xpeng motors listing

Xpeng Motors is trading lower in early US price action today after it released its earnings for the second quarter of 2022. It provided soft delivery guidance for the third quarter which spooked investors.

Xpeng Motors reported revenues of $1.11 billion in the quarter, which was almost 98% higher YoY and was ahead of the $1.06 billion that analysts were expecting. The company’s deliveries more than doubled to 34,422 in the second quarter. Xpeng Motors outsold both NIO and Li Auto in the quarter amid supply chain issues.

The company’s cumulative deliveries reached 220,000 at the end of July as compared to 227,949 for NIO. Xpeng Motors has been fast catching up with NIO on cumulative deliveries and looking at the recent trend, looked set to surpass NIO.

However, Xpeng Motors provided soft guidance for the third quarter and expects to ship between 29,000-31,000 cars in the third quarter of 2022. The company had delivered 11,524 cars in July which was 40% higher than July 2021. The guidance suggests that deliveries in August and September would at best match that in July.

Meanwhile, while Xpeng Motors posted better than expected revenues, its per-share loss of 46 cents was ahead of the 32 cents that analysts expected. Automotive companies have been battling higher input costs which have taken a toll on their profits.

He Xiaopeng, Xpeng Motors’ CEO said, “We are on track for the official launch of our flagship G9 SUV in September 2022. The G9 is expected to become the industry’s new benchmark for comfort, luxury and advanced technologies in the medium- to large-size SUV segment.”

New Vehicle Launch Would Help Lift Xpeng Motors’ Sales

Rival NIO is also launching new models and entering new markets in a bid to increase its sales. Li Auto has also launched Li L9, its first SUV model. The company was hitherto delivering only the Li-One model.

Li Auto delivered 28,867 cars in the second quarter of 2022 which were 63.2% higher than the corresponding quarter last year. Li Auto reported revenues of $1.3 billion in the quarter, which were 73.3% higher YoY.

The revenues however fell short of estimates. The company’s gross profit almost doubled over the period to $280.4 million at an impressive vehicle margin of 21.2%. However, its net losses also swelled to $95.5 million which is 172% higher than the second quarter of 2021.

Markets would next look forward to NIO’s earnings. Wall Street analysts are however overwhelmingly bullish on NIO given its strong brand and backing from China. In June, Morgan Stanley analyst Tim Hsiao advised buying NIO stock and called it a “tactical idea.”

Xpeng Motors Has a Strong Cash Pile

Xpeng Motors had a cash pile of $6.1 billion at the end of June. Li Auto also had $8 billion at the same time. Chinese EV (electric vehicle) companies are flush with cash after multiple rounds of capital raising. Despite delisting fears in the US, Li Auto has been raising cash through an at-the-market offering in the country.

The Holding Foreign Companies Accountable Act mandates that foreign companies listed would risk delisting if does not comply with the US PCAOB’s (Public Company Accounting Oversight Board) audits for three years in a row.

The Act was passed after the Luckin Coffee accounting scandal where US regulators found themselves handicapped amid the alleged lack of cooperation from Chinese regulators. US investors lost billions of dollars amid the accounting scandal.

Chinese companies have been offsetting the risk of potential US delisting through listing in Hong Kong. Xpeng Motors is also listed in Hong Kong and the company cited geopolitical tensions between US and China for the listing.

China’s Economy is Slowing

China’s economy is slowing. Both Alibaba and Tencent reported their first revenue decline in history in the June quarter while JD.com posted its slowest growth on record. The country’s economic activity was hit by the COVID-19 lockdowns in April and May.

It also took a toll on automotive production. Tesla, which was the largest EV seller globally lost the title to BYD Motors after the production disruption in China.

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