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XPeng reports strong revenue growth in Q2 but issues weaker than expected guidance

One of China’s biggest EV manufacturers, XPeng, reported strong revenue growth in Q2 earnings as demand for EVs continues rising worldwide, but rising material costs and lockdowns in China due to a resurgence in Covid are leading XPeng to be cautious with its Q3 guidance.

XPeng is one of several leading EV makers in China looking to gain market share in the surging EV industry. The company released its highly anticipated Q2 earnings as concerns over growth in China continue escalating. Unlike here in the US, China – the second largest economy – is cutting interest rates to stimulate the economy.

It’s a very different story than here in the US, as the Federal Reserve continues raising interest rates at a historical rate to cool inflation; however, China is dealing with several issues that are slowing economic growth, such as a massive property crisis and a “zero covid” policy that’s wreaking havoc on supply chains and slowing consumer spending.

Despite these issues, XPeng nearly doubled (+97.7%) its revenue from last year, reaching $1.1B. Although Xpeng is taking in more money, rising costs are cutting into margins – with this in mind, a widening loss and shrinking margins are a concern looking ahead.

XPeng G9 Source XPeng

A closer look at Xpeng’s Q2 earnings report

After celebrating its 8th anniversary just days ago, XPeng released its Q2 earnings report, giving us a closer look at how the Chinese EV maker is navigating a challenging economic environment.

Xpeng’s vehicle deliveries rose 98% from 2021, hitting 34,422 in the second quarter. The YOY difference may seem extreme, but deliveries fell from Q1 by 139 and more than 7,000 from a peak of 41,751 in Q4 2021.

Another concern for the young EV company is shrinking margins on vehicles. XPeng is making less per car because the materials to build the vehicles are becoming more expensive and more complicated to get amid shutdowns.

XPeng’s CEO and Chairman, Mr. He Xiopeng, summed up Q2 in his own words, saying:

Our deliveries sustained robust growth momentum in the second quarter despite unprecedented circumstances brought by the resurgence of COVID-19 in certain areas of China.

Mr. Xiopeng also added the automaker is on track to launch its G9 SUV in September. Currently, the XPeng has a three-vehicle portfolio, including the high-performance Xpeng P7, the P5 sedan, and the G3i.

The biggest concern in XPeng’s Q2 earnings is the company’s guidance going forward. XPeng expects total deliveries between 29,000 and 31,000, indicating its third straight quarter with falling deliveries.

Overall, Xpeng’s loss widened to $403 million, and its gross margin slipped to 10.9% compared with 12.2% in Q1.

Electrek’s Take

Although XPeng’s Q2 earnings have a few relatively significant concerns, the company is outpacing other Chinese EV makers.

Nio delivered 25,059 EVs in Q2, slightly less than XPeng. With this in mind, XPeng’s second quarter is more the reflection of China’s economy rather than the business itself.

That being said, a widening loss and falling vehicle margins are concerning for a company that has turned a profit once since going public. If China fails to stimulate the economy, XPeng and other Chinese automakers may have a long road ahead of them.

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Avatar for Peter Johnson Peter Johnson

Peter Johnson is covering the auto industry’s step-by-step transformation to electric vehicles. He is an experienced investor, financial writer, and EV enthusiast. His enthusiasm for electric vehicles, primarily Tesla, is a significant reason he pursued a career in investments. If he isn’t telling you about his latest 10K findings, you can find him enjoying the outdoors or exercising