To The Moon

Yesterday marked the 10th anniversary of $XPeng Inc.(XPEV)$ $XPENG-W(09868)$ and the 4th anniversary of its IPO. On this significant day, XPeng launched its new MONA M03 model:

XPeng Cheapest Model

The M03 is a compact electric sedan with a range of 515-620 km and a price tag of ¥119,800 to ¥155,800, making it the cheapest model in XPeng’s history!

Within 52 minutes of its launch, pre-orders for the M03 surpassed 10,000 units! As a result, XPeng's stock on the US market rose 6.52% yesterday, while $Li Auto(LI)$ $LI AUTO-W(02015)$ climbed 2.36%, and $NIO Inc.(NIO)$ $NIO-SW(09866)$ fell 0.74%.

Looking ahead, can the MONA M03 turn things around for XPeng?

The M03 is crucial for XPeng. Previously, XPeng has launched models like the P7, P5, G6, and X9, but their total sales were only 11,145 units in July this year. None of these models have become bestsellers.

A hit model is vital for new carmakers. It can drive scale advantages and quickly improve financial performance. For example, Li Auto’s L series has helped it surpass $Tesla Motors(TSLA)$ in gross margins and achieve profitability among new carmakers. A popular model also reflects a company’s strength, boosting investor confidence and facilitating financing.

XPeng's lack of a bestseller has increased financial pressure and its stock price has struggled, now only 34% of Li Auto’s market value.

If the M03 fails to gain traction like previous models, it could worsen XPeng’s financial situation and significantly dampen market confidence. Investors might doubt XPeng’s ability to make a successful car.

Therefore, the success of the M03 is critical!

The M03 targets the broad ¥100,000-150,000 market. In theory, lower prices should drive higher sales, but competition is fierce, especially against strong rivals like $BYD Co., Ltd.(BYDDF)$ $BYD COMPANY(01211)$ .

The M03's lowest-priced 515 km version matches BYD’s popular Qin PLUS EV Honor Edition, both priced at ¥109,800 with similar ranges (BYD Qin at 510 km). The M03’s key advantage is its advanced driver assistance features, including 2 radar sensors, 12 ultrasonic sensors, and multiple cameras for ACC adaptive cruise control, which the BYD Qin lacks.

However, BYD’s Qin is more popular for its hybrid models, and battery electric models have less appeal. In July, BYD Qin PLUS EV sales reached 17,354 units.

Compared to the BYD Qin, the M03 focuses on battery electric and smart features, which could give it a competitive edge. Initial data shows promising results: within 52 minutes of its launch, pre-orders for the M03 surpassed 10,000 units.

However, given the extensive pre-launch promotion,starting at the Beijing Auto Show in April and with reservations opening on August 8, this number is not surprising. Whether it will exceed expectations depends on future data.

Time Run Out

Before the M03 launch, XPeng released its Q2 report, with management guiding Q3 sales at 41,000 to 45,000 units. July sales were 11,145 units, suggesting an average monthly sales of about 16,000 units for August and September.

While the month-over-month growth looks impressive, the year-over-year growth is not as strong. This indicates management may lack full confidence in the M03's impact.

To address sluggish sales, management plans to boost numbers by releasing more models.

He Xiaopeng, Chairman and CEO of XPeng said:

"We're entering a strong product cycle starting with the MONA M03 launch in August. Over the next three years, we will release many new and updated models.

We believe that our robust product cycle, combined with our technological advantages and breakthroughs in AI, will drive sales growth in China and globally. We're confident in returning to a growth trajectory and determined to win in the intelligent and global market."

So, the success of the M03 is crucial. If it fails, XPeng’s time could be running out.