When we think about electric vehicles (EVs), our attention usually turns to well-known names such as Tesla (NASDAQ: TSLA) and BYD (SEHK: 1211).
Therefore, the mid-cap Chinese EV marker XPeng (NYSE: XPEV) often flies under the radar.
With a market capitalisation of US$12.3 billion, XPeng ranks as one of China’s more successful EV companies.
The company brands itself as a leading Chinese smart EV company that manufactures vehicles for technologically-savvy middle-class consumers.
Let us find out more about this smart EV company, which has recently expanded its operations in Singapore by opening its first showroom at UOB Plaza in July.
Road to profitability
Founded in 2014, XPeng is still navigating its path to profitability.
While concerns continue to swirl over its losses, it’s important to remember that XPeng is relatively young in the automotive industry.
To put it into context, it took Tesla, the world’s leading EV company, 18 years to finally achieve profitability.
Let us dissect XPeng’s financials to determine whether the company has the potential to turn profitable.
For the second quarter of 2024 (2Q 2024), XPeng reported RMB 8.1 billion in total revenue, marking a 60.2% year on year increase.
Despite this growth, XPeng recorded a net loss of RMB 1.3 billion, which is nevertheless an improvement from the previous year’s RMB 2.8 billion loss.
A reassuring sign for investors is XPeng’s gross margin, which has significantly improved from negative 3.9% a year ago to 14% in 2Q 2024.
This indicates that XPeng is selling its vehicles at a vehicular profit margin of 6.4%, with its net loss largely attributed to research and development efforts and administrative expenses.
When compared to other mid-cap EV companies, we can see that XPeng stands out for its stability.
For example, its Chinese competitor, NIO (NYSE: NIO), has a gross margin of 9.7% in 2Q 2024.
Meanwhile, Rivian (NASDAQ: RIVN) has a negative gross margin of 45% for 3Q 2024, with the company losing US$39,130 for every vehicle delivered.
As XPeng continues to scale up its production to meet growing demand, we can expect its margins to improve, paving the way for future profitability.
Growing deliveries
XPeng has demonstrated consistent delivery growth over the past four years, supported by the company’s three manufacturing factories across China.
For 1Q 2024, XPeng delivered a total of 30,207 vehicles, up 30.2% year on year.
For the entire 2023, the company has delivered a total of 141,601 vehicles.
The reason behind XPeng’s strong year on year growth is the company’s strategic expansion.
Rather than focusing solely on the Chinese market, XPeng has set its sights on international expansion.
The company is rapidly expanding throughout Europe, with vehicle sales in several Nordic countries, the Netherlands, Germany, and France.
XPeng is also exploring market launches in the UK and Italy.
This ongoing expansion is taking place despite the EU tariffs on Chinese EVs, underscoring the company’s commitment to its vision to become a global company.
Looking at 2024, delivery numbers are looking very positive.
For the first 10 months of 2024 till October 2024, XPeng announced 122,478 deliveries, representing an impressive 21% year on year growth.
Technological advancements
As previously mentioned, XPeng positions itself as a smart EV company, emphasizing not just automobile manufacturing but also technological innovation.
In May 2024, XPeng revealed the industry’s first artificial intelligence (AI) powered in-car operating system.
This system features a personalised AI assistant called Xiao-P, an in-built AI chauffeur and bodyguard, that enhances the smart driving experience for XPeng car owners.
A new model, dubbed “Mona”, launched in August.
The company has sparked interest by uploading a video on Weibo showing XPeng’s AI robot pre-ordering Mona.
By the fourth quarter of 2024, the company aims to achieve further breakthroughs in smart driving technology, addressing common challenges like parking, roundabouts, and narrow paths.
On 7 November, Xpeng launched XPENG P7+, an AI-defined smart electric fastback sedan.
The company also held its AI day on 6 November where it unveiled plans for an extended range hybrid system, updates on its autonomous driving chip, and flying cars, among others.
Beyond smart vehicles, XPeng is also venturing into robotics and flying vehicles.
Founded in 2016, XPeng Robotics is currently developing a quadruped robot named XPeng Robot Pony.
Additionally, XPeng has recently made a groundbreaking debut with its flying car, the “AEROHT X2”.
XPeng described this vehicle as a revolutionary piece of technology that is poised to transform urban mobility.
The company assures that its flying vehicles are designed to be safe, efficient, and eco-friendly.
To date, XPeng has completed over 20,000 test flights with its flying vehicles.
In a discussion with CNBC, the company revealed its goal to deliver its first flying car in 2026.
These two initiatives showcase XPeng’s dedication to diversifying its technological portfolio, making it stand out from other EV manufacturers.
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Disclosure: Aw Kai Rui does not own any of the stocks mentioned in this article.
