CHINESE electric car maker Xpeng forecasted third-quarter revenue that will miss analysts’ estimates, as the company feels the impact of a continued price war in its home market.
While the company will deliver between 41,000 and 45,000 vehicles this quarter – above the average estimate of 40,000 – it expects to post a maximum revenue of 9.8 billion yuan (S$1.8 billion), well below the 10.6 billion yuan expected by analysts.
The company, founded in 2014, said the outlook was based on market conditions which it did not detail. It reported a smaller-than-expected second-quarter loss on Tuesday (Aug 20), aided by funds from its year-old collaboration with Volkswagen (VW). Dozens of new products have flooded the Chinese market, which has seen slower growth. The competition has hurt pricing, squeezing margins for Xpeng and its rivals.
The net loss narrowed by more than half from a year earlier to 1.28 billion yuan, as revenue from its collaboration with Volkswagen kicked in, the company said. Analysts had expected a 1.4 billion yuan shortfall in the second quarter.
Xpeng delivered 30,207 vehicles in the period ended Jun 30, taking first-half sales to 52,028 – not even one-fifth of its annual target of 280,000. The company’s gross margin improved to 14 per cent due to cost reductions and revenue from the Volkswagen partnership, said Brian Gu, honorary vice chairman and co-president of Xpeng.
“I expect as the big product cycle drives our sales growth in the global market, our economy of scale, operating efficiency and cash flow will significantly improve,” he said.
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Just 19 of China’s 137 current electric car brands will be profitable by the end of the decade, leaving the rest to exit the industry, consolidate or battle for a minor market share, according to consultancy Alixpartners.
Xpeng has six EVs on the market and is looking to launch “a large number of new models and facelift versions” in the next three years.
It will soon announce the pricing of the first car from its Mona brand after acquiring ride-hailing giant Didi Global’s smart-car development arm last year. The MO3 could help drive sales if priced below 150,000 yuan, allowing it to compete with BYD’s Qin Plus and Volkswagen’s ID.3, according to Bloomberg Intelligence.
Xpeng is also deepening the partnership with VW, last month entering into a tech collaboration with the German automaker to cover all battery-powered cars made in China under the VW brand. The Chinese company is also pushing into as many as 30 countries covering Europe, the Middle East, Asia-Pacific, Africa, and Latin America. BLOOMBERG
