XPeng sees 'knockout' phase, with EVs at 85% of China's auto market in 3 years

MW XPeng sees 'knockout' phase, with EVs at 85% of China's auto market in 3 years

By Tomi Kilgore

Quarterly losses narrowed sharply to beat expectations, and revenue rose above expectations as deliveries increased

The U.S.-listed shares of XPeng Inc. were getting a lift in early Tuesday trades after the China-based electric-vehicle maker's third-quarter results beat expectations, and as gross margin continued its march up to record levels.

The company $(XPEV)$ also provided a delivery outlook for the current quarter that implied year-over-year growth of up to 51%, or triple the growth of the third quarter.

Chief Executive He Xiaopeng said on the post-earnings call with analysts that investments in artificial-intelligence technology have started to yield advantages in product experiences and cost efficiency, which has bolstered the company's competitive edge as the EV industry continues to grow.

"Looking at the industry landscape, I anticipate that between 2025 and 2027, which is [the] upcoming three years, we'll see a knockout phase in the Chinese automobile industry," he said, according to a FactSet transcript. "The penetration rate of China's new energy vehicles will likely rise to over 85%, while the integration of AI will lead to the next stage of consolidation of market shares."

XPeng's stock gained 1.5% in premarket trading.

Despite uncertainties over what Donald Trump's election win might mean for China's EV makers, in terms of potential tariffs, the stock has gained 1.6% since the election through Thursday. But among other China-based EV makers, shares of Nio Inc. $(NIO)$ have tumbled 11.6% over the same time, Li Auto Inc.'s stock $(LI)$ has dropped 10% and BYD Co. Ltd. shares (BYDDY) have shed 8.8%.

For the quarter to Sept. 30, XPeng reported net losses that narrowed to 1.81 billion renminbi ($257.6 million), or RMB1.91 per American depositary share, from RMB3.89 billion, or RMB 4.49 a share, in the same period a year ago.

Excluding nonrecurring items, adjusted losses per ADS of RMB1.62, which beat the FactSet loss consensus of RMB1.92.

Total revenue grew 18.4% to RMB10.10 billion ($1.44 billion), to top the FactSet consensus of RMB10.03 billion, as vehicle sales increased 12.1% to RMB8.8 billion and services and other revenue jumped 90.7% to RMB1.31 billion.

As previously reported, third-quarter deliveries were up 16% from a year ago to 46,533 EVs, followed by 23,917 EVs delivered in October.

Looking ahead, the company said it expects total fourth-quarter deliveries of between 87,000 and 91,000, which represents a 44.6% to 51.3% increase from a year ago.

For total revenue, the company expects revenue to be between RMB15.3 billion and RMB16.2 billion, to surround the current FactSet consensus of RMB15.14 billion.

The stock has lost 10.8% year to date through Monday, while the iShares MSCI China ETF MCHI has rallied 17.9% and the S&P 500 index SPX has advanced 23.6%.

-Tomi Kilgore

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November 19, 2024 09:31 ET (14:31 GMT)

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