The net loss exceeds 10 billion. How can Xpeng Motors break the game？

Our reporter Chen Jingbin reports from Guangzhou.

Recently, Xpeng Motors released its financial report for the fourth quarter and the whole year of 2023, showing that the company’s revenue in the fourth quarter reached 13.05 billion yuan, up 154% year-on-year, and its net loss was 1.348 billion yuan, down 42.9% year-on-year, and its gross profit margin increased to 4.1%.

However, for the whole year, although Xpeng Motors’s revenue increased by 14.2% to 30.68 billion yuan,The net loss expanded to 10.38 billion yuan, an increase of 13.6% compared with 2022.The gross profit margin for the whole year was -1.6%.

The reporter of China Business News learned from an interview in Xpeng Motors that Xpeng Motors’s gross profit improved to 6.2% in the fourth quarter through platform-based R&D and technology cost reduction, and its net loss narrowed year-on-year. The company plans to further increase the gross profit margin through scale effect and supply chain optimization in the future.

He Xiaopeng, director and CEO of Xpeng Motors, said that the delivery volume of Xpeng Motors increased quarter by quarter in 2023, surpassing 60,000 vehicles in the fourth quarter, and plans to launch more than 10 new models in the next three years, aiming at popularizing advanced autonomous driving technology and expanding the global market.

Nevertheless, Xpeng Motors’s sales in 2023 failed to reach the target of 200,000 vehicles, and only 70% of them were completed. In addition, the sales volume of Tucki P7, the main model, dropped significantly in January and February 2024, and the sales volume of Tucki G6, the new model, also dropped. Tucki X9, which has the highest sales volume, sold 1,448 vehicles in the same period, while the sales of P5, G3 and G9 were not satisfactory.

The net loss expanded to 10.38 billion yuan.

In 2023, Xpeng Motors’s financial situation experienced ups and downs, especially in the fourth quarter, there were some signs of improvement, but the overall situation was still under pressure.

This year, Xpeng Motors’s automobile gross profit margin experienced a process from negative to positive, reaching 4.1% in the fourth quarter, which was significantly improved compared with -6.1% in the third quarter. howeverFor the whole year, the gross profit rate of automobiles in Xpeng Motors is -1.6%, which shows an obvious downward trend compared with 9.4% in 2022..

Xpeng Motors also made decisive "changes" in this year to boost sales and improve its financial situation.

In order to impact the year-end sales, Xpeng Motors implemented discounts and preferential policies for its models. These measures, together with the adjustment of sales structure, such as the increase in the sales share of Tucki G9 with higher unit price and the reduction of bicycle cost, have jointly promoted the improvement of gross profit margin. Tucki G9, in particular, increased its sales share in the fourth quarter from 7% in the third quarter to 26%, which had a positive impact on the overall sales structure.

In terms of cost control, Xpeng Motors has also achieved certain results. In the fourth quarter of 2023, the cost of bicycles decreased by 11,000 yuan, reaching 191,000 yuan. This reduction is due to the implementation of technical cost reduction and the continuous downward trend of lithium carbonate price, which effectively controls the natural cost of vehicles.

Xpeng Motors’s organizational structure adjustment and business strategy optimization are also important factors to improve its financial situation. Since October 2022, Xpeng Motors has made a series of adjustments, including streamlining SKUs, optimizing sales theaters, merging inefficient stores and purchasing strategies. Especially after Wang Fengying joined the company as the president, these measures were further strengthened.

In terms of human resources, Xpeng Motors has also been optimized.In 2023, the total number of employees decreased from 15,829 to 13,550, and the number of R&D personnel also decreased from 6,313 to 5,401.At the same time, the growth of R&D expenditure has also been controlled, with an increase of only 1.2%.

Although Xpeng Motors has taken many measures to improve its financial situation, it still faces certain challenges.

In the fourth quarter of 2023, the company’s net loss was 1.35 billion yuan. Although it decreased compared with 2.36 billion yuan in the same period of last year and 3.89 billion yuan in the previous quarter, it still showed a loss as a whole. The annual net loss was 10.38 billion yuan, an increase from 9.14 billion yuan in 2022.

In terms of sales volume, Xpeng Motors also failed to achieve the set target.In 2023, the company originally planned to deliver 200,000 cars, but only 70% of them were actually completed.In terms of vehicle models, the sales of Tucki P7 and G6 dropped significantly in early 2024, while the sales of the new model Tucki X9 were relatively good, but overall, Xpeng Motors’s performance in the market still needs to be further improved.

