Xpeng Motors released first-quarter earnings on Monday night, giving a second-quarter forecast that fell far below estimate. The company said it has made progress in ensuring the production against the backdrop of a global shortage of chip and battery supplies, but investors remained concerned that a prolonged supply crunch and China’s strict Covid-19 measures will hurt margins this quarter.
Why it matters: Xpeng is joining a long list of Chinese tech companies facing a challenging quarter with production cuts and profits squeezed. The company expects deliveries to fall between 31,000 and 34,000 units in the three months until June, compared to the 34,561 vehicle deliveries in the first quarter of 2022.
Details: On Monday, Xpeng reported revenue of RMB 7.45 billion ($1.2 billion) in the first quarter of 2022, up 152.6% from the same quarter last year. However, net loss more than doubled year-on-year to RMB 1.7 billion. The company’s share prices fell 5.5% on Monday.
- Xpeng expects second-quarter revenue to reach up to RMB 7.5 billion, well below analysts’ average estimate of RMB 8.3 billion, according to data compiled by Bloomberg. Gross margin will also be impacted due to existing supply chain constraints, but is set to improve in September with the delivery of higher-priced new models to customers, said Dennis Lu, vice president of finance at Xpeng.
- Xpeng executives said on Monday that the company has expanded efforts to reduce the impact of supply-chain difficulties and China’s Covid-19 lockdowns. In addition, it has contracted multiple new suppliers and implemented more flexible design and manufacturing for its EVs.
- During an earnings call, Chief executive He Xiaopeng said that the company has begun to see significant progress as it aims to secure enough battery supply to meet demand in the current quarter. More “optimization” is likely to happen during the second half of 2022, thanks to a multi-sourcing strategy and the decline of battery prices, He said.
- However, the ongoing semiconductor shortage is getting worse, as the electric vehicle (EV) maker can only monitor the impact on the production of chip supply chains one week into the future. He added that the current semiconductor supply bottleneck could last into 2023 or even longer, in contrast to a previous estimate that the issue could be resolved or alleviated by the end of 2022.
Context: Earlier this month, rival EV maker Li Auto also delivered a gloomy revenue forecast for the second quarter, expecting up to RMB 7.04 billion, which is 36% lower than previous estimates, with the company citing supply chain issues related to Covid-19 lockdowns in China. Li Auto’s vehicle delivery plunged by 62% in April from the previous month to 4,167 vehicles, with Nio’s and Xpeng’s volumes nearly cut in half over the same period.