EV Maker Xpeng’s Losses Widen as R&D, Marketing Costs Rise

(Bloomberg) -- Chinese electric vehicle startup Xpeng Inc. reported a wider-than-estimated second-quarter loss as research and development costs ballooned and marketing and other selling expenses climbed. 

The company’s net loss increased to 1.19 billion yuan ($184 million) in the three months ended June 30, compared to a 146 million yuan shortfall a year earlier, the Guangzhou-based company said in a statement. Analysts had forecast an 800 million yuan deficit, according to data compiled by Bloomberg. 

Revenue however came in ahead of expectations at 3.76 billion yuan. Xpeng also gave third-quarter sales guidance of as much as 5 billion yuan, better than the 4.27 billion yuan the market was looking for. The company delivered 17,398 of its G3 sports utility vehicles and P7 sedans in the quarter, topping its own forecast of between 15,500 and 16,000 deliveries. 

“We delivered another record-breaking quarter with new highs recorded in several key metrics, underscoring an accelerated growth trajectory,” Chief Executive Officer He Xiaopeng said in the statement. “Notably, deliveries for the first half of 2021 exceeded the total deliveries for the full year 2020.”

Gross margins inched higher, at 11.9% for the second quarter compared with 11.2% for the first. Xpeng’s vehicle margins meanwhile were 11%, up from 10.1%. It put the improvement primarily down to a better product mix and material cost reductions.

Founded in 2014, Xpeng is yet to post a profit. Nevertheless, it’s undertaking an ambitious expansion plan, betting on the growth of China’s EV market as drivers switch to cleaner and cheaper rides. Electric-car deliveries are forecast to more than triple to 6.2 million vehicles by 2025, when they will account for a quarter of all passenger car sales in the country, according to BloombergNEF.

Factory Push

Last week, the automaker unveiled plans to double production capacity at its Zhaoqing plant in Guangdong province to 200,000 vehicles a year. Total capacity when all three of its factories are in operation will reach 400,000 cars a year. The company, which publicly listed in the U.S. a year ago, last month raised $1.8 billion in a Hong Kong dual listing, and said the proceeds will help fund research and development, production and sales.

The stock is little changed since its Hong Kong listing, closing Thursday at HK$156.90 versus the offer price of HK$165. The U.S.-listed shares have surged more than 160% since the IPO.

Having raised funds from share sales in both the U.S. and Hong Kong, Xpeng is ambitiously beefing up its research and development capabilities. The company had over 3,000 R&D staff as of end-June, an increase of nearly 50% from the start of the year. It expects to have more than 4,500 on board by the year-end, with more than 1,500 devoted to autonomous driving technologies. As a result, expenses increased, Xpeng said. 

The jump in selling costs was mainly due to marketing, promotional and advertising expenses and the expansion of its sales network. 

The company will start delivering its latest electric sedan, P5, in October, CEO He said in an earnings call Thursday. It also plans to launch at least two or three new models each year starting 2023, which will be compatible for both domestic and overseas market. 

The issue with computer-chips supply bottleneck is an “expected shortage we can deal with,” said He, though the pandemic resurgence might bring more uncertainty. Xpeng will take a series of measures, including placing orders way ahead of time, working with top-tier suppliers and local governments. 

For the third quarter, vehicle deliveries may be between 21,500 and 22,500, representing a year-over-year increase of 162.3% at the upper end.

Xpeng and rival startups Nio Inc. and Li Auto Inc. are establishing themselves in China’s EV market with more stylish designs and localized sales and services networks. Xpeng delivered 8,040 vehicles in China in July, putting it on par for the first time with California-based EV pioneer Tesla Inc., whose local shipments plunged last month. 

©2021 Bloomberg L.P.

With assistance from Bloomberg