Mohit Oberoi
XPeng Motors (NYSE: XPEV) stock is trading lower today after it released its earnings for the fourth quarter of 2022. Here are the key takeaways from the earnings report.
XPeng Motors reported revenues of $0.75 billion in Q4 2022, a YoY fall of 39.9%. The company’s revenues were slightly below what analysts were expecting as revenues from vehicle sales fell 43.1% to $0.68 billion.
The fall in revenues was led by lower deliveries as it only delivered 22,204 in the fourth quarter of 2022—a YoY fall of 46.8%. In the full year, it delivered 120,757 cars, 23% higher than the previous year.
The company’s gross margin was 8.7% in Q4 2022, down from 12% in the corresponding quarter last year.
NIO’s gross margin also plummeted to a mere 3.9% in the fourth quarter as compared to 17.2% in the corresponding quarter in 2021.
Xpeng Motors’ net losses also ballooned to $0.34 billion in the quarter. While the losses were similar to the previous quarter, they were almost double what it had posted in Q4 2021.
Meanwhile, amid tepid earnings, XPEV CEO He Xiaopeng said, “We have comprehensively reviewed our strategy and took decisive actions to execute our organisational restructuring and strengthen our capabilities where necessary.”
Notably, the company touted a “strategy review” during the third quarter earnings call also.
Xpeng Motors Continues to Disappoint
Xpeng Motors has disappointed markets with both its earnings as well as delivery reports for the last couple of quarters.
It delivered 6,010 vehicles in February which it said was 15% higher than in January. However, its deliveries fell as compared to February 2022 when it had delivered 6,225 cars. The company’s cumulative deliveries reached 269,308 at the end of February.
Li Auto has now surpassed XPEV in terms of total deliveries. In terms of valuation also, Li Auto is now the second most valued Chinese EV company behind BYD Motors. NIO comes third with a market cap of around $14 billion while privately held Zeekr recently raised funds at a $13 billion valuation.
For two consecutive months now, Xpeng Motors’ deliveries have come below 10,000. The company has been looking to increase sales to Europe and said that it has opened a second retail store in both the Netherlands and Denmark.
NIO has also started delivering its cars in Europe. Last year, Baillie Gifford also increased his stake in NIO. Many analysts see NIO as a worthy competitor to Tesla.
Xpeng Motors Provided Weak Guidance for the First Quarter
Meanwhile, along with the bottomline and topline miss, Xpeng Motors also spooked markets with its guidance for the first quarter of 2023. It expects to deliver between 18,000-19,000 cars in the quarter, which would mean a YoY fall of between 45% to 47.9%.
The company has delivered 11,228 vehicles in the first two months of 2023 and even the upper end of guidance implies deliveries of 7,772 in March.
To put XPEV’s guidance in perspective, NIO forecast Q1 2023 deliveries between 31,000-33,000, which would imply a YoY growth between 20.3%-28.1%. The top end of the guidance implies deliveries of 12,337 cars in March.
Li Auto forecast deliveries between 52,000-55,000 in the first quarter of 2023. It has already delivered 31,761 cars in the first two months of the year and the top end of the guidance implies deliveries of 23,239 cars in March, which would be a new monthly high for the Chinese EV company.
Xpeng Motors is Still Positive About the Outlook despite Dismal Earnings
In his prepared remarks, Xiaopeng said, “From 2023 to 2027, the industry will move from a phase of rapid EV penetration to an era of accelerated disruption by smart technologies, and we are confident that we will further strengthen our leadership in smart EV technologies.”
Meanwhile, Dr Hongdi Brian Gu, co-President of Xpeng Motors said that the company is looking to achieve operational efficiency through cost cuts. Gu said, “With the optimization of our product portfolio and the significant improvement of our marketing capabilities, we will resume growth in our sales and market share.”
All said, while China’s EV sales are growing at a brisk pace, Xpeng Motors continues to disappoint with its performance.
Startup EV Companies Are Burning Cash
It reported cash and cash equivalents of $5.55 billion at the end of 2022 while its market cap is just about $7.2 billion.
Rivian’s market cap is also similar to the nearly $12 billion cash on its balance sheet. Some would see the market cap falling below the market cap as a sign of undervaluation.
However, given the cash burn of startup EV companies, where Rivian alone burnt $6 billion worth of cash in 2022, their cash pile continues to dwindle every quarter.
Incidentally, despite the massive cash pile, Rivian recently announced a $1.3 billion convertible note offering.
Meanwhile, markets have given a thumbs down to Xpeng Motors Q4 2022 earnings report and the stock is down in premarket trading even as futures point to a flat opening for US stock markets.
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This article was written for Business 2 Community by Mohit Oberoi.
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