The Chinese electric vehicle manufacturer XPeng (XPEV -2.67%) recently released its second quarter results, and investors weren’t enthusiastic. After the earnings release, XPeng investors drove the company’s share price down 10%.
Why the strong reaction? Investors took a good look at some of XPeng’s delivery figures, gross margin and vehicle tips and determined that the company’s growth was slowing. Let’s take a look at five important figures from XPeng’s last quarter to get an idea of what’s going on with the EV company.
Revenue: $1.1 billion
XPeng sales soared 97% from the year-ago quarter to $1.1 billion. This strong growth would normally make investors very happy, but the huge increase comes with a little asterisk.
Indeed, in the second quarter of 2021, XPeng was not selling its P5 sedan. The company only started selling the P5 in September, so Q2 2021 sales don’t include any of the vehicle’s revenue.
Additionally, the company’s sales remained stable on a sequential basis. For a young, fast-growing electric vehicle company, revenue is expected to grow significantly on both a year-over-year and sequential basis.
Growth in deliveries: 98%
Similar to company revenue, XPeng shipments nearly doubled in the second quarter to 34,422.
Again, that’s an impressive jump on the face of it, but that includes sales of the P5 sedan, which wasn’t sold in the prior year quarter.
If we look at the company’s deliveries on a sequential basis, the picture is not so rosy. Vehicle deliveries were actually down 139 vehicles from the previous quarter. You can thank China’s strict “zero COVID” policy for that, as XPeng had to halt some production due to COVID-19 related lockdowns in the country.
“Our shipments maintained robust growth momentum in the second quarter despite unprecedented circumstances caused by the resurgence of COVID-19 in parts of China,” XPeng CEO He Xiaopeng said in a press release.
Net loss: $403 million
XPeng’s net loss widened in the quarter to $403 million from a loss of $185 million in the year-ago quarter.
Part of the problem is increased business expenses. XPeng’s selling, general and administrative (SG&A) expenses increased nearly 62% in the quarter to $248 million.
Company management said “higher marketing, promotion and advertising expenses to support vehicle sales” were the culprits, along with expenses related to the company’s sales network.
Vehicle margin: 9.1%
XPeng’s vehicle margin – which the company defines as gross profit from vehicle sales as a percentage of vehicle sales revenue – fell in the quarter to 9.1% from 11% in the quarter. the previous year. Rising vehicle costs were an issue for the company, including battery expenses.
The company tried to offset some of the rising expenses by raising vehicle prices earlier this year, but the price hike doesn’t appear to be enough to offset the cost.
“The quarter-over-quarter decline was primarily due to higher battery costs, partially offset by increased revenue from the selling price adjustment,” said the vice president of finance. of XPeng, Dennis Lu, during the company’s earnings call.
Vehicle Delivery Tips: 31,000 or less
XPeng management said vehicle deliveries for the third quarter would be between 29,000 and 31,000, representing year-over-year growth of just 17%.
That’s not exactly strong growth for the electric vehicle company, and investors should take note. When asked during the earnings call whether the slowdown in vehicle deliveries was due to supply chain constraints or a slowdown in customer demand, the vice president and president of XPeng, Brian Gu, said, “We are seeing the weakness primarily due to seasonal weakness ‘but also due to COVID control measures’.”
In short, the COVID-19 related lockdowns continue to hurt the company’s ability to produce and deliver the number of vehicles it wants.
The electric vehicle industry is still volatile
Not all of XPeng’s quarterly results were bad in the second quarter, but investors may want to be cautious investing in this Chinese electric vehicle maker right now.
The entire electric vehicle industry is suffering from supply chain shortages and rising costs, but XPeng’s problems are compounded by China’s strict COVID lockdowns. The result is already having an impact on the company’s financial figures and vehicle deliveries.