In addition, at the beginning of January this year, the retail sales of Tucki P7 in February were only 836 vehicles, and in January, there was a decline in the waist-cutting level; Tucki G6 also experienced a considerable month-on-month decline from the first month, with sales of only 1,161 vehicles in February. The highest sales volume is the new model Tucki X9, with a sales volume of 1,448 vehicles in the same period. The remaining Tucki P5 is 213 vehicles and G3 is as low as 26 vehicles. The sales volume of G9 is acceptable, but it is only 861 vehicles.

Zhan Junhao, the founder of Fujian Huace Brand Positioning Consulting, analyzed the multiple reasons why Xpeng Motors’s sales failed to meet expectations in an interview. He pointed out that,In addition to the pressure brought to Xpeng Motors by the market performance of competitors such as Huawei, BYD and Tesla,Xpeng Motors also has problems in product positioning, marketing, cost control and supply chain management..

Zhan Junhao mentioned that Xpeng Motors may not be able to accurately grasp the consumer demand in product positioning, and the strength and effect of marketing are insufficient, resulting in limited brand influence. At the same time, high R&D and production costs affect the competitiveness of product prices. Problems in supply chain management, such as unstable supply of raw materials and low production efficiency, have also had a negative impact on sales.

Regarding the expansion of Xpeng Motors’s net loss in 2023, Zhan Junhao thinks that this will have a negative impact on the company’s development. The increase of capital pressure may affect R&D, marketing and capacity expansion, while the decrease of investor confidence may affect the stock price and financing ability, while sustained losses may lead to the decline of market competitiveness and make it difficult to compete with competitors.

How to break the game under the double pressure of performance and sales?

Faced with the double pressure of performance and sales in 2023, Xpeng Motors has clearly recognized the seriousness of the problem and started to take a series of measures to meet the challenges.

Xpeng Motors made it clear that in the context of increasingly fierce competition in China’s automobile industry, it is the key to realize profitability and sustainable development to scale up and reduce operating costs through smart driving technology.

Gu Hongdi, honorary vice chairman and co-president of Xpeng Motors, told reporters that the company’s technical cost reduction and business improvement plan have achieved initial results, and the gross profit margin of automobiles increased by about 10 percentage points in the fourth quarter. Besides,Xpeng Motors’s cash in hand at the end of 2023 exceeded 45 billion yuan, which provided a solid financial guarantee for the company to achieve high-quality and high-speed growth in the fierce market competition..

In order to further reduce costs and improve efficiency, Xpeng Motors introduced SEPA 2.0 in 2023. This new architecture integrates the intelligent system, powertrain and vehicle platform into a unified intelligent platform, which realizes the maximum common sharing among vehicles. This platform-based R&D strategy not only helps to reduce supply chain and manufacturing costs, but also accelerates the company’s goal of reducing BOM cost by 25% by the end of 2024, and significantly improves the efficiency of R&D iteration.

In terms of sales network, Xpeng Motors has carried out a new round of channel upgrade through "Jupiter Plan". In 2023, the company introduced more than 160 excellent dealer partners, covering 40 low-tier cities. These adjustments not only improve the ability of sales channels, but also are expected to bring significant contributions to sales from the second quarter of 2024.

He Xiaopeng said at the performance conference that Xpeng Motors will start an innovative dealer cooperation model from the second quarter of 2024. This model will accelerate the delivery speed of terminals by establishing channel inventory for about half a month, and fully activate the enthusiasm of dealers, thus effectively increasing sales. At the same time, the company will strictly control the inventory level through the system and monitoring mechanism, and implement a unified national price strategy to avoid the disadvantages of the traditional dealer sales model.

Besides,Xpeng Motors also plans to accelerate the sinking of channels, and it is estimated that the total number of sales stores will increase to 600 in the third quarter of 2024.. This expansion and transformation will be a key part of Xpeng Motors’s sales growth strategy.

In terms of product iteration, Xpeng Motors’s new products also show strong market competitiveness. Taking Tucki X9 as an example, this newly-launched pure electric MPV model delivered nearly 4,000 vehicles in just two months, and continued to lead the market of pure electric MPV and pure electric three-seat models. The company expects that X9′ s sales in March and April will increase significantly from the previous month.

Nevertheless, in the face of intensified competition in the automobile market, Xpeng Motors is still under a lot of pressure. Can He Xiaopeng save the situation and give the capital market a satisfactory answer? As the first batch of "survivors" who built cars, the survival and development of Xpeng Motors is of typical significance.

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