeng’s Q2 results are a clear sign it’s not all rosy in the EV business, not just in China. COVID restrictions are still reverberating through the industry, China is going through one heck of a heatwave restricting its electricity supply, the EV fever is somewhat calming down and the recession means people are being more careful about their money. Cars were never top of the shopping list and many people prefer to hold on to cash and see what the market is going to do next. When it comes to Xpeng - market’s reaction was clear: shares are down to $19.58 which is nearly 7% lower than yesterday and keep on falling.

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